Major brand owners like PepsiCo, Unilever and Colgate-Palmolive have recently announced that they will fail to reach their sustainable packaging objectives. John Blake, a senior director analyst at Gartner who predicted this trend back in 2021, tells us more about the important learnings the industry can take away.
2024 has signaled a shift in the sustainable packaging movement that kicked off six to seven years ago. The focus on climate change and the public awareness of the issues of global plastic pollution initiated a movement that the industry hadn’t seen since the turn of the century.
Looking back to the early 2000s, sustainable packaging was marked by nascent efforts characterized by development of bio-based plastics, early programs to capture LCA’s of packaging and efforts to increase recycling.
The global financial crisis of 2007-2009 put an end to many of those initiatives. In fact, efforts to reduce costs increased the use of multi-layer rigid plastics and high barrier thin films.
The period between the global financial crisis and 2017 was relatively quiet in terms of investment and linking sustainable packaging to brand equity.
Then from 2018 to 2020 there was an unprecedented movement characterized by commitments to reduce or eliminate plastic, increase recycling and reduce reliance on single-use packaging, many of the commitments targeting 2025.
In 2021, Gartner, through its research efforts, predicted that most organizations with 2025 sustainable packaging commitments would fail to meet their stated goals. This analysis was largely driven by evidence of companies’ continued reliance on plastics and the lack of recycling and reuse infrastructure globally.
Sustainable packaging is much more complex than many outside of packaging R&D or converting industries recognized at the time of setting sustainable packaging targets.
The consequences of ambitious targets
As we approach 2025 organizations are forced to rationalize their commitments and clarify internally and externally what is achievable. In the past few months, we have seen major CPG companies clarify their ability to meet goals, often resetting deliverables and looking to a 2030-time horizon.
One of the headwinds organizations have faced is the alignment to goals that became ubiquitous such as 100% of packaging being reusable, recyclable or plastic-free. As these terms score well with consumers and bolster brand perception they were adopted before being fully vetted by R&D, supply chain, quality, procurement and manufacturing functions.
The level of engineering and science that is inherent in common packaging formats is often misunderstood. Plastics for example have been highly engineered over several decades to provide benefits of offering lightweight, safe, economic and convenient product protection.
But they were not developed for easy or economical reuse or recycling. The industry has found that to unwind this innovation in a short timeframe isn’t yet technically or economically feasible.
The pledge predicament
Upon continued examination of the gap between an ambitious packaging vision and the ability to deliver, there are several factors at play. For materials to be recyclable they need to be recycled at scale and in practice. This will require greater industry collaboration and government intervention.
There is a shortage of high-quality/food-grade recycled plastics. This leads to economic, quality and regulatory challenges. Supply chains and reverse logistics for reusable packaging are underdeveloped and will require investment to drive the scale required to be impactful.
Packaging and products cannot be viewed separately when they are developed, manufactured or used by consumers. It’s not just as simple as “change the packaging”. Product safety, transport efficiency, and economics must be factored.
Complex manufacturing and supply chains need to be modified or sometimes replaced resulting in the tens if not hundreds of millions in expense and capital writeoffs.
In hindsight, many of the pledges did not factor in the time or investments required to drive the scale required. There was also a draw to high-level consumer-preferred initiatives.
The reality is that products are unique in how they are made, consumed and what is required to protect them. Goals need to be designed with nearly as much detail as the products themselves.
Charting a new course
The ambitious targets of brands and NGOs should be applauded. Without them, the industry would not have made the investments or progress it has to date. The industry is now much more knowledgeable of the opportunities and challenges it faces going forward.
For organizations that have not yet committed to a sustainable packaging strategy, leverage the learnings of the early adopters. Take a pragmatic approach based on your packaging consumption and where you can have both short- and long-term impact. Understand fully the opportunities and limitations of sustainable packaging in the locations where you manufacture and sell products.
For those facing shortfalls for 2025 sustainable packaging targets, have transparent communications with stakeholders clarifying the root causes. In some cases, targets were not aligned to product and packaging formats or innovations have not progressed to commercial scale fast enough.
In others, economic feasibility is the limiting factor. The cost of sustainable packaging is a subject that is up for much debate. How expensive is too expensive for packaging improvements? Companies have an obligation to shareholders, yet consumers can vote with their wallets.
However, the growth in packaging legislation through bans, taxes and EPR could be the most decisive factor going forward. Regulations level the playing field reducing the risk for first movers, balancing costs and growing efficiencies through scale.
The sudden rise of ubiquitous sustainable packaging commitments should have been a warning sign to the industry, signaling more of a trend than a strategy. Sustainable packaging is complicated, there are many pros and cons to consider as well of tradeoffs for essentially every alternative material or format.
These need to be carefully assessed as we move forward to lessen packaging’s impact on the environment. To overcome the challenges the industry faces there needs to be greater commitment to collaboration and adherence to regulations that drive investment back into waste management and foster growth in innovation.
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