Approximately one-third of all food produced for human consumption is lost or wasted. The economic costs of this food wastage are substantial and amount to about USD 1 trillion each year. However, the hidden costs of food wastage extend much further. Food that is produced, but never consumed, still causes environmental impacts to the atmosphere, water, land and biodiversity. These environmental costs must be paid by society and future generations. Furthermore, by contributing to environmental degradation and increasing the scarcity of natural resources, food wastage is associated with wider social costs that affect people’s well-being and livelihoods. Quantifying the full costs of food wastage improves our understanding of the global food system and enables action to address supply chain weaknesses and disruptions that are likely to threaten the viability of future food systems, food security and sustainable development.
This document introduces a methodology that enables the full-cost accounting (FCA) of the food wastage footprint. Based on the best knowledge and techniques available, FCA measures and values in monetary terms the externality costs associated with the environmental impacts of food wastage. The FCA framework incorporates several elements: market-based valuation of the direct financial costs, non-market valuation of lost ecosystems goods and services, and well-being valuation to assess the social costs associated with natural resource degradation.
To demonstrate the proposed FCA methodology, this study undertakes a preliminary assessment of the full costs of food wastage on a global scale. In addition to the USD 1 trillion of economic costs per year, environmental costs reach around USD 700 billion and social costs around USD 900 billion. Particularly salient environmental and social costs of food wastage include:
• 3.5 Gt CO2e of greenhouse gas emissions. Based on the social cost of carbon, these are estimated to cause USD 394 billion of damages per year. • Increased water scarcity, particularly for dry regions and seasons. Globally, this is estimated to cost USD 164 billion per year. • Soil erosion due to water is estimated to cost USD 35 billion per year through nutrient loss, lower yields, biological losses and off-site damages. The cost of wind erosion may be of a similar magnitude. • Risks to biodiversity including the impacts of pesticide use, nitrate and phosphorus eutrophication, pollinator losses and fisheries overexploitation are estimated to cost USD 32 billion per year. • Increased risk of conflict due to soil erosion, estimated to cost USD 396 billion per year. • Loss of livelihoods due to soil erosion, estimated to cost USD 333 billion per year. • Adverse health effects due to pesticide exposure, estimated to cost USD 153 billion per year.
FCA gives an indication of the true magnitude of the economic, environmental and social costs of food wastage: USD 2.6 trillion annually, roughly equivalent to the GDP of France, or approximately twice total annual food expenditure in the USA. However, these results must be treated with a degree of caution as the calculation of non-market environmental and social costs of food wastage on a global scale requires a number of strong assumptions. The total environmental and social costs that have been calculated in this study are most likely to represent an informed underestimate as many impacts could not be included because of a lack of data or appropriate methodologies.
Further research should focus on specific contexts, at national or supply chain level. The FCA framework can serve as a template for more targeted research to inform mitigation policies. To assess the optimum level of food waste reduction for societies, it will be important to incorporate economic equilibrium analysis to simulate the interactions between food supply, prices, income and welfare in a dynamic economy. A further priority is to improve aspects of the social cost estimates. For instance, it is difficult to determine the exact impact of environmental conditions on individual well-being; many of the environmental variables associated with food wastage are highly correlated while others may not accurately measure the effect on well-being that is intended. We focus on three pathways to value environmental impacts on conflict, health and livelihoods, but there are likely to be many more. While our preliminary estimates are based on the best methods and data that are currently available, future work may be able to add missing pieces of the puzzle to further refine current estimates.
By unveiling the hidden environmental and social costs of food wastage, FCA provides an illustration of the market distortions in the global food system. These costs are real and they demand action. Despite the uncertainties that remain, it is apparent that food waste mitigation makes sense from economic, environmental and social perspectives. For future population scenarios, food wastage mitigation could play a crucial role in assuring food availability while respecting critical planetary boundaries.