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Packaging and Sustainability - An Open Dialogue Between Stakeholders
January 18th, 2012
Packaging is a hot topic in sustainability circles. The key question about packaging is the following: Given the economic and environmental costs and benefits of different materials, different designs, different applications and different logistical operations, how can we effectively manage these variables to make the most appropriate packaging decisions?
This is the question raised in a paper called “Packaging and Sustainability” published last October by Europen, The European Organization for Packaging and the Environment. I say “how can we effectively manage these variables” rather than “how can the value chain effectively manage these variables” as the paper does because I suspect many eyes glaze over at the term “value chain.” And I think that term obscures the reality that there are lots of real people involved here representing manufacturers, logistics providers, retailers, consumers and waste management companies, among others.
How can we arrive at the optimal packaging solutions that strike the right balance between cost, environmental impact, safety, while allocating costs appropriately among us? The paper provides a multi faceted answer:
- Good communication and shared responsibility across the packaging value chain.
- Appropriate government regulation
- Consumer education
- Use of analytical tools such as life cycle assessment to enable analysis across the full life cycle of packaging.
Packaging Presents Complicated Tradeoffs
Figure 1 Inventia Packaging Model (click to enlarge)
The need to balance complicated tradeoffs is what makes packaging such a challenging area. The model above, which was reproduced in the paper and provided by Stockholm-based Innventia, a firm that conducts research and development in pulp, paper, graphic media, packaging and biorefining, shows one example of a packaging trade off. The graphic suggests that there is an optimum quantity of packaging material that does the best job of protecting both the environment and the product. It also makes the point that under-packaging, which results in product loss and waste, has a greater negative environmental impact than over-packaging.
The paper also points out tradeoffs among product packaging (also known primary packaging), grouped packaging (or secondary packaging), and transport packaging (or tertiary packaging). Grouped packaging, such as six-pack holders, is used to group sales units into a package for purchase. Transport packaging is used to simplify distribution and limit product damage during handling and transport from the product producer to the retailer. Where’s the tradeoff here? One example: A reduction in primary packaging may necessitate an increase in tertiary packaging to maintain protection for products.
There are plenty of other tradeoffs, including who along the value chain bears the cost of various options, which are explored in the paper as well.
Drivers of Packaging Change
The paper has a useful short discussion of what is driving innovation in packaging today. On the list:
- Organics. The recent growth and development of the organic food movement has required the introduction of new packaging technology to prolong shelf life and make organic produce more price competitive with non-organic foods. The paper mentioned the development of special plastic wrap packaging that increased the shelf life of organic produce by up to four times
- Changing demographics. An increase in the number of smaller families and single-person households has encouraged product manufacturers to provide a greater range of product sizes and ready-to-eat meals, requiring the use of more sophisticated packaging.
- Policies and regulations at various levels of government also exert significant influence on packaging design. Some of the factors: the amount and nature of on-pack communications, and end-of-life responsibilities (i.e., who is on the hook for taking back and recycling products).
- Technological advances. We have seen “plant bottles,” dematerialized beverage containers, “modified atmosphere packaging” (MAP), which reduces the amount of oxygen in the packaging to prolong the shelf life of produce.
Importance of LCA and Other Tools
The contributors to the paper noted that proper analysis and informed decision making about tradeoffs requires the use of certain tools such as life cycle assessment, CEN (a European standards body that has issued packaging standards) and cost-benefit analyses. It’s not possible to solve tradeoffs in general terms; they need to be analyzed on a case by case basis. But they need to be assessed in the context of the entire packaging system from end to end. (Green Research has published a study on how to incorporate LCA into corporate sustainability strategy.)
Green Research Insight
According to Green Research studies, companies in a number of industries have quantitative goals on the books to reduce the volume of packaging they use. In 2011 we saw a number of commitments and initiatives to enhance the sustainability of packaging materials themselves. Toy makers Hasbro and Mattel announced commitments to shift to sustainably sourced packaging materials, for instance. Dell announced a new packaging material made of sustainably sourced mushrooms. PepsiCo announced a new plant-based bottle, and AT&T announced plans to begin using packaging that is partly plant based. Packaging is an excellent focal point for sustainability initiatives because it can affect material use, energy use and landfill all at once. Expect lots more innovation in the years ahead.
Other Studies Featured This Month
This recent study by Accenture and the Charted Institute of Management Accountants make a robust case for the role of the CFO and the finance function in corporate sustainability. “Plenty of people can advise an organisation on how sustainability performance should be measured,” the report says, “But few are as convincing as the CFO when it comes to demonstrating not only what should be measured but also how this creates business value and sustainable organisations.”
The report makes the point that the finance team has visibility into every part of the enterprise. And it has unparalleled credibility when it comes to defining, tracking and reporting metrics. An organization that wants to manage and improve sustainability performance the way it manages any other aspect of its performance should give the CFO and the finance team and key role in defining and managing sustainability performance, it says. (I make a similar point here.)
The report should intrigue sustainability professionals, finance professionals and CEOs alike. The full piece is here.
I will confess that this seemed to me like a whacky topic. Of all the things pre-IPO companies worry about, sustainability would seem to be low on the list. But consultant PwC begs to differ. The company says it analyzed more than 120 IPO registration statements in 2010 and early 2011 across eight industry sectors. More than 84 percent of the IPO filings, it says, had some level of disclosure relating to sustainability. Why? PwC says this reflects trend toward “corporate recognition that sustainability is both a business and sociopolitical risk and opportunity.”
The paper asserts “running a business sustainably results in running a business effectively.” It suggests that a corporate strategy that makes a clear statement about where sustainability fits in can present a company in the best light, not only to stakeholders with a special interest in sustainability but to the broader investing public. “It’s becoming increasingly clear that companies can optimize their capital raising efforts by identifying and mitigating sustainability-related risks and unlocking the value of sustainability-related opportunities,” the report says. It’s an interesting assertion. But will time-starved and revenue-hungry pre-IPO companies take note? Read the full report here.