Food waste often flies under the radar in retail and across the supply chain, and every year, immense value is lost through inefficiencies, spoilage, overproduction, and poor forecasting. The consequences of food waste are global and affect economies and the environment.
On the Reshaping Finance podcast, Dr. Leanne Keddie, Associate Professor of Accounting at the Sprott School of Business, Carleton University, in Ottawa, Ontario, Canada, whose research focuses on sustainability accounting and food systems, digs into why food waste data remains unclear and what it will take for finance to lead the charge towards a more sustainable future.
‘The social, environmental, and economic implications of food waste are incredibly massive,’ said Keddie.
Management accountants are uniquely positioned to influence this issue, because they sit at the intersection of data, decision-making, and performance measurement within organisations. Food waste reduction requires exactly the capabilities that management accountants possess.
Why food waste remains invisible in financial reporting
Food is critical to our survival, and we need to reorient our accounting and finance systems to ensure we're doing the best we can with the food we have.
According to Keddie, anywhere from 30% to 60% of the food produced is lost or wasted throughout the system, and traditional accounting systems often obscure food waste by recording losses under the catch-all category of ‘shrink’.
‘Shrink’ is a misleading bucket that mixes spoilage, theft, damage, and administrative errors, according to Keddie, and the lack of accuracy and visibility means:
Waste is not measured accurately.
Its financial impact is underestimated.
Its environmental impact is invisible.
Organisations cannot manage what they cannot see.
Opportunities for cost savings and efficiency gains are missed.
‘Most accounting systems are not actually set up explicitly to measure waste. And this is partly a technology issue. It's partly a training issue. And unfortunately, it's often not something that's really thought about within organisations,’ said Keddie.
For management accountants, misaligned information systems lead to misaligned decisions.
Keddie explained that this lack of visibility is a systemic issue that starts with how we define and track losses. The language we use matters and changing it is critical. Breaking down ‘shrink’ into its parts and naming food waste directly would help organisations tackle its causes more effectively, according to Keddie.
Emotional barriers and the status quo
Beyond systems and spreadsheets, Keddie highlighted the human side of food waste. Emotions seem to be a significant barrier to accurate reporting.
‘Some folks fear that if the waste were more accurately measured, they might be accused of not doing their job well,’ Keddie said. ‘But there's also a fear of hurting the firm's reputation and rocking the boat too much. And unfortunately, this fear seems to be contributing to the hiding of waste and maintaining the status quo.’
There is also a widely held assumption that the market will eventually solve the problem. ‘There’s a paradoxical belief that capitalism will fix food waste, that if there was profit to be made, someone would have solved it already. But that assumption creates inertia and prevents organisations from taking responsibility,’ Keddie explained.
Building accountability into accounting
So, how do we bring food waste into the light, and how can accounting frameworks help to overcome the challenges? ‘The first thing we need ... is better accounting measurement systems to make sure we're tracking, measuring, and analysing food waste in these settings,’ Keddie said.
‘I would argue we need to address this issue by requiring more and better reporting on not just the volume of waste, but its sources, where it's coming from, and what initiatives are being put in place to address it.’
She also recommended better and clearer accounting standards that would require reporting on food waste specifically, as well as the amount of waste and what the organisations are doing about it from a prevention perspective.
Reporting not only the amount of waste but also what organisations are doing to prevent or divert it enables accountability to become part of the system. Reporting requirements are needed to align business practices with societal and environmental goals, according to Keddie.
The role of technology and circularity
Looking ahead, Keddie sees technologies like AI as a game-changer.
AI and blockchain could create transparent, tamper-proof records for food throughout its life cycle, enabling accurate cost assignment and highlighting opportunities to reduce waste across organisational boundaries. Triple-entry bookkeeping and connected data streams could lay the foundation for a new era of sustainability accounting.
‘Imagine if food was tracked throughout the supply chain via blockchain, making waste visible at every stage ... For me, I think that could be revolutionary,’ Keddie said.
‘If we had an accounting system that was not bound by organisational walls ... we could get a better sense of the overall picture, how the food's being handled in the system as a whole.’
But technology is only part of the solution. Store-level accounting for food waste currently lacks connectivity to national sustainability targets. Building networks across farms, retailers, and municipalities is essential to redirect waste into productive uses, like upcycling brewery grains into animal feed or fertiliser, demonstrating circular economy innovation, according to Keddie.
Aiming for zero food waste and three steps finance can take now
The vision Keddie outlined is ambitious but necessary. A fully integrated sustainability accounting system would aim for zero food waste by aligning production, demand, and redistribution.
Finance’s role would shift, ‘investing in circular models that maximise resource use and minimise waste, supported by greater literacy in sustainability and economics.’
The path forward starts with making the invisible visible, embedding accountability into our systems, and building the networks needed for a truly circular economy.
Three steps finance can take now include:
Audit your 'shrink' accounts to identify food waste components.
Advocate for separate tracking of food waste in your accounting system.
Explore pilot projects with AI or blockchain for supply chain transparency.
To hear the full conversation and explore the topic of food waste, listen to the entire episode: ‘Accounting for Food Waste — Reshaping Finance for a Sustainable Future.’
Additional resources:
Re-defining finance for a sustainable world