Net Financial Benefit

Definition:

The Net Financial Benefit of a solution is the financial benefit that ReFED estimates a particular stakeholder (or all stakeholders combined) could acquire after incurring the necessary costs to implement the solution as well as any potential cost savings, added revenue generation, etc.

Master Net Financial Benefit Equation:

Net Financial Benefit = Gross Financial Benefit - Cost

(Note that all annual costs and benefits are calculated using Net Present Value over 10 years with a 4% discount rate.)

In ReFED’s data model, the following calculations are repeated for every sector, state, food type, and stakeholder before any aggregation is done.

Table 2. Calculations Performed to Estimate Net Financial Benefit of U.S. Food Waste Solutions

DATA ITEM	DATA SOURCE OR CALCULATION	EXAMPLE
Cost per Ton Diverted	Multiple data sources (See Appendix G for the data sources for each solution)	Estimated costs for each stakeholder involved in ‘Donation Storage Handling & Capacity’ in the Foodservice sector: Foodservice Companies: = $137 per ton for labor Solution Providers: = $1,007 per ton to store food Government: = $162 per ton for reduced tax revenue from donations tax deductions Consumers: $0 cost All Stakeholders Combined: = $137 + $1,007 + $162 + $0 = $1,307 per ton
Gross Financial Benefit per Ton Diverted	Multiple data sources (See Appendix G for the data sources for each solution)	Estimated financial benefits for each stakeholder involved in implementing ‘Donation Storage Handling & Capacity’ in the Foodservice sector: Foodservice Companies: = $206 per ton for waste hauling savings plus cash tax savings from enhanced tax deductions as opposed to taking a regular loss deduction Solution Providers: = $0 (most donations organizations do not charge businesses to donate food so they do not generate revenue) Government: = $0 Consumers: = $4,842 per ton from the retail value acquired from donated food All Stakeholders Combined: = $206 + $0 + $0 + $4,842 = $5,048 per ton
Annual Solution Diversion Potential	See Diversion Potential calculations above.	ReFED estimates that ‘Donation Storage Handling & Capacity’ could divert 93.35 tons of Prepared Foods Catering Overproduction annually in the Florida Limited Service Restaurants Mexican Foodservice sector.
Annual Cost to Implement	= Cost per Ton Diverted * Annual Solution Diversion Potential	Foodservice: = $137 per ton for labor * 93.35 tons diverted = $12,808 Solution Providers: = $1,007 per ton to store food * 93.35 tons diverted = $94,023 Government: = $162 per ton for reduced tax revenue from donations tax deductions * 93.35 tons diverted = $15,182 Consumers: = $0 * 93.35 tons diverted = $0 All Stakeholders Combined: = $12,808 + $94,023 +15,182 + $0 = $122,014
Annual Gross Financial Benefit	= Gross Financial Benefit per Ton Diverted * Annual Solution Diversion Potential	Foodservice: = $206 per ton for waste hauling savings plus cash tax savings * 93.35 tons diverted = $19,283 Solution Providers: = $0 * 93.35 tons diverted = $0 Government: = $0 * 93.35 tons diverted = $0 Consumers: = $4,842 per ton from the retail value acquired from donations food * 93.35 tons diverted = $452,020 All Stakeholders Combined: = $19,283 + $0 + $0 + $452,020 = $471,304
Annual Net Financial Benefit	= Annual Gross Financial Benefit - Annual Cost to Implement	Foodservice: = $19,283 gross financial benefit - $12,808 cost = $6,475 net financial benefit Solution Providers: = $0 gross financial benefit - $94,023 cost = $-94,023 net financial benefit Note: Notice that Solution Providers are not usually profitable for this solution. Since most donations organizations do not generate revenue from donations food, their costs are usually covered by grants so that they can remain operational. Government: = $0 gross financial benefit - $15,182 cost = $-15,182 net financial benefit Consumers: = $452,020 gross financial benefit - $0 cost = $452,020 net financial benefit All Stakeholders Combined: = $6,475 + $-94,023 + $-15,182 + $452,020 = $349,289 net financial benefit Reminder: This example calculation is not the total net financial benefit potential for the solution. These calculations were repeated for every sector, cause, food type, and state before aggregating and summing the total net financial benefit for each solution.