Paper & Packaging Report
This chapter expands upon the existing Bain Brief “A Roadmap for Sustainable Packaging in Consumer Goods” (published September 2022).
The environmental challenge of packaging waste has exploded, with governments, regulators, consumers, shareholders, employees, and society at large putting immense pressure on brands to address the unintended consequences of their current linear packaging system. Going forward, we expect to see a further acceleration of pressure on packaged goods companies. In parallel, reuse and refill may be legally mandated (as we are starting to see in France and other markets). Standardized packaging may also become the norm, and certain polymers, additives, and pigments may be banned.
In this context, many fast-moving consumer goods companies are reimagining packaging to achieve circularity targets while reducing greenhouse gas (GHG) emissions. But they face some big hurdles. Even when they invest in innovations for recyclable packaging, for example, companies often find themselves at the mercy of inadequate recycling and waste management systems in the markets where they make and sell goods. In addition to dealing with broad variations in infrastructure and legislation in different countries, companies must plot their packaging roadmap amid the uncertain path of technology advances in everything from materials to recycling as well as unpredictable consumer acceptance of different solutions, especially new business models. And success requires thoughtful coordination and cooperation with multiple stakeholders across the system, including suppliers, retailers, industry groups, and governments.
With these and other obstacles in front of them, companies are stymied by how to make progress in their sustainability journeys.
But sustainability is a huge deal and only getting bigger. Today, 45% of the world’s emissions come from making products and consuming them, and the top 10 sources of plastic litter by consumers are all in the consumer products industry. The stakes keep rising as consumer goods companies target growth in the developing markets that represent the lion’s share of unmanaged waste. In developed markets, it is critical for consumer goods companies to use more recycled content and to adhere to their sustainability targets.
Given the critical role they can play, most large consumer goods companies have made big commitments to packaging innovation and other means of reducing emissions, falling into different categories based on their ambition (see Figure 1). But major sustainability transformations are difficult to achieve. According to our research, only 7% of companies succeed—half the rate of other transformations. Another disappointing finding: 80% of companies that started less than a year ago report that their sustainability programs are not on track.
When setting targets for reducing packaging waste, consumer goods companies fall into four categories
Consumer goods companies that make the biggest strides toward packaging circularity will invest to understand the trajectory of five fundamentals at play:
- benchmarks and best practices;
- consumers and retailers; and
We refer to them collectively as BLICT (see Figure 2). That analysis helps companies prioritize the appropriate levers to pull so that they can achieve their packaging circularity goals, choosing among the four R’s, including reduce, reuse, replace, and recycle.
Mapping trends in the BLICT fundamentals also enables companies to clearly see the trade-offs they will need to make as well as the best way to mobilize stakeholders to deliver on the plan.
Creating sustainable packaging solutions requires building a view into the future in five key areas
This approach set the stage for a global beauty company to establish priorities and identify what to expect from each of the four R’s across all its markets. The company ultimately pinpointed ways of reducing packaging GHG emissions by more than 40% in 2030 vs. its 2020 emissions by using 20% less packaging material, delivering products in which half of the plastic ingredients are recycled, and by making 100% of all packaging ingredients either reusable, recyclable, or compostable.
Companies hoping to pursue similarly bold goals need to ask basic questions for each element of BLICT to understand their starting point as well as the potential impact on the industry.
How do you compare vs. competitor benchmarks? Consumer goods companies across subindustries have set ambitious packaging sustainability targets. The specific targets as well as the actions behind them, however, can differ significantly. Benchmarking vs. competitors can help companies identify where they outperform and where they must improve along their packaging portfolio. This could entail the types of packaging, number of packaging types, and current sustainability of packaging that they offer. The same applies to their sustainability targets. These could include specific substrate targets, such as striving to reach 100% sustainable materials (e.g., recycled or bio-based) by a certain deadline as well as establishing innovation channels through partnerships and innovative packaging materials or formats. It is similarly important to understand how and what competitors are communicating around packaging choices and targets.
How is legislation evolving? Waste legislation can happen in the form of bans (e.g., single-use plastics); mandatory targets (e.g., recycling rate, minimum required post-consumer recycled content); taxes and fees (e.g., extended producer responsibility, EPR, fees paid by the polluter); and standards and compliance (e.g., deposit return scheme, labeling). Although these mechanisms are similar globally, countries are in widely different stages of waste legislation evolution. In general, the EU is furthest along, with the revision of the EU Packaging and Packaging Waste Directive adding additional requirements, bans, and definitions. But a few pioneering US states are starting to implement a robust agenda, significantly increasing recycling rates through EPR mechanisms by material and select deposit return schemes, for example.
Consider the situation in three key markets for consumer goods. The UK’s favorable environment and ambitious targets should help many companies achieve their goals. For example, companies can avoid the circa £210-per-ton plastic tax if their packaging has 30% or more post-consumer recycled content; it’s a move that is spurring the recycled content market. On the other hand, Brazil’s legislation and infrastructure challenges are likely to persist, and cross-industry mobilization may be needed to help local companies achieve circularity goals.
In the US, different conditions across different states can require the industry to take the lead in nationwide strategies. For example, California’s SB 54: Plastic Pollution Prevention and Packaging Producer Responsibility Act established a broad EPR program. It requires all single-use plastic packaging and food service ware to be recyclable or compostable by 2032, a 25% reduction in plastic packaging, and a 65% recycling rate of single-use plastic, all by 2032. Given California’s outsized relevance for the overall US economy and the preference of consumer packaged goods companies to sell uniform products across all states, this bill could have effects across the nation.
Nongovernmental regulation can also play a role. For example, the Science Based Target Initiative (SBTi) defines the 1.5°C pathway as an absolute emissions reduction target of at least 42% by 2030 vs. 2020 levels. Consumer goods companies committing to a 1.5°C target will need to achieve this ambitious path in part by limiting the carbon footprint of their packaging.
What are the infrastructure requirements? Having identified the legislative environment in their major markets, companies need to look at infrastructure. The waste management infrastructure for packaged goods spans manufacturing, post-consumption discarding, collecting/sorting, and recycling/disposing. Infrastructure, as well as recycling rates, varies by material and by country (see Figure 3). For example, the UK and EU have achieved high rates of formal collection, sorting, and recycling for most important materials. By contrast, Brazil has low rates of formal collection and sorting. While the US has high rates of formal collection, its recycling rate is low, even for important materials such as polyethylene/polyethylene terephthalate (PET) plastics (typically present in bottles). While the UK and US waste management systems are consolidated into large companies, recycling in Brazil is made possible by several small and mostly informal participants. A deep understanding of how the waste management system deals with discarded packaging materials is key to informing product innovation and generating a positive impact.
Recycling rates vary greatly across countries
How is consumer behavior changing, and how are retailers responding? Consumer goods companies need to clearly understand the role that consumers and retailers play in accepting and leading changes. Consumers are increasingly aware of sustainability challenges and say they are more willing to act. Climate change, air pollution, and waste are the top-of-mind sustainability concerns globally, and avoiding excessive packaging is the action that consumers are most willing to take. Nearly a quarter of US consumers can be classified as “conscious consumers,” meaning that they are actively concerned about climate change and environmental sustainability is a key purchasing criterion for them. On the other hand, the US has 32% of “conscious nonconsumers,” meaning that they express concern about climate change and have several environmentally friendly lifestyle habits but do not buy eco-friendly–branded products.
There are, however, important issues that prevent consumer behavioral change. Although awareness is increasing, many consumers still are confused about sustainability—that is, what makes a product sustainable and what to do. Consumers aren’t fully confident in their ability to change their behavior or make an impact and are not always correct when choosing what they believe is the most sustainable solution. For instance, when presented with single-use plastic vs. single-use glass packaging, 75% of respondents did not know or chose glass as the product with the lower carbon footprint, when in fact it is plastic.
There’s also the convenience factor; adopting more sustainable practices requires greater effort from consumers. Retailers can make it easier for customers to identify sustainable products on the shelf through labeling, for example, and make sustainable products available when consumers are deciding which product to buy for each category (vs. separated/dedicated session, for example).
Finally, while consumers say they would pay a premium for sustainable products and brands, some perceive them as being too expensive. Even of those consumers who say they are willing to pay extra for sustainable products, roughly half will only pay a minimal amount—sustainable solutions are often still much more expensive than the premium price consumers are willing to pay.
There still is a gap between consumers’ expectations and available sustainable options. In general, for consumer goods companies to deliver on circularity targets, more consumers will need to make trade-offs by trying new packaging presentations or sensory experiences—everything from concentrated solutions in cleaning, for example, to powders and solid bars in toiletries. They’ll also need to participate in waste sorting and reverse logistics programs, where retailers can have a critical role to play and allow for real circularity.
Importantly, however, packaging can play a key role in positioning your brand as sustainable. Consumers place a lot of emphasis on packaging, with the plastics problem being vigorously publicly debated. When asked to rank elements of sustainability they consider when purchasing products, shoppers ranked sustainable packaging as the second most important element, ahead of the product contributing to animal welfare, being organic, and having a low carbon footprint.
Meanwhile, although the retailers that sell consumer products are at different stages of maturity, their overall level of environmental, social, and corporate governance (ESG) engagement is increasing. Our study across 40 global retailers found that nearly three-quarters of them included a sustainability pillar in their corporate strategy. They are setting science-based targets for reducing their emissions or becoming Ellen MacArthur Foundation Global Commitment signatories for circularity. Retailers are also putting significant pressure on brands to use recyclable packaging or packaging with recycled content. British supermarket chain Tesco, for instance, said it will no longer carry brands that use excessive or nonrecyclable plastic packaging. The immediate implication for the consumer products industry is that retailers will change what they find acceptable in packaging ingredients and will redefine shelf space allocation.
What are the technology breakthroughs? Technological innovations are being developed to minimize waste generation and to improve decarbonization and the management of unavoidable waste; GHG-capturing technologies are also in the works. Since 2018, private equity and venture capital firms invested more than $6 billion in recycling facilities and bio-based packaging alone. Recycling and substitution with recycled glass, metal, and paper are the solutions with the highest probability of scaling by 2030. To achieve their 2030 targets, companies shouldn’t count on chemical recycling or industrial composting, given that both technologies won't be available on a large scale by the end of this decade. On the other hand, mechanical recycling will get more effective and still should be the dominant technology by 2030. Recent significant price increases in recycled substrates such as recycled PET, however, have caused companies to revisit their short-term targets and look for alternative solutions. If prices remain high, this could be an enabler for new technologies breaking through and becoming economically competitive.
Planning for different scenarios
While packaged goods companies want to take meaningful action, the economic, environmental, and social implications of different solutions are often uncertain, and the industry still needs guidance regarding what actions to prioritize in diverse geographies/applications as well as how to find synergies among various solutions.
Based on this BLICT assessment, three plausible scenarios emerge for what consumer goods sustainable packaging could look like in 2030 across the US, UK/EU, and Brazil markets:
- a substitute economy in which advances in consumer behavior will lead to a shift toward alternative materials and new product presentation (in this scenario, companies should not rely too heavily on recycling);
- a circularity breakthrough brought on by advances mainly in legislation, infrastructure, and technology, leading to recycling industry development; and
- a green shift in which advances in all five BLICT elements reduce material demand and reshape the value chain to a circular flow.
Each market’s situation and unique BLICT trends will determine its most likely scenario. For example, in the UK, a strong push for recycling in the coming years, combined with incentives and a build-out of infrastructure capacity, likely will advance the market toward a green shift. By comparison, Brazil could move toward a substitute economy based on likely poor waste management infrastructure and an unclear 2030 legislation outlook. There, most relevant changes will be mostly driven by consumer behavior and retailers’ practices. In this context, companies’ product innovation will be critical to promote circularity.
The situation in the US likely will be more complex. Pioneering states with a robust infrastructure and legislative agenda can advance toward a green shift; in other states, a possible shift to a substitute economy will depend in large part on changes in consumer behavior encouraged by nationwide companies. Understanding these potential scenarios helps companies decide on the right circularity agenda and how to engage other stakeholders.
When a global beauty and personal care company went through this process, it was able to clearly determine the impact of different actions by evaluating the weight of materials produced, the potential to be truly recycled, reused, or composted, and the GHG emissions per ton produced (see Figure 4). Because those factors don’t always move in the same direction, the company needed an integrated view, and it acknowledged that some trade-offs would be required. It considered the feasibility of different initiatives given specific constraints. For example, the company could make great strides with innovation in refill packaging and concentrated product formulations, both of which involve minor technological challenges but major consumer behavioral shift requirements. Designing for recycling would be harder from a technology perspective.
One global beauty and personal care company determined it could make significant sustainability gains, even with market growth
The company decided that it could achieve greater impact in the short term by reducing material weight and by reducing or eliminating some plastic. Using compostable materials and biopolymers and developing on-premise refill or returnable options would take longer because of technological and waste infrastructure challenges, but those initiatives could transform the industry in the medium term. Meanwhile, working on alliances and coalitions to contribute to the development of infrastructure and technology, encourage consumer behavioral change, and support waste legislation would require coordination outside the organization, but doing so could help advance the sustainability agenda both within and beyond the company.
Armed with these insights, the beauty company created a clear roadmap for a more than 40% reduction in GHG emissions through packaging changes. The quantitative approach helped the company identify the key moves to make.
To achieve its goal, the company also needed to mobilize the organization and promote leadership alignment around priorities.
Circular packaging transformation: A top management collective agenda
What could this look like at a large consumer goods company? Sustainable packaging transformation is a complex agenda. As with any other strategic transformation, top management engagement is critical to set the priorities, allocate resources, promote behavioral change, and engage all stakeholders in the journey. More precisely, each top management leader will play a critical role to drive this change.
The CEO could make public comments and mobilize the organization while also committing company resources to ESG initiatives. The chief marketing and sales officer could focus on overcoming consumer barriers, generating desire for sustainable products, and commercializing more sustainable offerings together with retailers. Category managers could be tasked with translating product innovation projects that align consumer needs with the company’s sustainability goals.
The chief procurement officer should go after sourcing the new materials and ingredients needed, and the chief supply chain officer should revisit the supply chain and make the adjustments required to adopt new packaging materials and formulas.
Meanwhile, the chief sustainability officer could support all areas based on a quantitative approach with an integrated view and a clear roadmap. The R&D head could allocate the appropriate resources, respecting mandatory moves while also betting on future (and more disruptive) solutions. Teams could focus on developing a reverse logistics program as well as supplier engagement on product innovation, and they could create alliances within the industry, forging relationships with key stakeholders.
Forward-looking companies that build the capabilities and flexibility to navigate the complex packaging challenge are likely to emerge as winners. Success means starting early and taking some calculated risks. The best companies will identify options to shift toward favorable packaging materials, and they will gain control of after-use packaging materials and the supply of recycled materials through vertical integration or strategic collaborations with the full waste value chain. First movers can commit to volumes of recycled materials early on and ensure the availability of increasingly in-demand (and potentially increasingly expensive) raw materials. Brands that fully embrace circular economy principles can connect with their consumers in new ways and create new value pools around different sensory experiences (better design, better materials) and better delivery models.
Consumer goods executives see the opportunity to transform packaging as a way of advancing toward their circularity targets while reducing emissions. They acknowledge that there’s much on the line and much ground to cover quickly. Yet, as they plot their path amid an aggressive timetable and obstacles that seem daunting, those that take a systematic approach will make the biggest leaps toward their sustainable future.