Investing in the Future
Investing in the Future
This publication offers effective waste reduction solutions that can increase businesses’ financial returns. In the first part of the series, summarized below, we analyze waste's main sources and its impact. In part two, we highlight mainstream and innovative companies that have cut fuel costs by billions of dollars, slashed landfill waste by up to 90%, or reduced food spoilage to less than 1%. And in the final part, we present best practices to address waste that can prove profitable for businesses and investors. We also use data from UBS Evidence Lab to highlight regional, country and sector insights on waste.
At a glance
At a glance
Reducing waste boosts companies’ profits while lowering costs to the consumer. And what’s more, it can also improve broader societal outcomes.
We currently waste around 30% of all food globally at a cost of USD 1tr a year. Meanwhile, 10% of the global population goes hungry. Plastic packaging volumes are expected to more than quadruple by 2050, yet 95% of the value of such plastic is lost after one use, at a cost of up to USD 120bn each year. And, without change, plastics in the sea could outweigh fish by 2050.
Global solid waste composition
Food loss and waste (FLW) is a global issue, with the main drivers being supply chain inefficiencies in developing economies, and consumers buying more food than they end up consuming in richer nations.
Food waste threatens food security, food safety, the economy, and environmental sustainability. Although there are no definitive data on the global scope of food waste, one study indicates that we squander around 30% of all food globally (UN FAO 2015). Barclays estimates this wasted food costs the world economy around USD 1tr each year, potentially rising to USD 1.5tr by 2030. Meanwhile, more than 10% of the global population currently goes hungry. Global food waste translates into the equivalent of six refuse trucks of edible food being wasted every second.
Food waste comes at a cost. According to the Ellen McArthur Foundation, production and processing inefficiencies contribute 1.1 billion metric tons of waste per year, and 0.5 billion metric tons of food waste in cities through flawed transport and sales channels. This amounts to an annual economic loss of around USD 1.6tr each year. For particular foodstuffs like meat or waste, losses account for a fifth of production, the equivalent to 75 million cattle every year.
Paper and cardboard waste
The second largest contributor, paper and cardboard account for 17% of all global solid waste. The main drivers of paper waste are fine paper and tissue, with processed foods dominating as the end use for US corrugated board consumption.
In spite of technological developments (such as the rise of digital bank documents and online distribution), paper and cardboard are still widely used resources in the world economy. And some of the fastest growing economic sectors (such as e-commerce) may be driving increased use of cardboard for packaging.
In aggregate, global paper and cardboard waste (expressed as the ratio of consumption to production) has dropped modestly over the last 10 years.
However, there is considerable opportunity to increase efficiency and reduce waste across the sector. Waste levels have scarcely improved for fine paper used in printing and writing over the last decade—and have worsened for both tissue and newsprint. Waste management has improved in cardboard, albeit modestly.
Plastics (including plastic packaging) account for 12% of the world’s solid waste. The main drivers of plastic waste are excessive plastic packaging and low levels of recycling.
Despite their environmental impact, plastics remain an important part of the global economy. Plastic production grew from 15 million metric tons in 1964 to 311 million metric tons in 2014.Volumes are expected to double again over the next two decades, as plastic usage widens.
Today, 95% of plastic packaging’s material value, or USD 80–120bn annually, is lost after just one use. Just 14% of plastic packaging is collected for recycling. And when additional value loss in sorting and reprocessing is factored in, only 5% of material value is retained for a subsequent use. Plastics that do get recycled are mostly recycled into lower-value applications that are not again recyclable after use.
There is a disconnect between where major plastic producers and consumers are located, and where plastic ocean leakage is found. Although nearly all the top 20 plastic producers are located in the US and Europe, just 2% of the ocean’s plastics come from these two regions. Asia is home to 10% of the world’s 20 biggest fast-moving consumer goods (FMCG) companies (and none of the world’s biggest producers), yet the region accounts for 82% of plastic ocean leakage.
Share of annual global CO2 emissions, 2017
Industrial processes are the largest contributor to energy waste, accounting for nearly 40% of energy emissions (including indirect). The main drivers are inefficient energy or fuel mixes and poor conversion rates from inputs to outputs.
Why does industry account for such a large share of energy emissions? Energy mix is a major factor—the industrial sector remains dominated by fossil fuels (70%), mainly coal (accounting for around one-third of the total demand). ABB estimates that around 80% of energy is lost between extracting a resource (like coal) and the final use case (like electricity). In between, multiple industrial applications transport energy and drive production of final end products.
Energy efficiency measures could help to reduce waste, lower emissions, and cut pollution. The IEA estimates that, with today’s technology, one-third of energy could be saved (following a best-in-class approach). The expected payback period would only be three years in OECD countries and five years in non-OECD countries. The largest industry sectors in terms of energy consumption are steel production, chemical companies, non-metals (cement, glass, ceramics), and the paper industry. Reducing waste in these sectors would not only have positive impacts on carbon emissions, but also reduce solid waste and pollution.
Buildings and construction
Buildings and construction are the second biggest contributor to energy emissions. Here the main drivers of energy waste are energy-inefficient buildings and excessive use of building materials.
Buildings offer considerable potential for reducing energy consumption. The buildings segment currently accounts for around 36% of global final energy use and 39% of direct and indirect CO2 emissions. Based on IEA forecasts, new technologies and techniques for constructing and retrofitting buildings could improve energy efficiency (and reduce energy waste) by close to 40% by 2040.
Opportunities to improve energy efficiency within buildings abound. Water heating, lighting, and space heating consume a lot of energy, though efficiency rates vary across countries. Energy-efficiency measures in these areas can reduce waste, carbon emissions, and pollution. Examples include building insulation; a switch to LED lighting (particularly relevant when considering that lighting accounts for 15%–20% of all global electricity consumption); and building automation for climate control, lighting, and electricity outside of office hours.
The transport sector is the third largest contributor to energy emissions. The main drivers of waste are growing transport demand, high energy intensity for road travel, and limited adoption of zero- or low-emission modes of transport.
The sector consumes significant energy and generates large amounts of waste. For example, road travel is estimated to account for 73% of total transportation fuel use. At the same time, road travel is significantly more energy intensive than other modes of transport. Large passenger cars are more than six times as intensive as trains, and regular passenger vehicles have comparable intensity to planes.
Other forms of transport have made progress in reducing waste. According to a study by the International Council of Clean Transportation (icct), the compound annual reduction in fuel burn of new aircrafts was 1.3% between 1968 and 2014, or a total reduction of about 45%.In the marine industry, rising focus on reducing waste through stricter regulation (such as the International Maritime Organization’s 2020 rules on adopting compliant lower-sulfur fuels with a cap on sulfur oxide pollutants) can help to reduce emissions and pollutants alike.
What are the impacts of waste?
What are the impacts of waste?
Solid and energy waste both have direct and indirect impacts on a number of the UN Sustainable Development Goals. These impacts are typically environmental (through emissions or pollution) or social (such as health effects) in nature.
Waste reduction and its link to the UN’s Sustainable Development Goals
- Solid and energy waste has commercial implications (affecting costs and revenues) for households and mainstream businesses.
- We are spending too much on waste. On average, 60–85% of the costs associated with a building in the US are operating costs (for fuel, maintenance, and repair, etc.), which are directly affected by energy efficiency and waste. 95% of plastic packaging material value (USD 80–120 billion annually) is lost after a single use.
- And our well-being is also affected. The production of food and its by-products also have negative health consequences, estimated at USD 1.6trn each year. By 2050, around 5 million people a year – double the number of the world’s obese population today – could die due to unsustainable food production practices.