The government believes that in addition, business will benefit through achieving more streamlined supply chains and cutting out the expense of unnecessary waste.
Fundamentally though, the extra funding will allow WRAP - the Waste & Resources Action Programme - to work closely with manufacturers right along the supply chain to deliver what the government promises will be real change.
"This is a major step forward in reducing the 30 million tonnes of household waste that is produced every year," said UK environment minister Elliot Morley.
"I am delighted that the retail sector has thrown its support behind this groundbreaking initiative. I am looking forward to seeing high quality projects which bring savings to retailers and their suppliers, and reduce the waste householders have to throw away."
The campaign illustrates how food production and packaging are increasingly being targeted by governments in order to improve environmental performance. Research undertaken by WRAP shows that over 40 per cent of household waste which ultimately ends up in landfill, originates from purchases from retail supermarkets and convenience stores.
The ambitious aim of the Innovation Fund is to reduce this waste by 310,000 tonnes by March 2006.
To put this target into context, this is approximately equivalent to the total amount of household waste collected from the streets of Birmingham annually.
"Many consumers are becoming more aware of how much rubbish they are generating," said WRAP chief executive Jennie Price.
"They are recycling more and more, but there is relatively little they can do to control how the goods they buy are presented and packaged. Supermarkets and their supply chains have a major influence on what ends up in the household dustbin, and WRAP is looking forward to working with them to develop innovative products and packaging to reduce waste."
As far as retailers are concerned, the scheme could help business make significant operational savings. As well as achieving the primary aim of waste minimisation, the initiative could also help retailers to reduce their production, storage and transportation costs and lead to more efficient use of in-store shelf space.
In addition, the scheme could help companies improve their performance in relation to their corporate social responsibility (CSR) and sustainability targets.
"I welcome and support WRAP's Innovation Fund both in my Tesco role and as vice president of the Institute of Grocery Distribution (IGD)," said David Reid, non-executive chairman of Tesco.
"Innovation is key to growth and profitability for both retailers and suppliers and this fund will help us to develop new packaging and product designs whilst alsominimising household waste."
The British Retail Consortium (BRC) supports the initiative and directorgeneral Kevin Hawkins said: "The BRC fully supports the launch of the Fundand would encourage all those involved in the design of packaging for theretail sector to apply.
"This fund will create the opportunity to make major advances in the retail arena to the benefit of the environment and the sector as a whole."
WRAP is now inviting proposals for projects that offer direct reductions in the amount of food and packaging waste. Calls for applications to the fund have been posted on the WRAP website.