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Limiting ESG Risk from
Food Waste

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Food waste contributes to social inequity, causes environmental harm, and depresses food-industry profits. A Morningstar Sustainalytics analysis shows only moderate industry preparedness to manage the risk.

THE IMPACT OF WASTE

The United Nations estimates that one third of global food production is wasted each year, mostly from unused food. Waste weighs on industry profitability and contributes to social inequity. Waste also causes unnecessary environmental harm: Food production affects water systems and biodiversity and accounts for more than a quarter of carbon emissions.

LIMITING RISK

Investors who want to limit environmental, social, and governance risk related to food waste in their portfolios can use ESG ratings, which are integrated across Morningstar’s technology platforms. Sustainalytics has analyzed ESG risks arising from food waste across 59 food retailing companies, 30 restaurant chains, and 113 packaged-foods companies.

PARTLY PREPARED

The analysis shows only moderate preparedness to manage food-waste risks. Some firms have waste-reduction programs, like using bruised produce in prepacked meals. Others focus on mitigating social inequity by donating to food banks and charities. But there is room for improvement across all three subindustries.

OUTPERFORMING COMPANIES

Outperforming companies integrate food-waste management into their operations. Tesco, a British retailer, has reported food-waste data since 2013, has achieved a 29% reduction in food waste since 2016-17, and accounts for avoided food waste as a percentage of annual sales (0.45%). Danone, a packaged-foods company, has a goal of reducing food waste by 50% by 2025, measured against a 2016 baseline.
Estimated value of global food waste

Data Source: Morningstar Sustainalytics



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