A new report from the Ellen MacArthur Foundation highlights two attractive circular investment opportunities in the food industry
The events of 2020 have been hugely disruptive to the food and beverage industry.
As governments imposed global shutdowns in an effort to prevent the spread of COVID-19, the world for most of us was immediately reduced to our own four walls. We lived, worked, played and ate at home.
Many of us found a renewed appreciation for food as we cooked from scratch, bought local or even tried to grow our own produce. Delivery services for food boomed – grocery delivery increased 11.5% over the previous year in the UK alone.
But from the early days of lockdown, the cracks in our food supply chains have been exposed, making it harder to move food around the globe.
Producers struggled to transport food, internationally and domestically. Panic buying led to increased demand and shelves sat empty of basic necessities and luxury items alike. Farmers suffered a double blow as orders from the hospitality industry were canceled and then again as the migrant agricultural workers couldn’t get through to help with the harvest.
There have been changes in society’s relationship with food too. With unemployment on the rise, there has been a greater demand on food banks at a time when there are fewer food donations going int. It’s estimated that ‘265 million people around the world [will] be at risk of facing acute food insecurity in 2020’. The pandemic is also raising concerns about food safety and health-consciousness. Suddenly, what we put in our bodies matters more than it ever has.
But as good business owners know, disruption in the marketplace can lead to opportunities as well as challenges.
The Ellen MacArthur Foundation released a series of new reports recently, highlighting 10 attractive circular investment opportunities. And today we’re looking at two of these from the food industry.
‘The circular economy, as an instrument to decouple economic growth from resource use and environmental impact, opens up the way for a resilient recovery and a next wave of economic prosperity. By fostering innovation and competitiveness, reducing resource dependency and environmental impact, and creating new jobs, the circular economy presents a promising way forward.’
– The Ellen MacArthur Foundation
Shifting to regenerative agricultural models
With the right policies in place – those that support ‘reforming food, land, and ocean use by, among other things, making greater use of regenerative agricultural practices’ – the World Economic Forum projects that we could create 191 million jobs and USD 3.56 trillion in economic opportunities.
Regenerative agriculture is a way of farming that draws on both the rich knowledge of the past and the science and technology of today.
Most modern industrial farms rely on a single crop, genetically engineered seeds and lots of chemicals to keep pests away and increase yield. This has allowed them to produce at scale, with efficiencies, and to keep costs down.
But the negative impact of this type of farming is that, over time, the soil and the crops lose their nutritional quality, the weeds and pests adapt, yield goes down and the people coming into contact with the chemicals can experience health problems.
In contrast, regenerative farming allows smaller farms to rotate crops, grow multiple types of crops in one field and integrate fish or other animals into the process to help circulate nutrients. The focus is on quickly improving the quality of the soil, which leads to better yields and better food.
The report from the Ellen MacArthur Foundation finds that ‘a USD 78– 116 billion spend on accelerating the adoption of regenerative production has been estimated to yield USD 2.3–3.5 trillion in lifetime operational cost savings’. This can be achieved by planting diverse cover crops, not tilling the soil, practicing crop rotations and decreasing the use of pesticides.
‘Regenerative food production is aimed at building healthy, biologically active ecosystems: improving, rather than degrading the environment in which the food cultivation or rearing is embedded…With an emphasis on improving the ecosystem in which they are embedded, regenerative food production systems work with nature, rather than against it.’
One of the statistics coming out of the report that really surprised me was that regenerative agricultural practices could reduce total agricultural greenhouse gases by a minimum of 17% annually. The report notes that with the current emissions footprint of agriculture sitting at over one-fifth of all GHG emissions, achieving this reduced level could have a significant impact. They have also estimated that in a period of 25 years, the enriched soil could sequester 10% of human-induced carbon emissions.
Investments are needed in:
- Technical tools helping farmers adopt regenerative food production methods; for example, bio-fertilisers, vertical tillage tools, data collection and analytics from the internet-of-things
- Training to ensure these solutions are implemented correctly and effectively; both in-person and online so that training reaches those on the front-lines around the globe
- Tools that establish a market for food grown using regenerative methods; communicating the benefits of this type of food to consumers and creating a greater demand for these products
Increasing food collection, redistribution and valorisation infrastructure
In a world where 1.6 billion tonnes of food is wasted each year – amounting to USD 1 trillion in economic losses – it makes sense that one of the United Nation’s Sustainable Development Goals is to halve global food loss and waste by 2030.
‘Creating a circular food system where surplus edible food gets redistributed and inedible by-products are collected and transformed into valuable products –rather than discarded as in the current linear model – will be necessary for the value of these streams to be retained in the economy.’
If the food or its by-products are edible, we need to get better at collecting and redistributing them to those in need. This may mean shifting food to vulnerable communities or it may mean new product development. The report highlights Renewal Mill, which produces flour from tofu and soy milk by-products.
Inedible by-products could be valorised – their value enhanced – by making them inputs for agriculture (as compost, for example), bio-energy or even new products. The report highlights Ananas Anam which produces Pinatex – a plant-based leather – from pineapple leaves.
Investment opportunities here include:
- Physical infrastructure in low income countries, like cold chains for storage, processing and distributing edible food
- Physical infrastructure in high income countries, allowing us to redistribute surplus food from retailers, restaurants and homes to those who could use it
- Processing infrastructure to collect and add value to inedible food by-products, including anaerobic digesters, bio-refineries and composting facilities
- Digital infrastructure, mapping food flows from source to final destination to highlight leverage points
The report concludes:
‘With the wide-scale disruptions to global supply chains and people’s lives, the pandemic has both exposed the vulnerabilities of the current food system and ignited people’s interest in reconnecting with their food. In the midst of the health crisis, the value placed on nutritious food that benefits rather than degrades nature has grown, strengthening the case for shifting towards regenerative food production. Meanwhile, as both over-supply and shortages have plagued the value chain due to unprecedented disruptions, the necessity for improved food collection, redistribution, and valorisation systems has become glaringly obvious.
‘Therefore, circular investments in ‘tools for farmers that enable their shift towards regenerative food production’ and ‘increasing food collection, redistribution, and valorisation infrastructure’ will be key to building back a more resilient and healthy food system that enables greater food security while allowing both people and nature to thrive.’
You can download a copy of the report at the Ellen MacArthur Foundation. If you’d like to speak with us about potential investment opportunities or about how you can make your food production processes more sustainable, do get in touch! You can fill out our contact form or send us an email at firstname.lastname@example.org.