Foodsharing in Russia

12.11.2019

TIARCENTER and the Russian Association of Electronic Communications (RAEC) have released a report on foodsharing in Russia. You can find the full text of the study here.

download the report

Foodsharing is online services where food is distributed among members of a community. It is an effective way of preventing wastefulness. During 2018, in Russia, thanks to foodsharing, approximately 7,000 tonnes of food was saved. The further development of foodsharing in Russia is to a large extent dependent on the emergence of new technology-based platforms. In the mid-term, the potential annual amount of food saved could reach 1m tonnes – and this could provide food to around 1.3m Russians in need, prevent the emission of 143,000 tonnes of methane, and enable business to be done with food with expiring shelf-lives with a total value of around 85bn rubles.

Every year, the world throws away at least 20% of all food produced – that’s about 884m tonnes of it. It makes up around 44% of all household waste.

In Russia, the food content in municipal solid waste (MSW) reaches about 17m tonnes every year. This is around 28% of all the MSW created by the country. Virtually all food waste (94%) in Russia ends up at garbage dumps and landfill sites where it goes on to pollute the air, soil and water table. That amount of waste food, 17m tonnes, gives off about 2.4m tonnes of methane (a potent greenhouse agent); not to mention other gases such as ammonia and hydrogen sulphide.

Annual Amount of Food MSW in Millions of Tonnes

Food loss and waste are generated on different stages from agricultural production to final consumption. Cumulative annual food loss and waste volume exceed 40% in Russia. More than 8% of losses occurs at the agricultural production stage; approximately as much as is lost during processing. At the selling stage (retail & restaurants) the amount lost comes to around 5%. The greatest wastage, almost 12%, is created at the consumption stage, in households.

If we analyse the constituents of food waste, we can single out the top 3 food types which go into creating it:

  • Cereal products (bread and pasta based goods, flour) take first place in household kitchen waste (62%) and third place in waste food from wholesale and
    retail outlets (12%).
  • Dairy products (milk, kefir, yoghurt, cheese, curds) – conversely top the waste in wholesale and retail (47%) while taking fifth place among consumer waste (5%).
  • Potatoes complete the trio: 15% of consumer waste and 11% of wholesale & retail waste.

Completely eradicating losses in just these three categories would mean a reduction in the amount of household waste by 82%, and of wholesale & retail wastage by 70%.

Food Waste by Food Category

17m tonnes of wasted food is not only the source of 2.4m tonnes of methane and other gases created at garbage dumps but also a substantial loss of money. The cost of this food is estimated at over 1.6 trillion rubles ($25bn). This figure equates to 12% of food retail revenue in Russia. Saving this amount of food would feed 30m people, in other words, more than the number of people in Russia living below the poverty line.

The solution: the emergence of foodsharing

An effective way of preventing wastefulness where food is concerned may be foodsharing. Foodsharing is online services where food is distributed among members of a community. Members can post details of food available, how much there is and where it is, and negotiate transferring it, for free or otherwise, to anyone interested.

Foodsharing services are akin to the concept of foodsaving – the environmental movement to rescue food resources. Also, foodsharing services can operate not only as non-profits but also as businesses, deriving profit from facilitating food distribution.

The foods which foodsharing deals with may vary in what they are worth but what they all have in common is their expiring shelf-life. So, time is an essential factor (perfectly good food could go to waste in just a few days). It is none other than online services with their geolocation and instant messaging capabilities that can make this food as mobile as possible.

Developing the foodsharing model will bring society a threefold benefit:

  • The food saved goes to those who want it, including those in need.
  • Natural and labor resources are used in a rational way (fewer resources overall are used and more people are fed as a result).
  • The amount of food going to waste is reduced.

How to UNLOCK foodsharing’s potential in Russia

During 2018, in Russia, thanks to foodsharing, approximately 7,000 tonnes of food was saved. According to market players, the removal of regulatory barriers
(of which more later) could lead to foodsharing in Russia to increase in volume to 1m tonnes by 2024.

There are three key components to realizing the potential of foodsharing in Russia:

  • friendlier state regulation regarding the status of produce used in foodsharing and taxation;
  • the development of technological platforms to enable a rapid growth in the number of participants and provide the mobility needed for distributing food;
  • food producers and distributors dedicated to making food management as efficient as possible.

The Prospects for Foodsharing in Russia

Favorable conditions for unlocking foodsharing potential

1. Friendly state regulation regarding the status of produce used in foodsharing and taxation.
According to retail companies, the current tax system makes its collaborations with foodsharing services economically unviable. It is cheaper for companies to dispose of food than it is to give it away to the needy for free as the tax burden on donation can amount to 40% of the cost of the goods. A draft law intended to resolve this problem was put before the State Duma in June 2019, however it was rejected by the Budget and Taxation Committee soon after.
There are also more particular complications. Like, according to sanitary-epidemiological requirements, it is forbidden to sell fruit and vegetables the integrity of the peel of which is impaired, even though they may be perfectly edible.
It should be noted that from June 2019 a law came into force forbidding the return to producers of residual stock with less than 30 days until its expiry date, as a result of which disposal of unsold stock is the responsibility of the retailer. In the light of this, chains order fewer goods from suppliers which quite often leads to empty shelves at the end of the day. Giving retail the opportunity to sell left-over stock via foodsharing would rid chains of the risk of creating extra waste.

2. The development of technological platforms to enable the rapid growth in the number of participants and the mobility needed for food distribution.
According to the study by RAEC and TIARCENTER “The Sharing Economy in Russia 2018”, growth in the sharing market last year amounted to around 30%, but individual sectors (carsharing or P2P leasing of items, for example) doubled their gross transaction volume. Foodsharing, on the other hand, is expanding and a much slower rate than other segments. It is seen primarily as charity rather than business. The Russian market is yet to see any sufficiently notable technology-based foodsharing projects, although the first startups and investment in this area exist already. International experience (including Karma and Olio) shows that it is possible for social and commercial goals to be combined successfully.

3. Food producers and distributors dedicated to making food management as efficient as possible.
More and more companies are aware of their responsibilities regarding the effect they have on the environment and are trying to adhere to the principles of sustainable development. One of these principles is the rational use of resources. In this regard foodsharing services can be attractive partners in corporate programs to minimize food waste and in charitable activities. This practice is flourishing in Europe and North America:

  • Auchan regularly sends food to European food banks;
  • Mercadona (a Spanish retail chain) collaborates with community dining rooms and food banks;
  • The Champions 12.3 initiative, supported by companies such as Mars, Nestle, IKEA Food Services AB and many others, works towards reducing the amount of food wasted in a transparent way: it regularly publishes the results of its mission. The initiative’s name comes from Goal (SDG) 12, objective 3: to halve the waste and reduce losses incurred along food supply chains.

Russian experience also offers quite a few examples of responsible business. Among the committed partners of the Rus food bank are some of the biggest players in the consumer sector like PepsiCo, X5 Retail Group, Mars, Cargill, Billa, Danone, Procter & Gamble, DIXY and others. Yet these projects still haven’t yielded significant quantitative results on a nationwide scale. Less than one percent
of food with expiring sell-by dates is successfully saved today through foodsharing.

The further development of foodsharing in Russia is to a large extent dependent on the emergence of new technology-based platforms. In the mid-term, the potential annual amount of food saved could reach 1m tonnes – and this could provide food to around 1.3m Russians in need, prevent the emission of 143,000 tonnes of methane, and enable business to be done with food with expiring shelf-lives with a total value of around 85bn rubles.

Outline of Legal Constraints Hindering the Development of Foodsharing

Issue Description Possible Solution
Passing on goods through foodsharing is prohibited by current health regulations

A whole range of foods suitable for consumption cannot in fact be sold, including:

  • foods unmarketable in appearance (bruised, for example);
  • goods that are incorrectly labelled.

 

A change in the status of foodstuffs suitable for consumption but not intended for sale with regard to current health regulations.
The high costs for companies associated with passing on food to foodsharing services Goods officially passed on by companies to charity are classified as having been released into the market (subpara.1 para.1 art. 146 of the Tax Code of the RF), therefore in company accounts they are recorded in earnings at their market price (para.2 art.154 of the Tax Code of the RF), which means that they are subject to the corporate tax (20%).
Also, companies transferring goods to foodsharing services find themselves last in the value-added chain and thus have to pay VAT, for which they cannot be compensated (up to 20%).
The total tax burden on food given to foodsharing can amount to 40% of its market value. These costs can significantly exceed those associated with the disposal of waste.
 
Passing of amendments to the Russian Tax Code providing for goods handed to foodsharing services to be removed from the VAT and profit tax bases. Incentives to be created for organizations donating food with expiring shelf-lives free of charge.
Additional risks associated with producer responsibility for the quality of goods passed on to foodsharing services Some existing foodsharing schemes are not officially registered but operate as social media groups through which food is redistributed. In light of this, donor companies have a responsibility to consumers for the quality of the food donated to foodsharing services. Risks are particularly high with hand-over of the following categories of food: meat, fish and dairy products, especially given that volunteers collecting them could fail to store them properly, causing them to be spoiled as a result.
 
Those in receipt of said food should sign a disclaimer, thus relieving the company of all responsibility.
Appropriate amendments in the Civil Code of the Russian Federation would be required for such an option.