How Food Processors Can Manage Food Waste

Businesses and organizations that have pledged to reduce food loss and food waste by 50% in their operations by 2030 were honored in October 2022 at a Food Loss and Waste event sponsored by the Environmental Protection Agency (EPA), FDA, and USDA. Designated “2030 Champions” for their public commitment to fulfill the 2015 goal set by EPA and USDA to cut food waste in half by 2030 (as part of the United Nations’ 2030 Sustainable Development Goals), the businesses honored included food companies such as Kellogg’s, Kroger, General Mills, Tyson, and others.

Cutting food waste is increasingly seen as a critical component of addressing what remains a sorry blight worldwide in 2022: global hunger. This concern is highlighted in the Zero Hunger Challenge set by the United Nations that lists the adaptation of all food systems to eliminate loss or waste of food as one of the five key elements to end hunger and eliminate all forms of malnutrition globally. In the U.S., the EPA Food Recovery Hierarchy prioritizes the redistribution of food to hungry people as one of the top preferred strategies that companies can take to prevent and divert wasted food.

The need for this redistribution is uncontested given the staggering number of people in the world who don’t have enough food to eat. According to the Food and Agriculture Organization of the United Nations, up to 811 million people worldwide face hunger. In the U.S. alone, the Food Research and Action Center says that 38 million people, or 11.8% of the population, struggle with hunger. Furthermore, these numbers are based on 2020 estimates, numbers that undoubtedly rose during the pandemic, and more are increases expected due to the war in Ukraine.

Comprising between 30% and 40% of the food supply in the U.S., food waste through redistribution and, more recently, upcycling, is an increasingly attractive way for food manufacturers and processors to redirect more of their surplus toward beneficial aims such as hunger relief while at the same time making their processes more efficient and cost effective.

Among the incentives for companies to participate in food redistribution are laws protecting against liability, technologies to help with the safe distribution of goods from facility to donor site (either directly or via distributors), and expanded policies in the U.S. and abroad that are moving toward restricting food waste.

Easing Safety Risks

Jackie Suggitt, director of capital, innovation, and engagement at ReFED, a nonprofit organization that provides data-driven solutions to eliminate food loss and waste in the U.S. food system, characterizes redistribution of food waste as a “very easy sell” for companies not already participating in sustainability issues. “There is a great business case for just about anyone who is looking at food waste to improve the bottom line financially,” she says, citing the cost savings to a company by reducing inefficiencies such as waste.

According to data provided by ReFED, food manufacturers generate among the lowest annual percentage of food waste among all the sectors involved in the food supply chain (from producers to investors) given the built-in efficiencies already in place in manufacturing systems; however, current data showing that manufacturing generates about 10.6 million tons of surplus food highlights the fact that more can be done to reduce waste. Of the waste generated, most is due to byproducts and production line waste (91.4%), followed by buyer rejections (6.6%) and unshipped finished product (2%). By product, dairy and eggs make up the largest surplus (41.6%), followed by dry goods (28.8%) and produce (18.4%).

One major challenge for manufacturers in redistributing goods, particularly products requiring refrigeration such as dairy and eggs, is maintaining the cold food chain. “If I’m a producer and want to donate a product from point A to point B, I need to ensure that the right temperatures are maintained throughout the entire distribution of the product,” says Suggitt.

To help with this issue, she cites technologies such as time temperature indications (TTIs) that can be attached to packaging or products to prove that the cold chain has been protected throughout the distribution chain. Other technologies, such as modified atmospheric packing (MAP), can help ensure that produce stays fresh and is not compromised during transit.

Although manufacturing companies donating their excess produce is not a new concept, Suggitt sees a shift in more manufacturing and processing companies forming direct relationships with global food banks and redistribution organizations. “The standard model most manufacturing companies have in their minds is that a producer produces a product, it goes to a retail store, and if it doesn’t sell, the product gets donated,” she says. “The model is not new, but I think it is continuing to improve and expand.”

Forming a direct relationship with a donor site, she suggests, eliminates some of the safety risk of the product (particularly those needing refrigeration) by reducing the number of intermediary channels and people handling the product. For example, she underscores the challenge of transparency in ensuring the cold chain has been maintained when moving a product such as milk. Transparency may be easier to maintain with a direct distribution from manufacturer to the food donation site rather than when two or three parties are involved in moving the product.

Feeding America, a nonprofit with a network of 200 food banks and 60,000 partner food pantries and meal programs that directly engage with food processors and producers, underscores the importance of food safety and said it adheres to strict food safety protocols based on guidance from a number of organizations including the Association of Food and Drug Officials (AFDO). “If refrigerated or frozen product is being donated, the cold chain must have remained intact throughout the process of pulling the product and staging it for donation pick-up,” according to a statement from the organization. The organization lists additional food safety issues such as damaged or open products, inaccurate food product label information, and cross contamination that may occur when the donations are handled. “Donated product must have consumptions shelf life remaining on the product, and enough time to ensure that the product can be picked up, received into a food bank’s or partner food pantry’s inventory system, and then made available for charitable agencies to order for neighbors relying on their food distributions,” a Feeding America spokesperson tells Food Quality & Safety.

Liability Protection and Tax Incentives in Food Waste

Closely tied to food safety concerns are liability concerns that can act as barriers for manufacturers and processors who may otherwise be willing to participate in redistribution of food, according to Emily Broad Leib, faculty director at the Food Law and Policy Clinic and deputy director of the Center for Health Law and Policy Innovation at Harvard Law School in Boston. “It is really complicated how food safety regulations and fear of liability relate to one another,” she says.

Leib emphasizes that food safety issues are about following regulations for food safety—that is, to ensure that food meets the safety standards of health inspectors. Liability issues are quite different and pertain to what happens if a consumer gets sick after eating redistributed product, even if all safety rules are followed. “If you follow all the safety rules and you believe the donated food to be safe, what happens if the consumer gets sick?” she asks. “On that front, there are quite strong protections for businesses and nonprofits to help distribute that food.”

Federal legislation called the Bill Emerson Good Samaritan Food Donation Act provides comprehensive liability protection for food donors and nonprofits as long as they believe the food is safe and was donated in good faith, says Leib. States, she adds, all have a version of a liability protection as well, and protection under any of these state laws can’t offer less protection than under the federal law. “Congress has enshrined this protection because they believe that when we have safe, edible food, it should be donated,” she says.

Along with strong liability protection, further incentives to participate in donor programs are the federal and state tax incentives given to businesses for redistributing their excess food or waste. Leib underscores the strong federal benefits that allow companies that redistribute excess food to claim a deduction that is larger than the deduction allowed for donating money or other goods.

Under the enhanced tax deduction, companies can claim the lesser of either two times the basis value of the donated food (or the price you paid to acquire the ingredients) or the basis value of the donated food along with half of the food’s profit margin. “Companies need to look at how much they spent acquiring the raw ingredients and how much they would sell the product for to come up with these two amounts and then claim the lesser of the two,” she says. Additional state-level tax credits are also available in about 10 states, she adds.

A Sound Strategy for Food Waste

Businesses and nonprofits worldwide are increasingly participating in the redistribution or upcycling of their food waste. Guidance on food safety issues, along with favorable liability protections and tax incentives offer businesses strong incentives to participate, as does the social investment of taking a resource (food waste) and making it available as edible food for the millions of people who go hungry each day.

Making food production and processing more efficient by cutting waste and the cost of managing waste is a sound business strategy, and the social benefit of helping to feed people is good business sense. The U.N. goal of cutting food waste in half by 2030 is well on its way and may be achieved with the participation of more businesses and organizations in this shared venture of better managing food waste.