In our latest article from Robert Lilienfeld, founder and executive director of sustainable packaging think tank SPRING, Robert catches up with Dr. Thomas Gröner, director at TG Pack Solutions, to unpack the secret behind successful sustainable packaging ESG.
You have probably read at least one article recently regarding the failure of organizations to successfully integrate ESG (Environmental, Social, and Corporate Governance) criteria into their strategic decision-making processes. I believe there is a simple, but powerful reason for this situation: Lack of accountability regarding both the ability and inability to meet ESG goals.
An effective tool for translating rather esoteric philosophies into actionable goals is the use of metrics, especially ones that can be classified as Key Performance Indicators, or KPIs. I sat down (virtually, of course) with Dr. Thomas Gröner, Director of TG Pack Solutions in Bonn, and one of SPRING’s subject matter experts in the area of plastic and paper films. I asked the questions, and he provided the answers.
Dr. Gröner, what are KPIs and how are they traditionally used within the overall packaging industry: in terms of materials suppliers, converters, CPGs, retailers et cetera?
Traditionally, company KPIs are related to financial and production targets. Financial targets include turnover, cash flow, EBIDTA, raw material cost, return on capital invested, and profits. Classic production targets are volume produced (in tons, square meter, pieces etc.), staffing, efficiency, waste, quality, and customer delivery performance.
For many years, companies have set up KPIs in the area of employee health and safety for factors like LTA (lost time accident rate), the number of recordable injuries, or the number of safety-related discussions held with employees. This was the first move into more “soft/indirect” KPIs and sets the standard for which future KPIs relating to ESG can be designed and implemented.
If you wanted to use KPIs to improve your company’s sustainable packaging metrics, where would you start?
We need to look at the most burning problems related to sustainability. In general, these are the reduction of the CO2 footprint and the move toward creating a circular economy. We can develop meaningful KPIs in these areas which have an impact in the transformation process.
As a start, it makes sense to look at the “map” where the company is located: Look at customer requirements, supplier and competitor activities, existing and upcoming legal requirements, and initiatives from NGOs and society. From there, you can define the focus areas for the development of KPIs.
How would you use your process to help identify, dimensionalize, and illustrate the need for reductions in greenhouse gas generation?
As said above, greenhouse gas generation, or reduction of CO2 footprint, is a top sustainability target across various sectors and across all regions. The key question to answer is: Where can the company make the biggest impact. Is it Scope 1 (from use of energy sources for internal combustion) or Scope 2 (from supply of energy from external sources) emissions? Is it in transportation or raw materials?
Analyzing the status quo is the first step, and then it’s even more important to work out where significant reductions can be achieved within the company business model.
What are the specific KPIs you would put in place?
Typically, in the packaging industry we can implement a midterm KPI for CO2 footprint reduction, such as ‘Reduce Scope 1 and Scope 2 CO2 emission by more than X% by end of 2025, compared to 2020’. On top, we should think of a target year for the company to become Net Zero. This is a long-term target for CO2 footprint reduction.
Secondly, we need to tackle the circular economy: How can the company contribute to making certain packaging materials circular? Here we can put in place a KPI for design for recycling: e.g. ‘by 2025, 95% of our products can be recycled in the final market’. This has to consider the design of the packaging material as well as the collection, sorting and recycling infrastructure in that final market.
In the area of circular economy, we need as well to increase the use of recycled materials. Here a meaningful KPI can be: ‘Increase the use of recycled materials from X % in 2020 to minimum Y % by end of 2025.’
These are just a few examples, it’s important that the KPIs are relevant for the company and that the company can make significant improvement steps starting now.
How would you promote these KPIs and motivate all members of an organization to participate?
Once you have set the targets, it is mandatory to follow the KPIs with a scorecard on a bi-annual or annual review scheme.
That means during bi-annual or annual business reviews the progress is tracked and discussed. Such scorecards should be available to the employees (company app, newsletter, intranet, notice boards etc.). It must be clear that if we are not on track we put in place actions, in the same way the company puts in place actions if financial or production KPIs are not on track.
If we have such a company approach on sustainability, it will empower the employees and make them proud to work for this company.
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Here’s one more point to ponder: Scorecards are a good approach to helping people set packaging sustainability goals and strive to reach them. But it would still be even more powerful if we could translate scorecards into financial benefits, thus tying environmental and social efforts to the third leg on the sustainability stool – economic benefits. After all, these are the benefits of primary concern to most corporate stakeholders.