How Europe’s top food retailers are failing to disclose food waste-based emissions

DISCLAIMER: All opinions in this column reflect the views of the author(s), not of EURACTIV Media network.

Food loss and waste emissions amounted to an estimated 3.3 GtCO2 in 2019, or 9% of total emissions generated worldwide. [Virginia Retail / Flickr]

European food retailers need to widen the scope of their greenhouse gas reporting in order to account for emissions resulting from food waste and loss across their supply chains, writes Matthew McLuckie.

Matthew McLuckie is Director of Research at Planet Tracker, a non-profit financial think tank.

Food loss and waste (FLW) is a relatively well-publicised issue for the global food retail sector. But if you consider that, globally, 30% of total crop land and 23% of fresh water is used to grow food that is never eaten, the scale and severity of the problem becomes much starker.

Every year in the United States, US$218 billion is spent on growing, processing, transporting and disposing of food that is eventually lost or wasted. Together with FLW generated by other regions, the global direct economic cost for FLW currently stands at US$940 billion per year.

Critically for food retailers within the food supply chain, FLW does not only represent lost earnings potential and reduced operating profit margins, but also contributes significantly towards their greenhouse gas (GhG) emissions. According to the Global Carbon Project in 2019, global FLW-based GhG emissions amounted to an estimated 3.3 GtCO2, or 9% of total GhG emissions generated worldwide.

What’s more, these GhG emissions have a tangible financial, as well as environmental, cost. Once you take into account the US$305 billion of its attributed GhG emissions, FLW generates a total global market cost not of US$940 billion, but US$1.2 trillion.

Just in Europe alone, this figure stands at €143 billion. As such, the EU has placed its “Farm to Fork Strategy” at the heart of the Green Deal and its overall efforts to meet the United Nations’ Sustainable Development Goals. A first for EU Food Policy, the strategy proposes a comprehensive agenda for addressing environmental and financial challenges at every stage from production to consumption – including GHG emissions generated from FLW.

Despite all this, there is evidence of publicly-listed food retail companies in Europe underreporting their FLW metrics and the GhG emissions they indirectly generate along their entire value chains – known as Scope 3 emissions.

More focus needed on food waste in the creation of a circular economy

Ahead of a Finnish Council Presidency’s conference that aims to set the EU agenda for action on food waste towards 2030, a number of companies have made commitments to reduce their food waste, but a number of barriers still stand in their way.

The farm-to-fork disclosure gap

To investigate the environmental and financial impact of underreporting on FLW in Europe’s food retail sector, Planet Tracker analysed the region’s top 12 publicly-listed food retail companies: Ahold Delhaize, Carrefour, Tesco, Ocado, J Sainsbury, WM Morrisons, Casino Guichard Perrachon. ICA Gruppen, AX Food, Jenonimo Martins, Colruyt Group and Kesko Corporation.

We found that reported Scope 1 (direct from sources owned or controlled by a company, such as its facilities and vehicles), Scope 2 (indirect from companies’ operations, such as purchased electricity and heating) and Scope 3 (resulting from a company’s activities from sources from not owned or controlled by it, such as transportation) emissions of these companies in 2018 amounted to 26.6 MtCO- equivalent to 7% of the estimated 186 MtCO2 of food waste emissions produced annually in Europe. Importantly, Scope 3 emissions make up an estimated 44% of this total.

Though we do see positive commitments to more effective emissions reporting from these food retailers, Planet Tracker found that only seven provide any Scope 3 emissions reporting in their financial accounts. What’s more, excepting Kesko Corporation, none of the screened food retailers fully account for FLW-based Scope 3 emissions. As a result, total Scope 3 emissions estimates for the European food retail sector are likely to be significantly underreported.

This means 11 of the top food retail companies in Europe and their investors are ultimately unable to correctly assess total generated emissions across their supply chains. Investors, therefore, are unable to undertake accurate emissions-based benchmarking, or aggregate portfolio-based emissions exposure. This lack of accurate data also means that these companies are unable to meaningfully support the EU’s stated ambition in its “Farm to Fork Strategy” of “reducing the environmental impact of the food processing and retail sectors by taking action on transport, packaging and food waste”. After all, how can you mitigate what you do not measure?

Outside the scope?

Given the clear incentives for food retailers to manage their FLW and Scope 3 emissions, why aren’t more reporting on these metrics?

Partly, it’s due to the lack of control over, and difficulty in, mitigating Scope 3 emissions that often deters companies from assuming responsibility in addressing the issue. But, of course, the effects of such emissions on a company’s finances and environmental footprint will persist even if unreported.

For those companies looking to accurately measure their exposure to FLW, however, there is little steer on best practice for reporting Scope 3 emissions, particularly within three established FLW and GhG reporting frameworks employed by these food retailers. Analysing the Greenhouse Gas Protocol, the Food Loss and Waste Protocol and the UK Government Environmental Reporting Guidelines, Planet Tracker noted the lack of explicit guidance on FLW-based Scope 3 emissions accounting.

In our view, these protocol designers, in collaboration with food retailers, should look to develop FLW-specific Scope 3 measurement and reporting methodologies within these standards by 2022 to enable accurate and consistent disclosure across the sector.

Call to action

Reporting on FLW-related Scope 3 emissions does not just benefit food retailers – as already highlighted, there are other key stakeholders who stand to gain from driving this initiative.

The top 10 investors in the Europe’s primary 12 publicly-listed food retailers, for instance, collectively hold US$31.5 billion of equity value. If FLW lowers earnings margins, these investors will generally find their earnings also reduced. What’s more, five of these investors are registered supporters of the Taskforce for Climate-related Financial Disclosures – thus, obtaining information on their exposure to FLW-related Scope 3 emissions represents a clear business priority.

Such investors have significant power in helping to drive change within the sector. For example, investors can ensure the issue is being addressed by requesting from food retailers their reported FLW data by volume – preferably by type of food; FLW-based Scope 3 emissions accounts; transparent detailing on how they are accounting for and incorporating Scope 3 emissions into their net-zero emissions targets; and clear FLW-related Scope 3 reduction targets.

Similarly, the EU is well-positioned to support by updating its EU Waste Framework Directive to specifically include FLW-related Scope 3 emissions reporting in the food retail sector. Not only will this step underpin the achievement of its own “Farm to Fork Strategy”, but it will also help EU governments to factor in the FLW volume and total GhG footprints of companies contributing to national accounts – thus enhancing the accuracy of FLW data at a country level.

Thus, with a concerted and coordinated effort from all corners of the food retail market, the sector could set a clear pathway to meaningfully reduce its FLW, while improving its environmental and financial performance.

EU green finance czar: 'Obvious' that companies should report on climate risk

Reporting on greenhouse gas emissions should become mandatory “as soon as possible” for companies with more than 250 employees, argues Michèle Lacroix, an EU expert who helped design the EU’s landmark green finance taxonomy.

Subscribe to our newsletters

Subscribe
Contribute