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As brands shift towards developing more sustainable packaging, they must make the right investment choices and partnerships to achieve the scale needed.
In brief
- Brands must consider the packaging life cycle, as well as the product, to reduce the amount of flexible plastic film ending up in the environment and landfills.
- Consumer product companies must innovate to find new sustainable materials while developing the systems and infrastructure needed for them to be viable.
- With multiple stakeholders and a broad range of potential sustainability solutions, ecosystems and partnerships are critical to scale at speed toward country-wide or global adoption.
We accept that store shelves are full of bright colors and designs ready to grab our attention and whet our appetites. But when we’ve had our fill, we turn a blind eye to the fate of the wrapper or packaging. As corporate ESG and Sustainability strategy become more of a priority, it is a fate that needs addressing.
Developing sustainable flexible plastic packaging is a particularly difficult issue with no single solution. Currently, the mechanical recycling systems that recycle rigid plastics are not able to cope with flexible plastic film. It’s very lightweight with a low value per unit, often contaminated by food oils, and high volumes of high-quality materials are difficult to collect. It’s also often comprised of multiple layers of film, which takes recycling to another level of complexity. Innovation is required to identify either new materials (easy to recycle or ones that biodegrade), new disposal methods (chemical recycling or composting at scale), or a combination. However, all options require new business models and infrastructure to support them, as well as consumer education. All require extensive testing and significant investment, while being mindful of evolving local regulation.
With so many complexities to understand and manage in unison, it is not surprising that for too long, the problem has sat in the ‘too difficult box’. But now, with pressure mounting from all sides, decisions need to be made to develop a transition strategy.
Consumer product companies are all too aware of the issue and have made commitments to reducing plastic packaging a priority through a combination of reducing usage, increasing recyclability and developing biodegradable solutions. This is not an easy balance to strike as packaging is essential to preserving and maintaining product quality. It also plays an important role in reinforcing the brand’s identity, which means well-known brands have a particular imperative to lead the transition. For them, without proper sustainable disposal options, the packaging on the shelf that catches the eye can fast become an eyesore, as branded litter that presents a reputational risk.
More consumers are consuming with care
Consumer attitudes are shifting. The EY Future Consumer Index shows that younger generations are critical, skeptical, and willing to switch brands if expectations aren’t met. Twenty-four percent of GenZ and Millennials check the sustainability claims brands make, compared to only 4% of Boomers.
In fact, they’re not only much more likely to make the effort to investigate a company’s credentials, but they are also more likely to take action. Already, 21% of GenZ and Millennials have stopped buying a product because the brand isn’t doing enough to help the environment (compared to 6% of Boomers). Brands reluctant to proactively change their packaging to more sustainable forms risk losing their future consumers to alternatives.
Governments are also paying attention by setting plastic and waste reduction targets to meet their contributions to Sustainable Development Goals (SDG) and monitoring how businesses contribute to fulfilling those goals. Investors are becoming uneasy about impending potential risks. Pivotal decisions must be made by brands to ensure the right long-term choices are made to benefit both the business and the planet.
So, how do consumer product companies deliver on their plastic reduction commitments?
Clear options, but no clear winner
The usual starting point is to reduce the amount of packaging and plastic used and introduce more recyclable materials. Currently, mechanical recycling is the most resource- and energy-efficient method for achieving circularity. However, mechanical recycling plants are not able to process flexible plastic film. Its high tensile strength means it can become entangled in revolving machinery, leading to clogged equipment that requires downtime to be cleaned. And, if it is not removed, it can reduce the effectiveness of sorting screens, resulting in contamination (for example, unwanted plastic in paper streams).
To address the sustainability of flexible film packaging, companies are seriously considering the merits of chemical recycling versus biodegradable materials, and both have their pros and cons.
The chemical recycling market is at an early stage of development and there are several technologies in development which process flexible film packaging resulting in feedstocks that can be used to produce polymers indistinguishable from virgin plastic and suitable for food-grade use. Producing a material with a commercial value not only removes the need to send packaging to landfills, but it also creates a new market while reducing the use of virgin plastic. However, chemical recycling requires additional sorting and decontamination, and scaling will take a considerable amount of time to attain production costs that are comparable to the cost of creating new plastics from fossil fuels.
Equally alluring is switching to a packaging material that degrades into organic matter. Biopolymers can be obtained from renewable biomass sources such as vegetable oils, starches and proteins. They provide the dual advantages of conservation of fossil resources and reduction in CO2 emissions, but require significant and valuable agricultural land resources. When SDG 2 is Zero Hunger, how acceptable is it to devote agricultural land to the packaging rather than the food? There are high costs associated with production and extraction due to the high cost of polymerization and the nascent stage of the technology. Establishing and scaling the ecosystem to generate the level of packaging materials required and the consistency of supply will be a challenge. Additionally, each biodegradable or compostable polymer will degrade at different rates and to different levels. When packaging is composed of multiple layers of different materials, each with a different purpose, rigorous testing is required to determine the conditions (heat, humidity, and microorganisms) and time needed to biodegrade into a “soil conditioning material”.
What it takes to deliver the vision
In an ideal world, the future of flexible plastic packaging will have the following characteristics:
- Sustainable packaging materials will cost less than incumbent materials, preserve the quality of the product and catch the eye of the consumer.
- Disposal will ultimately result in an output with an economic value – either by being recycled in a closed loop system or having the capability for composting or biodegrading into organic matter that is not harmful or a pollutant.
- The chemicals and materials required will be available in sufficient quantities and their production will not impact the environment or society.
- The technology will be tried and tested, with the right investment choices made in the complex machinery and equipment required to make it work.
- New players will be working with established ones, forging new ecosystems.
- The process will be scaled identically across all geographies as part of a consistent global regulatory landscape and infrastructure.
- Recycling and composting will be entrenched in consumer behavior with collection mechanisms in place.
Consumer product companies are at the beginning of their journey to reach this utopia and cannot work through the problem alone or in isolation. They can take the following steps to advance long-term value for their organization, the consumer, and society:
1. Align the internal experts
Whether it’s replacing the current resin film with a biodegradable material or developing a closed-loop recycling system for flexible plastic, the organization needs a wide range of internal subject-matter experts who are aligned on the path forward. Product management, supply chain, R&D, purchasing, strategy and, of course, sustainability teams need to work together to determine the best transition plan. Each option involves emerging technologies, so internal alignment to a direction and testing plan is critical.
2. Revisit the product and your consumers
Take the opportunity to revisit the fundamentals, determine the optimal packaging requirements and consider more innovative alternatives and solutions. Understanding exact product requirements, as well as consumer usage and preferences, will guide companies to develop strategies that reduce the flexible plastic used in packaging.
3. Stay ahead of regulation
Navigating the myriad of rules, incentives, taxes and legislation to stay on the right side of government actions will require constant monitoring. Ideally, investment in sustainable packaging initiatives will be in advance of legislation, such as bans on single-use plastics, plastic packaging taxes and carbon border adjustments, and take advantage of regulatory incentives for sustainable materials and processes. In addition, brands have a positive role to play in advising and lobbying governments to drive change at scale.
4. Partner to create sound ecosystems
Companies must identify the right ecosystem business model and determine which ecosystems they should orchestrate and in which they should simply be a participant. Working with peers and competitors will help create scale, and competitive concerns can be managed by agreeing to clear rules of risk and reward sharing. Partnerships with non-profits, governmental organizations, universities and research institutions can be leveraged to share the efforts and initial cost burden of plastic reduction as well as establish standards for recyclability, composting, and labeling. Consumer product companies can also partner across the value chain to make investments with chemical recyclers or biodegradable plastic manufacturers to establish cost-effective materials and secure future supply.
5. Engage your consumers to make them part of the solution
Consumer product companies are adept at influencing consumer behavior, which will be an important skill to employ at the right time as consumers and communities must play their part. They’ll need to encourage, engage and educate consumers to adopt new behaviors and routines. For example, chemical recycling of flexible plastics requires consumers to remember to recycle flexible plastic material and to recycle it correctly. It also requires single stream curbside recycling by municipalities and a sorting system that gets the material to a chemical recycler. Biodegradable packaging may need consumers to engage in home composting, otherwise the material would simply be buried in a landfill like any other plastic. In any scenario, brands will be a necessary part of the solution by applying their skills to encourage good habits and informative labeling to facilitate accurate recycling.
The status quo is no longer an option, but given the nascent stage of sustainable packaging technologies, initiatives may not prove economically viable for years. In the early development phase, investing in several technologies to determine the technical viability and cost-effectiveness of a lead technology is likely to be the most prudent approach. Once established, focused investment will be needed to rapidly scale the technology and secure the necessary material supply.
Collaboration with peers and across the value chain will enable companies to manage risks and costs, especially in procurement, as well as drive greater demand to achieve scale.
Thanks to the following for their contribution: Mark Weick, Matt Handford, Minhaj Baqai, Morgan Cole and Melissa Harari of Ernst & Young LLP.
How EY can help
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Summary
Mounting regulation and consumer demand are creating an environment where non-recyclable or non-biodegradable flexible plastic film packaging will be unacceptable. Consumer products companies must find sustainable alternatives to preserve the quality of their products. But there is no simple solution. Brands must make decisions now that are not without risk, the need for investment, or far-reaching consequences. They must choose the optimal solution for their packaging portfolios and manage a multi-faceted approach to deliver it. Forming strong partnerships and efficient ecosystems will be critical to speed progress.
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