Food for Thought: Healthier Eating, Healthier Planet
How the food and agriculture industries could benefit from improving sustainability and helping consumers to fight climate change through healthier eating.
Agriculture and food production have a significant negative impact on the environment in terms of their use of natural resources and contributions to greenhouse gas emissions.
Consumers’ eating habits in many developed countries worsen the problem, as livestock bred for the meat and dairy industries are among the biggest contributors to these problems.
The food industry has numerous business opportunities to reduce waste and serve nutrition-conscious consumers who care about sustainability.
Many of us in developed countries consume a traditional Western diet typically heavy on animal protein and refined carbohydrates. We tend to eat whatever we want without thinking about how our diet impacts the environment and climate change.
And although most of us are accustomed to seeing fully stocked grocery store shelves, ensuring that people everywhere have regular access to sustainably produced, nutritious food in a way that doesn’t deplete natural resources is one of the world’s greatest challenges.
This involves contentious issues such as the meat industry’s harmful environmental impacts and destroying forests to clear land for agricultural use. It also entails alarming levels of food waste and food insecurity in many parts of the world.
Addressing these problems requires innovative solutions that we believe also offer compelling investment opportunities — e.g., shifting to alternative proteins, upcycling and sustainable farming. We believe the food and agriculture industries worldwide can meet the food sustainability challenge.
What Is Food Sustainability?
How Food Production Affects the Environment
The primary environmental impacts of food and agriculture businesses include:
Greenhouse gases (GHG).
Eutrophication (i.e., runoff from land that produces an overgrowth of plant life that kills aquatic animals due to diminished oxygen).
Loss of biodiversity.
Figure 1 shows that agriculture is a significant producer of greenhouse gases, rivaling the energy used for transportation and buildings.
Figure 1 | Aside From Energy Production, Agriculture Is a Significant Source of GHG Emissions Globally
Data as of 2016. Source: Climate Watch and World Resources Institute.
Animal-based foods tend to have higher carbon footprints than plant-based products. For example, producing 1 kilogram (kg) of beef emits 60 kgs of CO2e (carbon dioxide and other greenhouse gases), while producing lamb and cheese generates more than 20 kgs of CO2e per kg. Poultry and pork are less harmful but still generate 6 kgs and 7 kgs, respectively, per kg. Compare that to peas, which emit just 1 kg of CO2e per kg.1
Half of the world’s habitable land is used for agriculture, and many agricultural practices harm the environment and are generally unsustainable. For example:
Expanding the amount of land used for agriculture is one of the biggest contributors to an alarming loss of biodiversity. Agriculture threatens 24,000 of the 28,000 species designated as “threatened with extinction” on the International Union for Conservation of Nature’s Red List of Threatened Species™.
Seventy percent of freshwater withdrawals (taken from ground or surface water sources) globally are used for agriculture, placing significant pressure on water resources in water-scarce regions.2
Agriculture causes about 78% of the global ocean and freshwater eutrophication.3
Fighting Climate Change by Eating Better
Is it possible to address these problems by making healthy changes to our diets? Many of us don’t necessarily follow nutrition experts’ advice in making our food choices. But we may not realize that the impact of our suboptimal eating goes beyond our health by contributing to climate change.
Producing meat and dairy products, particularly from cows, accounts for roughly 14.5% of the world’s greenhouse gases each year. Many studies show that people who eat meat-heavy diets could shrink their food-related carbon footprints by one-third or more by adopting more sustainable vegetarian regimens. Giving up dairy would further reduce GHG emissions.
Of course, going full-blown vegan is not realistic for most people, and importantly, it’s not the only way to help improve this situation! Simply shifting our diet toward more vegetables, legumes, grains and fruits and consuming less dairy and meat (especially red meat) would significantly contribute to combating climate change. According to the World Resources Institute, the average American’s food-related carbon footprint would decline by around 13% if we replaced one-third of the beef we eat with pork, poultry or legumes.4
Of course, making this more readily achievable change in how we eat would also produce real health benefits and likely reduce medical expenditures. Studies show that eating a diet full of antioxidant- and fiber-rich foods like fruits, vegetables, whole grains and legumes can improve blood pressure, reduce heart disease, lower the risk of developing type 2 diabetes and reduce the risk of cancer.5
More Sustainable Food Production Means Less Food Waste
Given that producing food uses so many natural resources, we think it’s shocking that over one-third of the food produced in the United States is never eaten. Think about that in light of the United Nations’ prediction that the world population will grow to 9.3 billion by 2050.
Food production would have to increase by over 50% versus 2010 levels to feed that many people. But by reducing food waste, we could greatly reduce the amount of new food production the world will need! That would decrease projected deforestation, biodiversity loss, greenhouse gas emissions, water pollution and water scarcity.6
Minimizing food waste is worth pursuing to reduce the food and agricultural sector’s environmental impact, but it would also improve profitability. The Business Case for Reducing Food Loss and Waste found that for every $1 invested in reducing food waste and loss, companies could save as much as $14 in operating costs.
In addition to reducing food waste, we believe there are several opportunities for the food industry to appeal to consumers and generate profits while reducing the environmental harm caused by agriculture. According to Grand View Research, the global dairy alternatives market was valued at $23.2 billion in 2021 and is expected to expand at a 12.5% compound annual growth rate (CAGR) from 2022 to 2030. The market is gaining momentum, with strong demand for sustainable food options reflecting a shift in consumer eating patterns and dietary trends.7
Leading alternative protein sources include plants, insects, mycoprotein (e.g., mushrooms) and cultured meat. Investors are taking note of the opportunity they represent, as retail sales of plant-based foods grew 6.2% in 2021 over a record year of growth in 2020. For example:
In 2019, Tyson Foods sold its 6.5% stake in Beyond Meat and now manufactures its own plant-based products.
Bill Gates and Chinese business magnate Li Ka-shing have stakes in Impossible Foods.
Richard Branson and Tyson Foods have invested in Memphis Meats, a U.S.-based company now known as Upside Foods that produces “clean” meat by culturing animal tissue from cells.8
Some companies, such as Motif Foodworks (a Boston-based “foodtech” startup), are working to improve the texture, mouthfeel and flavor profile of plant-based meat alternatives to make them more appealing. Spain-based Novameat has been experimenting with 3D-printing technologies to imitate the fibrous texture of steak. Meanwhile, Good Catch Foods, Finless Foods and New Wave Foods are creating sustainable seafood alternatives.9
McKinsey predicts continued growth in alternative protein-based food sales from a growing number of new brands and food industry giants such as Kellogg, Nestle and others.
Upcycling Reduces Food Waste
Upcycling food is good for the environment, good for food and water security, and has nutritional benefits.10 According to the Upcycled Food Association, upcycled food is made with ingredients that otherwise would not have been consumed, are sourced and produced using verifiable supply chains and positively impact the environment.
Brands that have embraced this movement include Barnana (uses imperfect bananas to make snacks), Wtrmln Wtr (uses imperfect watermelons to make cold-pressed juice) and Barvocado (uses upcycled avocado seeds to make energy bars). According to Future Market, the upcycled food market is worth $46.7 billion, with an expected CAGR of 5% over the next 10 years.
Opportunities for Sustainable Farming Through Technology
Sustainable farming practices that reduce costs and boost yields are another way to reduce agriculture’s environmental harms while improving the food industry’s economics. For example:
Farmers could use artificial intelligence (AI) to identify the best-performing regenerative agriculture practices to prevent soil exhaustion without conducting costly, time-consuming field trials.
Digital and precision agricultural technologies could help farmers generate better results while reducing the amount of chemicals they use.
Manufacturers could develop slow- or controlled-release fertilizers, which make nutrients available over a longer period while preventing leaching and groundwater contamination.11
AI algorithms could help with food sorting using images and data from cameras, X-rays, lasers and other technologies.12
Manufacturers could develop new seeds and crops through breeding and hybridization, as well as genome editing to produce crops with advantageous characteristics.
Farmers could switch to electric equipment to potentially realize cost savings of $229 per ton of carbon dioxide equivalent.
There has been a noteworthy shift in consumer preferences toward sustainable food options. Businesses could better satisfy consumer demand and build brand loyalty by rethinking their products in terms of sustainability and continuing to innovate to help mitigate climate change.
Investors may find opportunities by examining how companies adapt and innovate to capture a bigger share of consumers’ food spending based on growing preferences for healthy, good-tasting and planet-friendly food.
Bakkafrost is the leading producer of top-quality salmon from the Faroe Islands, the self-governing archipelago of the Kingdom of Denmark. The third-largest fish farming company in the world, Bakkafrost is committed to the highly sustainable production of top-quality food that creates value for its customers, shareholders and society.
Committed to minimizing its environmental impact, the company has a good feed conversion (GFC) ratio, the standard measure of livestock production efficiency, where the weight of feed intake is divided by the weight gained by the animal (lower is better).
According to Bakkafrost sustainability materials, the company seeks to protect the environment around its farming sites across fjords and lochs and has a relatively low CO2 footprint. (The salmon industry has a low carbon footprint compared to other industries — less than 3% of the emissions associated with beef production.)
The company achieves this partly through efficiencies from a vertically integrated value chain and striving to use all the co-products from its salmon — selling backbones, offcuts, bellies, skin and heads. Its hatcheries have a high demand for water, so it has invested in improved technology to recycle water at all its hatchery sites.
DSM is a Netherlands-based global leader in development and manufacturing solutions for human and animal health and nutrition. Self-described as a science-based company operating in the fields of health, nutrition and bioscience, it focuses on sustainable solutions in Food & Beverage, Health, Nutrition & Care, and Animal Nutrition & Health, having recently divested its Materials division.
DSM has a pipeline of innovative solutions directly tied to some big sustainability themes.
One example is a new product, Bovaer®, a feed additive for cows and other ruminants that DSM researched and developed over 10 years. A quarter teaspoon of Bovaer® per cow per day suppresses the enzyme that triggers methane production in the animal’s intestines and consistently reduces the animal’s methane emissions by approximately 30% for dairy cows and up to 90% for beef cows. 13
Livestock accounts for 37% of U.S. methane emissions, and cattle are responsible for 86%.14 We believe the product has the potential for commercial success as it will help food companies to meet their climate pledges.
Another innovative product from DSM that supports biodiversity is Veramis®. Developed through a joint venture with Evonik, Veramis® uses algae to create omega-3 fish oil. While humans consume omega-3 fish oil as a health supplement, it is also used for farm-raised fish like salmon. According to DSM, 20% of all fish caught today are used to produce fish oil to feed farmed fish!15 Creating fish oil from algae can make fish farming much more sustainable.
Hannah Ritchie, “You want to reduce the carbon footprint of your food? Focus on what you eat, not whether your food is local,” Our World in Data, January 24, 2020.
Peter H. Gleick, et al., “The World’s Water: The Biennial Report on Freshwater Resources,” 2014.
Hannah Ritchie and Max Roser, “Environmental Impacts of Food Production,” Our World in Data, June 2021.
Julia Moskin, Brad Plumer, Rebecca Lieberman, and Eden Weingart, “Your Questions About Food and Climate Change, Answered,” The New York Times, April 15, 2022.
Margaret O’Malley, “Why Mark Bittman wants you to be a part-time vegan,” NBC News, July 10, 2018.
Kirsten Jaglo, Shannon Kenny and Jenny Stephenson, “Part I: From Farm to Kitchen — The Environmental Impacts of U.S. Food Waste,” U.S. Environmental Protection Agency Office of Research and Development, November 2021.
Grand View Research, “Dairy Alternatives Market Size, Share & Trends Analysis Report by Source (Soy, Almond, Coconut, Rice, Oats), by Product (Milk, Yogurt, Cheese, Ice Cream, Creamers), by Distribution Channel, and Segment Forecasts, 2022-2030.”
Deloitte, “Plant-based alternatives driving industry M&A,” 2019.
CB Insights, “Research Brief: Our Meatless Future — How the $2.7T Global Meat Market Gets Disrupted,” August 9, 2021.
Daphne Ewing-Chow, “Upcycled Food Is the Coolest Trend You’ve Probably Never Heard Of,” Forbes, May 31, 2021.
Matthias Baeumier, “Agribusiness Can Lead the Shift to Sustainable Farming,” Boston Consulting Group, February 22, 2022.
Daniel Aminetzah, Joshua Katz, and Peter Mannion, “Agriculture takes center stage in the drive to reduce emissions,” McKinsey Quarterly, June 2020.
DSM, “How cows can help us fight climate change,” accessed October 21, 2022.
Erin Jones, Ariane Datil, and Alanna Delfino, “Yes, cattle are the top source of methane emissions in the U.S.,” Verify, December 14, 2021.
DSM, “Plenty more fish in the sea? Replacing fish with Veramaris® algal oil,” accessed October 21, 2022.
References to specific securities are for illustrative purposes only, and are not intended as recommendations to purchase or sell securities. Opinions and estimates offered constitute our judgment and, along with other portfolio data, are subject to change without notice.
Many of American Century’s investment strategies incorporate sustainability factors, using environmental, social, and/or governance (ESG) data, into their investment processes in addition to traditional financial analysis. However, when doing so, the portfolio managers may not consider sustainability-related factors with respect to every investment decision and, even when such factors are considered, they may conclude that other attributes of an investment outweigh sustainability factors when making decisions for the portfolio. The incorporation of sustainability factors may limit the investment opportunities available to a portfolio, and the portfolio may or may not outperform those investment strategies that do not incorporate sustainability factors. ESG data used by the portfolio managers often lacks standardization, consistency, and transparency, and for certain companies such data may not be available, complete, or accurate.
The opinions expressed are those of American Century Investments (or the portfolio manager) and are no guarantee of the future performance of any American Century Investments' portfolio. This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.