Why eco-friendly, sustainable packaging is the future of FMCG

Why eco-friendly, sustainable packaging is the future of FMCG
Fraser Gibson

10 minutes

Why eco-friendly, sustainable packaging is the future of FMCG

Find out how FMCG organisations and the sector are large are fighting back against plastic waste and ushering in more a circular, sustainable economy.

The amount of plastic pollution in the environment makes for sobering reading. According to a report by the Ellen MacArthur Foundation, by 2050, there could be more plastics than fish in the oceans. The primary culprit in causing this environmental degradation? Single-use plastic packaging.

Thankfully, the fast-moving consumer goods (FMCG) industry is making giant strides towards ensuring this stark prediction doesn’t come to pass.

In a global, concerted effort, converters, manufacturers, and retailers alike are actively seeking ways to create eco-friendly products and increasingly sustainable supply chains. In doing so, the FMCG industry is helping to usher in a circular economy: an economic system aimed at eliminating waste and encouraging the continual use of resources.

The urgent need to reduce plastic leakage has led to swift action: in 2020, the top ten global FMCG firms (including the likes of Coca-Cola, Danone, PepsiCo, L’Oréal, and Unilever) set an ambitious target of 100% sustainable packaging by 2025.

By making such commitments to develop increasingly sustainable packaging solutions for consumer products and link up the circular supply chain, FMCG companies of all sizes can fulfil demand while keeping harmful materials out of the environment.

In this article, we’ll explore the extent of the problem; examine what FMCG organisations are doing to facilitate a circular, sustainable economy; and forecast what the coming years hold for this burgeoning sector.

 

What is sustainable packaging design?

Sustainable packaging is packaging that has been manufactured from sustainable materials or recycled products using energy from renewable sources.

According to the Sustainable Packaging Coalition (SPC), sustainable packaging is defined by being:

  • Beneficial, safe, and healthy for individuals and communities throughout its life cycle
  • Sourced, manufactured, transported, and recycled using renewable energy
  • Manufactured using clean production technologies and best practices
  • Made from materials that are healthy throughout the life cycle
  • Effectively recovered and utilised in biological and/or industrial closed loop cycles

By encompassing these definitions (as well as meeting market criteria for both performance and cost), sustainable packaging also promotes the optimal use of renewable or recycled source materials.

 

Types of sustainable packaging

Examples of sustainable packaging usually fall under three categories:

  • Recycled plastics
  • Bio-based plastics
  • Plastic-free alternatives — e.g. corrugated cardboard and paper-based packaging

Interestingly, biodegradable plastics (also known as oxo-degradable plastics) — which are often portrayed in the media as being compostable and therefore environmentally friendly — could be causing an increase in micro plastics in our oceans.

Indeed, mounting evidence suggests that unless very specific atmospheric conditions are met, so-called “biodegradables” do not safely biodegrade. As such, NGOs such as Greenpeace and the WWF do not endorse their use.

 

The importance of sustainable packaging in FMCG

As more governments become privy to the need to push eco-friendly solutions, sustainable packaging plays a pivotal role for FMCG organisations. It meets growing consumer demands, prevents waste by protecting products for proper consumption, and opens new business opportunities for partnerships, innovation, and diversification.

Further benefits of sustainable packaging for FMCGs include:

  • Decreasing carbon footprint and lowering shipping costs
  • Driving down operational costs
  • Demonstrating corporate social responsibility (CSR)
  • Increasing sustainability in manufacturing, operations, and the supply chain
  • Using fewer natural resources and raw materials
  • Improving health and safety for workers

With so many advantages, the transition from traditional to sustainable packaging not only makes sense from an environmental or moral outlook; it also makes sense from a business standpoint, too.

 

Acting upon a collective commitment to change

Packaging is everywhere, from the food we buy at the grocery store to the household items we order from online wholesalers. However, the ongoing efforts of environmental campaigners and increasing awareness of the long-term impact of man-made climate change has led to public outcry for companies to act more sustainably.

Indeed, the high demand for sustainable products could make the food and agribusiness sector more valuable than unsustainable legacy industries such as mining. Some are even calling it the sustainable packaging “revolution.”

Among the FMCG companies that have made commitments to act on packaging waste and support sustainability, McKinsey research found that the most widely embraced initiatives are:

  • An emphasis on full recyclability and a significantly higher degree of recycled content (60%)
  • A reduction of total plastics usage (26%)
  • The innovation and promotion of change in the use of packaging (14%).

The German chemical and consumer goods company Henkel is driving progress towards a circular economy through its “100-50-Zero” strategy. In other words, by 2025, the brand has committed to achieving 100% recyclable and reusable packaging, reducing fossil-based virgin plastics use in consumer packaging by 50%, and reaching a target of zero plastic waste into nature.

Meanwhile, by the same target date, Unilever has revealed ambitious aims to collect and process more plastic packaging than the company sells. According to Unilever, “plastic has its place and that place is not in the environment. We want to keep this valuable material where it should be — in the circular economy, where it can be reused, recycled or composted.”

Recyclability is the foundation on which the circular economy of the future is built, and packaging is already being designed in ways that makes it easily recoverable and recyclable in existing infrastructure that is in practice and at scale. For example, major players within FMCG are developing “high-barrier” mono-materials such as flexible paper-based packaging to replace more harmful plastics or aluminium laminate packaging.

The rampant use of single-use plastics has long placed a heavy burden on the environment. FMCG brands now have a huge responsibility to leave the least possible footprint during operations through minimising food waste and reducing the environmental impact of packaging — and many are rising to the occasion. However, the road ahead contains several obstacles to conquer.

 

Addressing the challenges

Many multinational FMCGs operate across a fractured regulatory landscape, especially with regard to recyclability. A more holistic, harmonised approach is therefore needed to ensure the value chain can properly link up. As the 2020s progress, advanced recyclable solutions will be aggressively pursued by businesses to overcome a series of obstacles across the entire value chain.

 

The business shake-up

Like all transitions from traditional industries to the green economy, sustainable packaging involves several trade-offs for FMCGs and retailers. According to McKinsey, these trade-offs are “far from trivial” for businesses:

  • FMCG is a cost-sensitive market, so the pressure to reduce packaging costs remains strong
  • Recycled plastic is more expensive than commonly used virgin plastic, a cheap resin produced from petrochemical feedstock (such as natural gas or crude oil)
  • In a circular economy, the cost implications of creating sustainable products go beyond just packaging material prices and conversion costs
  • Different actions (e.g. targeting zero waste) have a wide range of impacts on the different aspects (e.g. carbon footprint) of the sustainability footprint
  • Technical and economic feasibility varies according to plastic type and application, as well as by geographic region
  • Packaging material or design changes create complexities for overall branding strategy, particularly for organisations with large, diversified portfolios (consisting of different plastics, applications, and geographies)

To properly address these trade-offs and remain scalable, the entire industry is working towards making high-quality recycling more competitive. Though prices are high, FMCGs are rapidly improving innovation capacities and catching up to consumer demand.

For example, firms are increasingly turning to a new packaging sustainability agenda that focuses on downgauging (also known as “lightweighting”) — a cost-saving measure that also reduces a product’s CO2 footprint.

Thanks to material innovation upstream at substrate producers (such as resin producers), rigid packaging formats are being replaced by lighter, stronger, and more flexible packaging. Traditional polymer packaging is also being ditched in favour of renewable fiber-based packaging.

 

Underdeveloped recycling infrastructure

Aside from the cost and strategic drawbacks, perhaps the biggest potential obstacle to universal sustainable packaging is the lack of high-quality packaging recycling solutions.

Today, a significant amount of the packaging produced cannot be recycled in existing recycling systems — especially for multi-material flexible packaging. Recovery rates for packaging and food-service plastics remain low: 40% in Europe and only 28% in the U.S.

Meanwhile, global leakage or unmanaged dumps of all plastic material flows is estimated at around 19%. Only 16% of all plastic waste is re-processed to make new plastics.

In a bid to stop materials falling out of supply chains, governments and the private sector are increasingly throwing their support behind existing waste management infrastructure and launching waste collection initiatives.

 

Regional discrepancies

Along the circular value chain, different regions present different challenges for FMCGs looking to minimise packaging waste and commit to fully sustainable options.

In emerging regions, for example, packaging demand growth is outpacing global growth rates and waste-collection systems are simply not in place at the required scale. For recycling to flourish across a worldwide circular economy, robust global waste collection infrastructure needs to be developed before recycling infrastructure can be upgraded and optimised.

Even then, the struggle is uphill — as evidenced by the non-existent recycling rates in emerging markets like Chile (1%), Turkey (1%), and Mexico (5%).

However, several developing nations are taking progressive measures to lead the way: Thailand — one of the world’s worst offenders when it comes to plastic leakage — recently announced a full ban on plastic waste imports. And with the global manufacturing powerhouse, China, also banning plastic waste imports and passing important recycling legislation, a host of developing countries are set to follow suit in the coming years.

 

Consumer behaviour

For most sustainable packaging companies, the main strategic focus is making progress along the value chain with their partners, from plastic converters/manufacturers through to post-consumer waste collectors. Within this value chain, the consumer also has an important role to play by properly recycling. Brands, therefore, have a role to play in educating the consumer on recycling best practices.

While consumers overwhelmingly support brands creating more sustainable, eco-friendly solutions, this awareness is not translating into consumer action. Indeed, many of us have not fundamentally altered the way we dispose of our goods.

By drawing on “Nudge Theory” — a concept in behavioural economics which proposes positive reinforcement as a way to indirectly influence buying habits — brands are deploying clear on-pack information to persuade consumers to make certain decisions without removing freedom of choice.

In a recent example, Just Eat trialled a pre-ticked box on its app and website to encourage customers to opt out of receiving excess plastic (such as cutlery, straws, and sauce sachets). According to a company spokesperson, Just Eat’s initiative aimed to “drive more environmentally-friendly behaviour among our restaurant partners and customers.”

 

Political considerations

Finally, plastics manufacturers and FMCG companies need to overcome the political hurdle. In other words, a true circular economy cannot be achieved without effective global, multilateral agreements between nations with shared plastic reduction and sustainability targets.

The implementation of such high-level guidelines is already well underway. For example, the EU has implemented a packaging-and-waste directive, while the US legislators introduced a bill aimed at reducing single-use-packaging waste — encouraging FMCG businesses to scale their sustainable packaging efforts.

That said, for organisations that operate across geographies, staying up to speed with all the latest regulatory requirements may prove something of a headache.

 

The road to a sustainable future

As we have seen, sustainability is high on both the public and regulatory agenda. And with the climate catastrophe looming large, the urgency of the task at hand is causing FMCG companies to rethink their entire strategic focus.

Today’s consumers are more environmentally conscious than their predecessors. According to a Trivium survey of 15,000 consumers across the US, Europe and South America, 59% of consumers said they’d pay more for products with sustainable packaging. In addition, 53% claimed to be ‘actively’ looking for recycling or sustainability information on packaging and taking this into account when making a purchase.

Thanks to the rise in e-commerce and digitisation, consumer buying habits are also shifting. At the same time, new regulatory requirements across the globe are piling the pressure on manufacturers to modify their products and processes. In response, FMCG organisations are rethinking delivery chains and beginning to self-regulate.

While this major industry shake-up could threaten many companies, it also signals a huge opportunity for forward-thinking packaging converters and manufacturers.

Central to the transition to a sustainable economic model is the relationship between FMCG manufacturers/retailers, waste collectors, and packaging converters. As supply chains become more horizontal and eventually loop around to become circular, collaborative partnerships are becoming a hallmark of the industry.

In 2017, Henkel became the first FMCG company to partner with the social enterprise Plastic Bank, with a joint goal to “reduce plastic waste in the oceans while improving the lives of people in poverty — especially in countries that lack waste management infrastructure.” In 2018, SC Johnson also partnered with Plastic Bank to create a total of 509 plastic collection points in Brazil, Thailand, Indonesia, Vietnam, and the Philippines over the course of three years.

Meanwhile, in 2020, Diageo partnered with venture management company Pilot Lite to form the sustainable packaging technology company, Pulpex Limited. The partnership launched a plastic-free, paper-based bottle made entirely from sustainably sourced wood. The bottle is set to be used by Johnnie Walker and will be fully recyclable using standard recycling collections.

Finally, a new UK-based zero-waste platform called Loop, the brainchild of a coalition of leading consumer product brands, is revolutionising food and beverage retail. Loop sends consumers products in waste-free, durable, reusable packaging. In 2020, Loop launched a groundbreaking e-commerce initiative with retail giant Tesco to encourage more sustainable shopping habits among customers.

As platforms like Loop become more common and sustainable supply chains become more robust, the FMCG industry is actively helping close the “loop” on the circular economy itself — all while remaining scalable, profitable, and innovative.

As forward-thinking companies like Henkel demonstrate, success does not merely hinge on getting sustainable products into the hands of consumers. It also depends on supporting the entire ecosystem of businesses that process the continual stream of recycled material across the supply chain.

 

A positive outlook for the FMCG sector

FMCG is a diverse, high-growth industry that spreads its tentacles across all geographies and sectors. Between 2020 and 2025, the expected global compound annual growth rate (CAGR) for the industry is 4.6%. The Asia-Pacific region — long a titan of global manufacturing — is a particularly productive region for the sector.

Because of this forecast, FMCG jobs offer some of the brightest employment prospects within STEM. With a range of career progression opportunities across markets and geographies, the sector also offers high salaries. And with the sustainable packaging revolution well underway, there’s never been a better time to work in FMCG.

If you’d like to speak to about the latest FMCG jobs in your area and learn how you can get involved in creating sustainable packaging, please get in touch via fraser.gibson@srgtalent.com


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