The food economy is taking on a cyclical structure

The social and environmental impact of the feed and food sector is among the highest of any industry. The sector therefore has a key role to play when it comes to global sustainable development. The fight against food waste is one of the largest sustainability challenges in the sector. In Italy, around 5.1 million tonnes of food are wasted every year, while 4.5 million people are living in poverty.

Approximately 815 million people worldwide are suffering from hunger, but every year 1.3 million tonnes of food – around a third of the total produced – are wasted (The State of Food Security and Nutrition in the World 2017, produced by various UN Agencies). In the face of such challenges, the sector is, today, undergoing an innovation revolution, as startups bring new “sustainable” business models to the table. The models use new technologies and collaborative systems to create cyclical solutions that transform food waste into a shared value.

Between 2011 and 2017, in Italy and internationally, 399 agri-food startups were set up that also had objectives concerning social, environmental and economic sustainability. They account for around 20% all startups that are both active in the feed and food sector and have business models that propose innovative ways of using resources more efficiently, introducing “short supply chains” or using only natural materials in production.

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The concentration of agri-food startups in Italy is among the highest in the world: only Israel and Spain report a higher density. However, this market is still evolving slowly: with an average of 300,000 dollars of financing (compared to a global average funding for startups of 2.4 million dollars), these new companies are still struggling to achieve economic stability and to scale up their businesses. Essentially, there are many success stories of businesses in the sector that explore cyclical solutions to reducing food waste, increasing process efficiency and bolstering their social responsibility. However there remains a difficulty in taking these “isolated” instances and making them the common supply chain method. This would encourage partnerships with huge potential, between companies, startups and subjects in other sectors (non-profits, social enterprises and the public sector).

These results emerged from the first study conducted by Milan Polytechnic’s Food Sustainability Network within the School of Management.

“When it comes to the food and feed sector, innovation and collaboration are the key ingredients for more sustainable, cyclical and inclusive systems that can reduce food waste and aim generally for the ‘sustainable transformation of businesses’,” says Alessandro Perego, Director of the Department of Economics, Management and Industrial Engineering at Milan Polytechnic and Scientific Lead of the Food Sustainability Network. “Creating a cycle in fact demands new solutions to preventing and managing food waste, as well as innovative products and technologies and restructured management and logistical processes. In this way, the entire supply chain would be redesigned and so would the system of partnerships between companies and others operating within the system. Startups are contributing more and more effectively towards the innovation drive, pushing new socially and environmentally sustainable business models that encourage companies to seek ways to strengthen their position in the market and respond to customer demands, which are increasingly concerned for social and environmental issues.

When it comes to the food and feed sector, innovation and collaboration are the key ingredients for more sustainable, cyclical and inclusive systems that can reduce food waste.

Alessandro Perego, Director of the Department of Economics, Management and Industrial Engineering at Milan Polytechnic and Scientific Lead of the Food Sustainability Network

Sustainable agri-food startups

Society and the environment are the key focus areas of the world’s 399 “sustainable” agri-food startups. Their objectives are in fact directed at fighting food insecurity, moving towards responsible manufacturing processes and consumption, investing in more efficient infrastructure and promoting more sustainable and inclusive industrial processes. More specifically, innovation aims to promote sustainable agriculture (increasing the turnover of small-scale producers by giving them access to manufacturing resources and increasing their productivity and resilience to waste in the face of climate change), to reduce food waste at all stages in the supply chain and to optimise usage of resources, as well as to adopt “clean” technology and industrial processes that respect the environment.

Looking at the distribution of agri-food startups across the world, the US has the highest proportion by a long shot, with 790 startups, taking it to 39% of the total 2026 startups worldwide. But if we focus our attention on the countries most active in the sustainable feed and food sector, we see a different picture. Across the world, the country with the largest number of sustainable startups is Israel – 64% of its 28 agri-food startups are sustainable. They are notable for business models based on environmental-technological innovation. Israel is followed by Spain – 38% of its 29 startups focus on sustainability. Italy is next – 37% of its 38 startups are sustainable – and there is a heavy focus on merging environmental concerns with social ones. However, if we look at funding, Italy’s startups are still not attracting concrete recognition from investors. Globally, 62% of startups have received at least some funding, making a total of 605 million dollars in the year studied. This averages out at 2.4 million dollars each. In Italy, however, there was just 1.9 millions dollars of funding in total, an average of 0.3 million per startup. This is a long way away from the 296 million dollars (averaging 3.4 million per startup) doled out in the US.

Startups play an increasingly important role in promoting innovative solutions and new business models.

Paola Garrone, Scientific Lead of the Food Sustainability Network

Over the entire supply chain, sustainable agri-food startups tend to be service and technology providers. In fact, in most cases (47%), they are service providers – providing software or apps or offering consultancy services on sustainability. Otherwise, they are technology suppliers (16%), such as precision farming technology manufacturers, or they operate in the field of food processing (13%) for local, healthy or low-environmental-impact foods.

“Startups play an increasingly important role in promoting innovative solutions and new business models within the agri-food sector,” says Paola Garrone, Scientific Lead of the Food Sustainability Network. “In particular, they confirm the increasing relevance of technology in enabling companies to flourish. These young companies are, from the outset, places for experimenting with innovation to boost sustainability. They can bring new knowledge and skills to sectors whose ways have remained unchanged for years. These new businesses, however, still need to find economic stability and the ability to scale up if they are going to become systems that can generate a significant impact in the long term. In Italy we are beginning to see a huge innovative change, fuelled by a growing number of startups that focus on sustainability but that, for now in any case, struggle to achieve economic stability and to scale up the business.”

Business models for a sustainable food and feed sector

In addition to fuelling product and process innovation, the business models sustainable agri-food startups aim to follow have the power to create economic value that will have a positive effect on the environment and on society. The most common model is that of developing innovative systems that maximise efficient use of resources (38% of them fall into this category). This is followed by those focused on swapping the existing supply chain structure for short chains (27.5%, although they are ranked fifth in terms of how much funding they receive) and on using natural and/or renewable processes and materials in production. Other sustainable solutions that draw investment are those aimed at upstream protection of the supply chain (receiving around 2.7 million dollars) and reducing food waste, which interests entrepreneurs but still needs to earn the market’s recognition (receiving on average about 660,000 dollars).

The various sustainable startup business models we studied underline the importance of partnerships between the key players,” explains Raffaella Cagliano, Scientific Lead of the Food Sustainability Network. “If we take the models that turn waste into a valuable resource as an example, these startups are developing technologies and know-how to come up with innovative solutions in preventing and managing food waste. This attracts the attention of large supply chain companies. The benefit is two-fold: the startups obtain more resources with which to increase their impact, while the large companies gain support in resolving a highly relevant issue and, at the same time, legitimise their sustainability strategies.”

Partnerships play a vital role in reducing food waste and, more generally, in making the whole supply chain sustainable.

Raffaella Cagliano, Scientific Lead of the Food Sustainability Network

Partnerships can be formed between supply chain partners, between players in the “extended” supply chain (i.e. technology and service providers) or even with less traditional subjects such as non-profits, social enterprises and the third sector (cross-sector partnerships). Partnerships between startups and large companies can lead to a “symbiotic” model of working together that permits the implementation of business models centred on creating sustainability. Alternatively, it can create an “enlarged” model that allows startups, through the know-how and technology with which they pursue sustainability, to access a larger market and produce on a larger scale. Cross-sector partnerships allow profit-focused companies to pursue a social mission that is not usually central to their strategy. It brings them into contact with the disadvantaged subjects with which the third sector would usually work. “Partnerships play a vital role in reducing food waste and, more generally, in making the whole supply chain sustainable,” Cagliano clarifies. “Of all the supply chain structures, the vertical ones (although the more common models) are those that find it more difficult to implement sustainability; meanwhile those that function between startups and large companies or between sectors have huge potential, largely untapped because companies are unaware of the opportunities there are to establish partnerships.”

How to transform waste into something of value

To beat food waste, many agri-food companies are already operating a cyclical economy and exploring innovative solutions to make their processes more efficient and reinforce their social responsibility. In recent years in Italy, the rate at which food waste is recycled has increased from 7.5% in 2011 to 9% in 2015, thanks to a vast social awareness and to the spread of innovative practices – such as new packaging materials that extend the life of products, new digital technologies that optimise company processes and improved management of food stockpiles, with supply chain players donating surplus food to third-sector organisations.

The real challenge is moving away from excellent but isolated instances of recycling (difficult to scale up) and towards a true ‘recycling supply chain’.

Marco Melacini, Scientific Lead of the Food Sustainability Network

The Food Waste Hierarchy (FWH) allows for the implementation of food cycles that give priority to intended use in the following order: firstly, food products approaching their expiry date are recovered and redistributed to those in need. Then they are designated for animal consumption, recycled for industrial use, used to produce fertilisers and used for energy production. Only as a last resort do they go to landfill. Beginning with FWH’s model, the Network has studied innovative preventative practices and the management of food waste cycles at the various stages of the food and feed chain, thereby identifying which practices are most widespread and highlighting those less used due to being more difficult to implement. Precision farming technologies are already widely used in agricultural production – especially in the fruit and vegetables sector – to monitor crop health and develop methods of preventing waste production. The latter takes any waste generated and reuses it or redirects it towards social purposes. Another innovative but less widely used practice is that of implementing selection technologies in fruit and vegetable production, allowing for a significant reduction of waste both in the field and at collection centres, all the while responding to market demands. Best practice in processing companies seems to involve reusing and redistributing surplus final products for human consumption, implementing sales and operations planning to prevent surplus being generated, digital technologies that trace expiry dates and the state of preservation of foods, and packaging materials that can extend the shelf life of products. Reusing the surplus – highly perishable and therefore difficult to recover – that these establishments generate is still not a wide spread practice. For this to be the case, new partnerships are needed both within the supply chain and on a cross-sector basis. From suppliers to restaurants, there are huge numbers of innovative startups that work on optimising waste management downstream of the supply chain, yet the possibility of scaling up these solutions remains uncertain and work still needs to be done on managing unsold stock in large supermarket chains, which would require new partnerships between processing plants and suppliers.

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Success stories prove it’s possible to reduce food waste, but there are paths left to tread, rigid structures and barriers around preventative solutions and waste management that need to be broken down,” says Marco Melacini, Scientific Lead of the Food Sustainability Network. “The real challenge lies in taking excellent but isolated recovery activities that are difficult to scale up and turning them into a true ‘recovery supply chain’ system, one that marries technological solutions, collaborative efforts and streamlined processes with business models that involve all the players in the supply chain as well as inter-sector partners in a system-wide outlook.”

Success stories

The main route to success for the agri-food chain lies in reusing surplus and waste. Such reuse can take place outside the chain – supplying other sectors – or it can be within it.

There are two startups most notable for their ‘external’ reuse, both of them Italian. One is Ricehouse, which reuses the “secondary materials” of rice – straw, hulls and husks – for bio-construction,” explains researcher Federica Ciccullo. “The other is Orange Fiber, a Sicilian startup that reuses orange peel in the production of high-quality fabrics. It works with some of the largest fashion houses, including Ferragamo.” (See the two spools of thread in the featured photo, used to make garments.)

As far as external reuse is concerned, these are the largest examples. “The Swedish startup, Rescued, recovers from Ica supermarkets [the largest chain in Sweden] fruit not deemed suitable for sale to consumers because of aesthetic defects or because it is approaching its expiry date. It makes juice from the fruit, which the supplier then resells under a private brand,” explains Cicullo. “English startup Winnow has instead developed a software that records the food waste generated in dish preparation in restaurants so that the data can be viewed in real time, raising awareness among kitchen staff.” Since 2014, IKEA has adopted this solution at its stores in Sweden. Through this partnership it has reduced its food waste costs by 50% at most of the stores where the tool has been implemented. It also allows it to meet the demands of customers who are concerned for the issue of food waste, legitimising IKEA in the eyes of consumers. Then there is Nutrient, another Swedish startup that, by partnering up with Ica, has increased the volumes of food waste it is able to offer as insect feed. The insects are then used as fish food and, in the future, may be used to develop new insect-based proteins for human consumption.”

There are also two Italian examples in this field. “ReBOX makes recyclable containers with an innovative design that allows customers to take left over food (still edible) home from restaurants. It has created a network of 500 restaurants and around 1.5 million consumers. This is all thanks to its partnership with Edenred and ad hoc marketing campaigns promoting a no-food-waste culture. And we must not forget the partnership between social enterprise Semi di Libertà (which translates as ‘seeds of freedom’) and brewery Mastri Birrai which has established an educational project that teaches inmates in Roman prisons how Semi di Libertà’s craft beers are produced. The beers are sold under the name “Vale la Pena”, a play on the phrase meaning “it's worth it” and the word “pena” meaning “punishment”. A partnership with Eataly means the beers are sold at Eataly outlets in Rome, as well as via the retailer's eCommerce channel. In addition, Semi di Libertà has recently launched its “RecuperAle” beer, produced by fermenting surplus bread recovered from the Hotel Rome Cavalieri and Eataly outlets. This is done in partnership with not-for-profit organisation Equovento,” concludes Ciculli.

Di |2024-07-15T10:05:09+01:00Agosto 8th, 2018|MF, Sustainability & CSR|0 Commenti