The New Economics of Food Waste

By: Daniel Triot, Senior Director, FMI-GMA Trading Partner Alliance

Industry, government and consumers all are looking for a solution to the urgent problem of food waste. According to Barbara Cohen, co-founder of Food Cowboy, every year, 44 million tons of food valued at over $60 billion is wasted after production and before reaching retailers. 

But now, recent amendments to the tax code provide the industry with new incentives to donate food that would otherwise be wasted, meaning there is a new economic motivation around decreasing food waste in our supply chains. At the TPA Supply Chain Conference (February 22 – 24) we’ll be looking deeper into the topic of food waste during the session, Technology, Taxes and the Economics of Food Waste. I took time to chat with co-founders Cohen and Roger Gordon beforehand to better understand the complexity of the issue. 

They shared that along with the intrinsic benefit of reducing environmental hazards and hunger, there are tangible industry benefits to donating food. “Recent permanent changes to the tax code make it easier for the industry to benefit from enhanced tax deductions on food donated to charities. These changes provide for industry-wide tax savings of up to $6 billion a year for donating unsaleables,” said Gordon.

Cohen continued to explain that the changes allow all businesses to be eligible for tax breaks and that fair market value (FMV) can now be calculated without regard to defects. “Businesses are able to deduct an additional amount equal to 50 percent of profits “lost” when they donate (the difference between the FMV and costs) from their taxable income (in addition to actual costs). The tax change also contained a special provision that triples the tax benefits for growers.