Packaging & Sustainability | INVERTO, A BCG Company

Sustained Confusion

Plastic tax, ban on disposable bags, CO2 certificates – the politicians have come up with ideas to stem the flood of plastic waste. More and more consumers also take a critical view of conventional packaging. Sustainable solutions are therefore a high priority for retailers, consumer goods manufacturers and packaging producers. High time to create clarity with a study …

Everybody wants sustainable packaging, but nobody knows exactly what it is. That’s because there are no exact criteria for what it takes for packaging to be sustainable. Yet, the vast majority of the packaging manufacturers, consumer goods producers, and retailers that responded to our survey expect demand for sustainable packaging to increase significantly over the next few years and are therefore on the lookout for innovative solutions.

In line with expectations, 76 percent of packaging manufacturers see sustainable packaging as highly relevant, as do 55 percent of consumer goods producers. By contrast, only 27 percent of retailers view sustainable packaging as a highly significant topic, while a clear two-thirds are more likely to judge the quality of the packaging as moderately important. In line with this, just 32 percent of retailers surveyed believe that sustainable packaging is a crucial competitive advantage.

This is also interesting because most consumer goods and packaging producers feel under pressure from retailers and consumers to create sustainable solutions.

Now, very few goods on the shelves are sustainably packaged: most respondents say that no more than one quarter of all products currently come in sustainable packaging. However, respondents do expect that share to increase significantly over the next five years. Around half of retailers anticipate the proportion of sustainable packaging to reach between 50 and 100 percent by 2025, while the majority of consumer goods producers expect to start using sustainable packaging for almost all their products. Packing manufacturers are more skeptical: 37 percent of them already offer predominantly sustainable packaging, and don’t expect any meaningful increase in that share.

Packaging manufacturers more skeptical about sustainability than their customers

Packaging manufacturers may be less ambitious because they see the sustainability challenges more clearly than customers of cardboard boxes, cans, or bottles. When it comes to manufacturers, 55 percent say that the issue is highly complex – not helped by the different statutory regulations in each consumer country or by high customer expectations. And while most of the packaging specialists are experts or even have entire departments dealing with sustainability, the majority of them bemoan the extreme complexity of the issue. In addition, many respondents from the industry believe that their company does not have comprehensive expertise on the full range of sustainable solutions, with a quarter of respondents reporting only a partial understanding. Barely 40 percent of retailers and consumer goods producers believe they have extensive knowledge of the options.

A slim majority believe that consumers are not prepared to pay higher costs, even though they want sustainable solutions.

A larger number of respondents from all industries occasionally face the problem that sustainable raw materials or recycled plastics are not available in sufficient quantities. Just 35 percent of respondents indicate that they can always access sufficient quantities of the raw materials they require, and this shortage could also prove to be an obstacle to the desired level of growth.

Switching to sustainable packaging entails higher costs for almost all companies, and opinions among respondents are divided on whether they can pass these costs on to consumers. A slim majority believe that consumers are not prepared to pay higher costs, even though they want sustainable solutions. By contrast, 46 percent are confident that the public will meet them at least part way on sustainable packaging.

And the latter appear to have judged things correctly: 72 percent of respondents in a representative consumer survey indicate that they would pay at least 10 percent more for a product if it were sustainably packaged, and almost 30 percent of consumers would even accept a surcharge of more than 20 percent. The younger the respondents, the higher the level of acceptance. Respondents apply the sustainable label here to packaging made from renewable raw materials (70 percent) or recycled materials (65 percent) as well as reusable designs (65 percent). Unfortunately, how consumers respond to surveys doesn’t always match their purchasing behavior. Similar studies have shown that while the public prioritizes sustainability in theory, they are more likely to be guided by price when they actually make a purchase.

How should we define sustainability?

Businesses that want to use more sustainable packaging in the future should start by examining how sustainability is defined in-house. As there are currently no clear specifications for what constitutes sustainable packaging, defining an individual strategy is important. Should new packaging be made from renewable raw materials, for example, or from recycled material? Or is reducing the carbon footprint the priority?

Once a business has decided which aspects of sustainability it wants to focus on, the next step is to define objectives and implementation steps and then to follow them consistently. The procurement department should be involved from the outset, so it can test the market and deliver realistic assessments. As the holy grail of packaging – one that meets all the required product characteristics for protection, stability, and hygiene, but is also 100 percent sustainable – is yet to be discovered,

it is essential to set priorities and calculate the potential additional costs of the solutions being considered. It should be remembered, though, that being more sustainable doesn’t necessarily mean being more expensive; reducing material quantities or substituting different materials can save on costs. Once a course has been charted, you can set sail for strategic procurement.

CONCLUSION

Sustainability in terms of packaging is not a passing trend. The issue is already seen as highly relevant, and this will only increase significantly over the next five years, with pressure coming from politicians as well as consumers. As requirements for material properties increase, targets are also being set for the use of recycled materials. Taxes and financial penalties for using virgin plastics are in the pipeline, while economies of scale mean that manufacturing sustainable packaging will become more affordable over time. There are no short cuts to implementation, so businesses are having to develop and invest in their own strategies to boost sustainability.

Authors

Paul Mohr

is Managing Director of INVERTO’s Cologne office and a food industry expert. He advises clients predominantly from retail, the the retail, food and consumer goods sectors.

contact@inverto.com

Laura Steinhoff

is a Principal at INVERTO in Hamburg. She is an experienced buyer in the retail and consumer goods industry, advising customers from these sectors as part of comprehensive procurement optimization projects.

laura.steinhoff@inverto.com

Interview with Professor Sven Sängerlaub

Sustainable Packaging

When is packaging sustainable?

The concept of sustainability is not clearly defined. It covers various aspects that do not necessarily go hand in hand. The use of renewable resources, a material’s capacity to be recycled, resource conservation in general and carbon footprint reduction are all factors considered to be sustainable.

The whole subject is a minefield, and even experts often have differing views on what the best solutions may be. Businesses thinking about this issue should seek independent advice and consider which criteria are most important to them.

How can a company determine which solution is the right one?

There are some aspects that you need to look out for: raw materials and foods should be produced, processed and composed locally, to save on transport resources. Economic and social responsibility – two other aspects involved in defining sustainability – are a separate discussion altogether.

Monomaterials, in other words packaging made from one single synthetic material, are particularly good from a recycling point of view. You should be able to reuse this material multiple times. A critical mass needs to be reached for recycling to be worthwhile economically. However, we can’t use monomaterials for everything: it depends on the requirements of whatever needs to be packed. They can even have the opposite effect and lead to waste, which would be quite the opposite of sustainability. With foods for example, an extra layer of material often needs to be added as a barrier, to reduce oxygen levels or stabilize the packaging.

Isn’t there a huge amount of packaging we could get rid of?

For many products such as food and pharmaceuticals, it is impossible to reduce the amount any further, as we have high quality and hygiene requirements in Europe. In actual fact, consumer protection and product safety take precedence over sustainability.

There are also social developments that mean the mountain of packaging is getting bigger and bigger: portion sizes are getting smaller, as there are more single households than there used to be. Also the demand for fast food has grown, as we are cooking less at home. But the major driving force at the moment is clearly the rise of e-commerce.

Does sustainable packaging have to cost more than conventional packaging?

No, not necessarily. The Fraunhofer Institute has repeatedly shown opportunities to save on materials, making it less expensive, as reducing the use of materials helps to save on resources and lower the carbon footprint.

Are there even enough raw materials to switch entirely to sustainable packaging made from renewable resources in the years to come?

If we wanted to completely switch to renewable raw materials, it wouldn’t be possible straight away, as we don’t have the material and production capacity for it yet. As for fiber materials that could be made into paperboard and molded pulp trays substancial research is being done into resources made from grass, tomatoes, and various annual plants. However, the manufacturing process should not use the foods themselves, but rather the by-products from food production.

The use of by-products is also being discussed to produce biopolymers, in this case plastics from renewable resources. But the total amount of polymers produced using sustainable resources currently makes up less than 1 percent of all plastic production. It will take more time yet for adequate amounts to become available.

And what about recycled plastics?

At the moment, high-quality recycled plastic is more expensive than new, as a result of the low price of crude oil. Of course, oil, as a finite resource, will not remain this cheap, but until then we need solutions to ensure recycled plastics can compete. That would certainly make it possible to significantly expand capacities.

There is a discrepancy between genuine and perceived sustainability. Could you give us some examples?

There are plenty. Returnable glass bottles, because of their weight, only have a better environmental footprint than single-use bottles provided if they travel no more than 200 kilometers. On the other hand, PET bottle recycling works relatively well. Around 95 percent of bottles returned to stores in Germany are collected and made into new bottles; this system works because only one type of item is collected separately from all other recycling. A slightly different example would be cucumbers from southern Europe: when they are shrink-wrapped in plastic film, they last longer, and there is less food waste. This is where companies and consumers have to ultimately choose what is more important to them: plastic waste prevention or food conservation. Alternatively, people can buy local cucumbers that do not need to be shrink-wrapped in film.

What role does legislation play, in your opinion?

Many countries have established a legal framework for collecting various types of waste that has been sorted. In some areas, there is room for improvement, but it can be seen as positive on the whole.

Policy will fundamentally support sustainability and encourage change through laws and taxes or duties. Within the EU, there are already plans to charge a plastic tax on plastics that are not recycled. There is also talk of a carbon tax. In the long term, conventional packaging will become more expensive, such that sustainability will finally be worthwhile financially for businesses.

Sustainable packaging study

Sustained Confusion