Global Trends & Influence
A survey from IPSOS, a market research company, found that 55% of people would pay more for eco-friendly packaging. Another survey from Stora Enso Packaging Solutions found that 59% of Millennials consider sustainable packaging to be important throughout the entire value chain. Additionally, four out of five Millennials consider packaging to be important when making purchasing decisions and 85% consider the packaging material a part of the brand experience, compared to 71% among non-Millennials. The survey also suggested that 44% of Millennials are willing to pay a premium for products with sustainable packaging.
In addition, a growing number of government regulations around the world are driving companies to rethink a greener supply chain. For example, in the U.S., the Clean Air Act provides the principal framework for national, state and local efforts to protect air quality. Individual states including California, Maine, Maryland, South Carolina and Utah have passed their own e-waste legislation that establishes requirements for the proper disposal of electronic items such as televisions and laptops. Another pertinent state law is California’s Rigid Plastic Packaging Container Law, which was enacted to help cut down on the amount of plastics thrown into California’s landfills. Each container must meet additional requirements prior to being distributed in California. Each plastic container must meet at least one of the following five criteria:
- The container must be made from a minimum of 25% recycled materials;
- The container must be reusable;
- The container must be source-reduced (container weight reduced by 10%);
- The container must contain floral preservatives and later be used in the floral business;
- The container must have a 45% recycling rate at minimum.
Defining Sustainable Packaging
But what exactly is “sustainable packaging?” Packaging materials, including glass, plastic, paper and aluminum cannot be classified as good or bad. Each has advantages and disadvantages, depending upon the product application and the goals and mission of the packager. As such, there seems to be no clear industry consensus for what exactly sustainable packaging means, but it is estimated that the market for such packaging is expected to be $244 billion by 2018.
One attempt to define the market comes from the Sustainable Packaging Coalition, a project of GreenBlue, a non-profit dedicated to the sustainable use of materials in society. Its condensed definition of sustainable packaging includes:
- Is beneficial, safe and healthy for individuals, communities throughout its life cycle;
- Meets market criteria for both performance and cost;
- Is sourced, manufactured, transported and recycled using renewable energy;
- Optimizes the use of renewable or recycled source materials;
- Is manufactured using clean production technologies and best practices;
- Is made from materials healthy throughout the life cycle;
- Is physically designed to optimize materials and energy;
- Is effectively recovered and utilized in biological and/or industrial closed loop cycles.
The efforts of introducing sustainable packaging into supply chains while maintaining the four key functions of packaging have resulted in increasing collaboration between retailers/consumer packaged goods providers and suppliers. Walmart, Coca-Cola Enterprises and McDonald’s are among such companies to issue sustainable mandates.
Walmart. In 2005, Walmart partnered with suppliers to improve packaging on its private label Kid Connection toy line. By reducing the packaging on 300 toys, Wal-Mart saved 3,425 tons of corrugated materials, 1,358 barrels of oil, 5,190 trees, 727 shipping containers and $3.5 million in transportation costs, in just one year. As a result, the following year, the company expanded this initiative and announced plans to measure its 60,000 worldwide suppliers on their ability to develop packaging and conserve natural resources. This initiative’s goal was set to reduce overall packaging by 5%.
The company achieved its goal in 2013 and surpassed it in some cases. Deemed a success for all involved, Walmart commented, “Suppliers understood from the very beginning that there was an opportunity for them to save some additional money in their own procurement processes, in their own supply chains, and find a new way to evaluate and, in many cases, find a new way to distribute what they were shipping to us.”
Coca-Cola Enterprises. Coca-Cola was added to the Dow Jones Sustainability World Index because of its efforts in sustainable packaging. 100% of its bottles and cans are fully recyclable. In addition, by 2020, the company plans to reduce the amount of material it uses across all of its packaging formats by 25%. To achieve this, packaging will be made to weigh less. In total, since 2007, Coca-Cola Enterprises has reduced the amount of packaging material it uses by 20%. In 2014, light-weighting initiatives reduced the carbon impact of the business by 9,300 tons of carbon dioxide equivalent.
McDonald’s. In 2015, McDonald’s announced its centrally purchased packaging in Europe is 100% sustainably sourced. According to the Chartered Institute of Procurement & Supply’s publication, Supply Management, McDonald’s uses 170,000 metric tons of wood fiber annually in its packaging across Europe; 90% of this packaging comes from renewable sources. Indeed, according to McDonald’s, “The achievement has involved collaboration across the length and breadth of our supply chain in all 38 European markets, from those that supply our restaurants right back to the family-run businesses that own the forests.”
Implications for the Supply Chain
Much of the success achieved by companies such as Walmart, Coca-Cola and McDonald’s can be attributed to collaboration with supply chain partners. Thanks to innovative software solutions such as Elementum and Amber Road, collaboration has become easier and traceable through improved visibility. Shorter cycle times, perfect orders and minimal inventory stockouts are among the every-day benefits of such IT tools. In addition, these systems generate amazing amounts of data, which can be analyzed to forecast and improve business processes as well as encourage product innovation.
As more and more companies embrace sustainable practices including packaging, metrics to measure the success will become more and more commonplace to gain a broader understanding of supply chain performance and, hence, more meaningful business decisions that take into account the environmental impact.
The demand for sustainable packaging will grow around the world, particularly as e-commerce grows. A 2014 study from Sealed Air found that 34% of respondents indicated the packaging a retailer uses for e-commerce shipping tells them about the company’s environmental policy and commitment based on the type and amount of packaging materials used.
When asked about their pet peeves related to e-commerce packaging, 32% pointed to packaging that is difficult to dispose of and 27% said packaging that is difficult to recycle or is unrecyclable. As a result, businesses should not wait for a clear definition of sustainable packaging but instead collaborate with supply chain partners and customers to determine the best sustainable solutions for its products.
As chief operating officer, Kim McQuilken oversees Spend Management Experts’ operations, sales and marketing organizations, applying more than 20 years of executive leadership experience to his role. He has been instrumental in defining the strategy that has contributed to the company’s growth. For more information: www.spendmanagementexperts.com