Waste Food, Not Money

April 2019 – When sustainability first became a big thing in produce, I became an avid student of the subject. I did course work at Harvard, read dozens of books and spoke with leaders in the field. As I wrote more and more on the subject, I also began giving speeches. As I crossed the country and even traveled the world speaking on sustainability and its application to the produce industry, I sometimes would mention the costs of these efforts.

Very frequently someone in the audience, typically people in charge of sustainability efforts for their company, would object. They would explain that their sustainability efforts save their companies money. Typically, they would give an example such as replacing the light bulbs with longer-lasting versions or versions that were more efficient in electric use — so there was, in fact, a positive payback, even when the time value of money was included.

Yet, this didn’t really make sense to me. In order for sustainability to be “a thing,” you had to identify projects that a sustainability-minded CEO would execute but a CEO with a different perspective  would not. Of course, every project depends on the individual circumstances of a company, so if the company doesn’t have cash or financing available to buy the more expensive bulbs, then, of course, sustainability-loving or not, the company must buy the cheap ones and, literally, keep the lights on.

Even assuming a well-financed organization, if buying better bulbs saves a company money sufficient to cover the cost of financing the bulbs or if the improvement exceeds a hurdle rate that attracts investment — then any CEO should approve the expenditure. If we call that sustainability, then we are just saying businesses should be conducted with a long-term focus, which is actually a tenet of business management anyway.

Understanding terms and what one is trying to achieve is crucial to the conduct of business and public policy. Thus the mass focus on food waste is really a concern, because the very term “food waste” is not clear, so the condemnation — the very use of the term “waste” implies a negative — is often more virtue-signaling than an actual problem.

All over the world, companies have launched so-called “funky produce” efforts. The idea sounds flawless: Take perfectly healthy and delicious produce that happens to suffer from some cosmetic defect and is now being mostly left in the field or packinghouse and pack it up to be sold to consumers at a discount.

Yet, time after time, these programs are announced with great fanfare — public evidence of everyone’s desire to do the right thing — then quietly dropped when the programs fail. The items don’t sell, or they do, but only at a price where everyone loses money.

The reason these don’t work is that the word “waste” is misused by modifying it with the word “food.” Having some produce sit unharvested in a distant rural field is actually a way of avoiding waste! Each item is different of course, but generally speaking, to add value to that item, it has to be picked, packed, shipped, insured, inspected, given shelf space in a store and marketed. It is not uncommon for those other costs — post-growing costs — to account for more than 90% of the cost a consumer pays for produce.

So, it typically makes sense to apply all these other costs against cosmetically pleasing produce. We have now seen time and again that consumers will accept wonky produce, but they feel entitled to deep discounts over standard produce pricing, discounts not justified even if the wonky produce was free to take from the fields of Idaho — or Peru!

The whole battle against food waste seems to be conducted with a presumption that the optimal amount of waste is zero. But this is not true. If you send pickers in to repick fields, and they can’t pick enough to cover the cost, then you are wasting labor.

If the value of what you are shipping won’t cover the trucking cost, you are wasting gas, vehicle depreciation and driver time.

Even with consumers, sure, there are areas where the industry can do better. Recently when the U.S. Department of Agriculture (USDA), the U.S. Environmental Protection Agency (EPA) and the U.S. Food and Drug Administration (FDA) announced a federal interagency strategy to address food waste, FDA Deputy Commissioner Frank Yiannas pointed out the challenges of date labeling: “Contrary to popular beliefs, date labeling on food packages is often intended to communicate time ranges for optimal food quality, not safety.”

He is right that it would be good to date-label more effectively to be clear about safety and quality. But how much food waste this causes in produce is unclear. Most produce is not date-stamped, and many people want their food to not only be safe but also of optimal quality. They might throw it out even with perfect knowledge.

Consumers are really good at expressing what they value by what they buy and what price they pay. Is it worth expending resources to go back and do a third picking of smaller peppers? The market tells us. And if we do it, despite consumers not being willing to cover the cost, we will reduce “food waste” at the expense of wasting labor, fuel, equipment and, in the end, money.

Since money can buy food, medicine and so much more, warping policy to favor a minimization of one type of waste ­— food ­— at the expense of other things is a mistake. Money is a terrible thing to waste.                                                                                                     pb