The Economics Of Food Waste: How MNCs Benefit From It

I’m sure we’ve all heard about the plethora of effects the wastage of food can have on our daily lives. In fact, you probably don’t need to look further than your own kitchen or cafeteria to see perfectly edible food being dumped.



Food wastage, the act that sends more than a third of the world’s food supply to rot and is a major contributor to climate change, seems like an issue that should be easy enough to address - simply get people to stop throwing food away!


You’d be saving time, money, AND effort! Yet here we are, living in a world where 1.3 billion tonnes of edible food ends up wasting away in the corner of some trash can while millions die of hunger each year. That is 1/3 of the total food produced!


So why is this problem so hard to solve? The answer lies within the intricate depths of corporate marketing strategies - utilizing consumer tendencies to knowingly instill a certain ideology into the average buyer’s mind; like many problems facing our society in the 21st century, the finger needs to be pointed at Large multinational corporations, or MNCs for short.


But before we dive into the technicalities, we need to first understand the types of costs food waste brings along with it. These costs and externalities can be split up into 3 main categories: resource, environmental, and social.


1) Resource Cost


A considerable amount of financial loss from food waste comes from the wasted labor, material resources, time, and energy that go into food production. Even for a standard dairy milk chocolate bar, anywhere from 3 days to a week of hard labor goes into it - and that’s for ONE bar.


In fact, The Food and Agriculture Organization of the United Nations (FAO) recently estimated annual losses of $1 trillion from resource costs. Redirecting these resources back into the production process would not only save companies upto 12% in revenue but also avoid having to pay what’s called a ‘waste tax’ a tax on the average waste companies produce in several countries around the world.


2) Environmental Cost


It’s no surprise that food waste comes with an abundant environmental externality too. We dispose of nearly a quarter of our water supply in the form of uneaten food, over $172 worth billion in water.


As it begins to rot away at landfill sites it becomes a significant source of methane – a potent greenhouse gas with 21 times the global warming potential of carbon dioxide.


3) Social Cost


Finally, along with a resource and environmental costs comes a societal one. The lost consumer surplus resulting from waste eventually inflates food prices and ultimately results in the working class paying a lot more as food costs. This indirectly becomes a source of nutritional deficiency and can result in food insecurity as well as higher health care costs for those with low-incomes. Adding this externality to resource and environmental costs, the FAO projects a combined annual cost of $2.6 trillion from America’s food waste.


Now that we’ve identified the costs and externalities from food waste, it’s time we analyze why we’re not able to solve this problem. We’ve probably seen several waste reduction policies implemented around the world, but the problem with all of them is that they simply don’t target the people who actually create the waste. Feel free to blatantly point your finger at MNC’s here, because frankly, more of us need to do so.


To make it simpler, here’s a quick infographic demonstrating how MNC’s like Nestle and Unilever “aim” to reduce food waste, but never get around to actually doing it.



MNC’s ensure that these ‘waste reduction’ clauses are excluded within legal documents so that focus groups and green organizations can’t take action towards them. This allows them to continually market products as ‘sustainable’ while maximizing profit.


Moreover, with the green sticker symbolizing a global movement towards sustainability and eco-friendly products, several MNC’s (including Nestle) change their packaging in order to incorporate them in order to trick consumers into thinking their products are ‘green’ when they are anything but. Ensuring that the green sticker is certified by an organization such as the EFA is a great way to avoid falling for marketing scams such as this one.


Finally, if there’s anything you take away from this article, it’s to support local, driven businesses that emphasize sustainability. They often go out of their way to reduce waste, and hardly engage in scams with regards to ‘zero waste’ policies.


As individuals living in a world battered by climate change, it’s our responsibility to stay informed about the legal regulations, policies, and hidden behavioral economics behind company decisions and to only engage with businesses that truly embody what it means to be sustainable.


Written by Aiswarya Rambhatla


Sources

  • https://hbr.org/1980/03/how-mncs-cope-with-host-government-intervention

  • http://www.fao.org/policy-support/policy-themes/food-loss-food-waste/en/

  • https://www.intereconomics.eu/contents/year/2014/number/6/article/food-loss-and-waste-as-an-economic-and-policy-problem.html


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