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Time to end the supermarket food waste scandal

Waste notDaily Business today highlights the scandal of food waste, in particular the disposal of edible food by retailers.

Waste Not Want Not seeks to reduce the volume of food and drink which is thrown into skips when more of it could be sold cheaply or donated to the needy.

Reducing waste is also in the interests of those who own the supermarkets – their shareholders – and evidence says they would increase their returns if they did so.

The supermarkets insist they are already reducing waste significantly and claim that contrary to popular belief, the figures show that very little food waste comes from supermarkets and their depots.

The Waste and Resource Action Programme, a not-for-profit organisation looking at UK resource efficiency, says seven million tonnes of food waste – more than 50% of which could have been eaten – is thrown away and one big City institution says the retailers remain the key to reducing this mountain.

The figure is equivalent to six meals per week for the average UK household. Furthermore, WRAP says, reducing this waste would dramatically decrease CO2 emissions – equivalent to taking one car in five off the road.

Britain’s biggest supermarket Tesco, admitted in 2013 that of all the bagged salads produced in this country, 68% are never consumed. Some 40% of apples are thrown away together with half of all bakery products.

Food wasteWhile all this food goes into skips and landfill sites, charities are providing food parcels to 500,000 UK families every year and food banks are springing up across the country.

Although the case for reducing food waste depends to some extent on the consumer, Legal & General Investment Management believes food retailers are the key link in the chain and that there is much that the retailers need to acknowledge:

First: Bombarding shoppers with special offers for food that they do not want is no longer a sustainable strategy.

Second: Shopping habits are changing, with consumers making more visits to convenience stores rather than doing a single large weekly shop.

Third: Investors are beginning to note the benefits to them in responsible and ethical behaviour. L&G believes that companies with good corporate governance and sustainable business policies will usually generate superior financial returns for their shareholders.

As an active investor in food retailers and food producers listed in the FTSE, LGIM says it wants to ensure that “these companies are addressing the risks associated with food waste which can have an adverse impact on their business model”.

It asked Marks & Spencer, Morrisons, Sainsbury’s and Tesco how they were tackling this issue.

“All four have identified food waste as a societal and environmental risk and have taken steps to limit their own impacts,” says Angeli Benham, a corporate governance manager at LGIM.

“To date, only Tesco has taken the step of publishing its own food waste data. Other companies were a little reluctant to disclose this level of information at the time of the meetings. However, a number of them have agreed to disclose this information from this year. We think disclosure of the scale of the problem is an important step in addressing the associated risks. Measurement is key in determining whether policies are delivering desired reductions in waste.”

Why should LGIM as an investor be concerned?

“Food waste is a consideration for all shareholders as it impacts shareholder value,” says Ms Benham. She highlights the following points:

• Security of supply can lead to higher input costs for the retailer which can impact margins and their ability to compete in the current environment.

• Loss of revenue can lead to lower profitability, lower share price and dividends.

• Losses within the stores/warehouses will incur additional expense both in terms of loss of revenue and disposal costs.

• Too much focus on driving volume by using bulk purchase tactics can result in loss of customer loyalty and revenue.

The retailers, through the British Retail Consortium, say the figures tell a different story.

Using data from seven major supermarkets and independently collated by the Waste & Resources Action Programme charity (WRAP) they say that of the 15 million tonnes of food thrown away in the UK each year only 200,000 tonnes or 1.3% came from the grocery retail industry.

WRAP estimates that there was a 10% reduction in food and drink waste by grocery retailers and manufacturers between 2007 and 2012.

It also says that beyond reducing their own food waste, supermarkets are acutely aware of their customers’ desire to get the most value from the food they buy and have been working through WRAP’s Love Food, Hate Waste campaign with their customers to help them reduce household food waste, make it easier to purchase the right amount and to store food in the best way to prevent food waste.

The BRC says supermarkets are also working with farmers and producer groups to tackle food waste and losses in agriculture as well as reviewing current specifications for produce, smarter ways to forecast and opportunities to improve storage and transportation. In addition, its members proactively discount products as they reach the end of their shelf life and working with organisations such as FareShare, FoodCycle and Community Shop to redistribute more unsold surplus food to those who need it.

Andrew Opie, BRC Director of Food and Sustainability, said: “Our members are pleased to introduce new levels of transparency into the supply chain and the figures tell a positive story about the vast efforts grocery retailers have made to reduce their food waste.”

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