Today, the number of startups is mushrooming. According to Tech in Asia, an online community for startups in Asia, Indonesia's startup ecosystem remains conducive despite the current economic turmoil caused by the pandemic. Many startups are still receiving funding from venture capitalists, although the rate is declining. The difference is that venture capitalists are now more rigorous in assessing startups' profitability plans and the potential of their sectors.
The emergence of technological innovations through startup services across various sectors has had a significant positive impact on the Indonesian economy, both at the micro and macro levels. According to INDEF research, the digital economy contributed 5.5%, or approximately IDR 814 trillion, to Indonesia's GDP in 2018. The same research also found that the digital economy sector has created approximately 5.7 million new jobs. According to a report titled eConomy SEA 2019, the valuation of Indonesia's digital economy reached $40 billion in 2019 and is predicted to reach $130 billion by 2025.
Serious attention to startup growth is certainly necessary to advance the nation's economy. According to William Gozali, Chairman I of the Indonesian Venture Capital and Startup Association (AMVESINDO), there are three potential sectors to be explored in 2021: MSME digitalization, social commerce, and food technology.
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The final sector, food technology startups or food and beverage startups , has shown promise recently. This is evidenced by Kopi Kenangan's success in securing $109 million (approximately IDR 1.6 trillion) in funding amid the pandemic.
The next challenge is how to create a food industry business model that can generate significant profits not only economically but also environmentally. To achieve this, there are at least three areas of the food industry that need to be disrupted by introducing more environmentally friendly innovations:
1. Optimization of local food
Local food consumption can be defined as the practice of consuming food produced locally. In the United States, locavores are known as "locavores," and they typically consume food produced within a 100-mile radius of their home.
The distribution and transportation of food, which is generally over long distances, is associated with high fuel consumption, increased air pollution and greenhouse gas emissions, which have a negative impact on the environment.
By consuming local food, these negative impacts can be mitigated. Furthermore, consuming local food supports local farmers or small-scale landowners, who generally practice more environmentally friendly production systems than larger landowners. Generally, local farmers' production models are agroecological and multicultural, with minimal use of chemical inputs, thus maintaining soil fertility. Consuming local food, which is synonymous with food diversification, can also help maintain genetic diversity (biodiversity).
2. Reducing the number of food loss and food waste
An estimated one-third of the world's annual food production (approximately 1.3 billion tons) is wasted, either as food loss or food waste . Food loss is the waste of raw food that can no longer be processed and is ultimately discarded. Causes can include post-harvest spoilage, poor quality, or low market demand. Food waste, on the other hand , is food that is ready for human consumption but is simply thrown away and ends up in landfills.
Food waste has a negative impact on the environment. According to the FAO, agricultural production accounts for 92% of the country's water footprint. A product's water footprint is defined as the total volume of fresh water used to produce it. Environmental problems arise when water use is greater than blue water (irrigation) and green water (rainwater). This can lead to soil degradation, water depletion, and salinization. In fact, globally, the blue water footprint for agricultural production from wasted food reached approximately 250 km3 in 2007.
Another major problem is the carbon footprint. Food waste that accumulates in landfills produces methane and carbon dioxide. Both of these compounds are unhealthy for the environment because they have the potential to damage the ozone layer. The average carbon footprint is around 500 kg of CO2 per capita per year. Furthermore, food waste is also associated with wasteful land clearing, which generally results in the loss of biodiversity.
3. Substitution of environmentally unfriendly packaging materials
According to the Indonesian Olefin, Aromatic, and Plastic Industry Association (INAPLAS), plastic consumption in Indonesia reached 17 kg per capita per year in 2015. This high level of plastic use negatively impacts environmental sustainability. The accumulation of non-biodegradable plastic waste can pollute the environment. Synthetic polymers, the main component of plastic, degrade over tens or even hundreds of years. When burned, plastic produces carbon emissions that pollute the environment.
To mitigate these negative impacts, biodegradable plastics have been developed, which are plastics that are easily broken down by microorganisms in the soil into environmentally friendly compounds. Biodegradable plastics are made from natural polymers such as starch, cellulose, and fats. The main ingredients often used in biodegradable plastics are starch and polylactic acid (PLA).
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Starch is a widely available raw material in Indonesia. Starch is obtained by extracting carbohydrate-containing plant materials, such as cereals and various tubers. Commercially, the bioplastic production industry is still limited due to low domestic demand. Biodegradable plastic is more expensive than conventional plastic, partly because production capacity is not yet optimal and processing technology is not yet widely developed. Furthermore, the lack of regulations restricting the use of conventional plastics is also a contributing factor.
These three areas need to be managed effectively to mitigate negative environmental impacts. Innovation in the form of environmentally-oriented food technology startups can provide a solution. Digital services can easily connect local farmers with consumers, enable traceability of food ingredients, optimize food waste recycling, process low-quality crops while still maintaining their quality, and encourage research and the use of environmentally friendly packaging to increase affordability.
The services above are just a few examples of what can be done to optimize technological advancements to protect and preserve the environment. There are certainly many more. The flexibility of startups in developing business models is a distinct advantage, enabling them to quickly adopt an environmentally friendly economic system.
To realize this idea, collaboration is needed from various parties, including the government, businesses, and consumers. Now is the time to direct technological advances to transform the food system and economy to be more environmentally friendly.
By: Muhammad Zaki Maarif Firman
IPB University Students
