Kimbal Musk meets with Square Root farmers at the company's Brooklyn headquarters, home to farms housed in shipping containers. Mary Stevens | CNBC

One-third of the world's food supply is wasted, according to research from the UN Food and Agriculture Organization. Now a start-up called Square Roots, co-founded by Kimbal Musk (Elon Musk's brother) and Tobias Peggs, wants to reduce that waste by growing food as close as possible to the point of use. Based in Brooklyn, New York, Square Roots has developed and installs "modules" — hydroponic farms in reclaimed shipping containers that can grow certain non-GMO vegetables around the clock and without pesticides. Today they are producing mint, basil, other herbs and leafy greens. The company made CNBC's 2019 Upstart 100 list, released Tuesday. The modules, which employ software-controlled LED lighting and irrigation systems, can be set up in the parking lot of a grocery store or even inside a large warehouse or industrial building, enabling a food maker to access fresh ingredients locally for use in their dishes or packaged products. According to CEO Peggs, raising at least some crops close to where they will be eaten helps reduce the food damage and spoilage that occurs during shipping from a point of harvest to a faraway destination. Growing food in a tightly controlled microclimate also means those crops can have better flavor and yield than counterparts that are grown in traditional farms, said Peggs, who added that in the great but unpredictable outdoors, everything from changes in soil acidity to humidity can harm crops.

Square Roots CEO Tobias Peggs is redefining urban farming. Square Roots

Those who buy Square Roots produce can scan a QR code on the packaging to read a "transparency timeline," with details about their fresh food, like the identity of the farmers who grew it and when it was harvested and delivered to the store. One day Square Roots aims for its technology to work off-world. Kimbal Musk, who is Square Roots' executive chairman and also holds board seats at SpaceX and Tesla, said: "I'm focused on bringing real food to everyone (on Earth), but the farming technology we are building at Square Roots can and will be used on Mars." Peggs, who has a Ph.D. in artificial intelligence from Cardiff University, has a history of building businesses with Kimbal Musk. Peggs was the CEO of a social media analytics firm called OneRiot, which Musk co-founded. They sold it to Walmart in the fall of 2011. Peggs and other OneRiot employees joined Walmart Labs, and helped the retail giant roll out mobile apps and analytics in international markets. That was when Peggs became intrigued with the potential for software to help feed the world. More from Upstart 100:

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Amazon has triggered an arms race in this technology Square Roots faces significant competition in what's known as indoor ag or sunless farming, including venture-backed competitors Bowery Farming, Plenty, Freight Farms, Gotham Greens and AeroFarms, among others. Their potential to reduce the environmental footprint of agriculture is yet to be determined. Modern agriculture accounts for 24% of greenhouse gases and is the No. 1 source of pollution on the planet, according to environmental researcher Paul Hawken, the founder of Project Drawdown, a nonprofit that points to ways global warming can be reversed. Hawken told CNBC, "Indoor ag may or might not pencil out with respect to sustainability when all the energy and inputs are totaled." That's because indoor farming requires more human-made energy but less transport and distribution energy.

Square Roots container farms can grow fresh mint and basil, year-round, in Brooklyn. https://squarerootsgrow.com/

Moreover, crops from indoor farms might not match the nutrition of soil-grown crops, because the medium the plants are grown in is either hydroponic or assembled substrates. Hawken wrote: "What makes plants superfoods and nutritious is stress, not 'perfect' temperature-controlled growing environments. Phytonutrients that are vital to human health do not develop to the same extent indoors. Sun, UV radiation, insects, dryness, competition, wind and wide temperature variations ultimately make plants strong, delicious and nutritious." But it will bring locally grown, organic produce — part of a healthy diet — to markets that may not have much of it otherwise, he said.

Inspiring a new generation of farmers

Square Roots is aiming to work with partners that use renewable energy as much as possible to power their modular farms, said Peggs. One recent example is Square Roots' partnership with Gordon Food Service in Grand Rapids, Michigan, which runs its business partly on wind power. The company has agreed to roll out Square Roots modular farms across their network of hundreds of retail stores and food production and distribution facilities in the U.S. in coming years.

Rather than a plant factory, where you'd spend tens of millions to build an industrial-scale facility that could take two to three years, we pop up in a new city in a matter of weeks. Tobias Peggs Square Roots co-founder