Packaging Trends in Sustainable Supply Chains

There are plenty of reasons to reduce packaging in the supply chain—adapting to consumer concerns, meeting legal requirements, following industry leaders, and preserving margins. We’ll dig into:

• The current state of packaging and how legal, corporate, and consumer factors are changing the stakes.
• How packaging will change in the future as it becomes smarter and more sustainable.
• What companies like yours need to do to meet these new trends and challenges.

The Current State of Packaging

When it comes to understanding the packaging market right now, there are three vital perspectives:

1. Governmental and legal regulations that are introducing new rules forcing changes to packaging.
2. The actions of corporate and industry leaders, and the need to keep up with competitors.
3. The behaviors of the end consumer and how they feel about your brands, products, and packaging.

How Governmental and Legal Regulations Work to Reduce Packaging Waste

Around the world, governmental and regulatory agencies are introducing new legislation to limit packaging and reduce waste. Packaging directives and rules that are being debated or have been signed into law include:

• Europe: the EU wide tax on non-recycled plastic packaging waste will come into effect from January 1st, 2021, and will cost companies approximately € 0.80 per kg on the weight of non-recycled plastic packaging waste in their supply chain.
• Europe: Packaging and packaging waste directive is an established law that requires packaging to meet standards around packaging and weight and requires measures to prevent packaging waste, including making producers accountable by 2024.
• Europe: Regulation on single-use plastic packaging is a recently approved law that targets ten of the most common single-use plastic products that lead to marine pollution.
• Australia: Australian Packaging Covenant is an agreement that 100 percent of Australian packaging will be recyclable, compostable, or reusable by 2025.
• California, U.S.: SB-54 Solid waste: packaging and products is a bill that seeks to reduce plastic waste by 75 percent and to almost completely phase out single-use plastics.

These examples are just some of the laws that suppliers, manufacturers, retailers, and others need to meet. This is just the start. Over the next few years, we can expect multiple new standards to come into place as governments take more action against packaging pollution. 

For businesses that want to sell into global marketplaces, meeting these requirements is essential. Failing to do so can result in legal actions, fines, reputational loss, or the inability to sell into particular geographies.

How Corporate Behavior Requires All Businesses to Act-On Packaging Waste

In an increasingly competitive global marketplace, businesses of all kinds are seeking any advantage to get ahead of their rivals. As market leaders and major industry players announce serious efforts to combat packaging waste, businesses of all sizes must keep up or risk losing customer share.

Fast-moving-consumer-goods (FMCG) retailers, in particular, are increasing their focus on sustainable packaging. Much of this is led by profit margins—less packaging and lighter materials reduce costs throughout the supply chain. 

Initiatives announced by corporate leaders include:

• Walmart announced new packaging waste reduction commitments to make all of its private brand packaging recyclable, reusable, or compostable by 2025.
• Nestlé is investing millions of dollars to make all of their packaging recyclable or reusable by 2025.
• The Loop Reusable Packaging Program will allow consumers to buy everyday products in durable, reusable packaging and is supported by industry giants like Coca Cola, Unilever, Procter & Gamble. The Body Shop, Danone, Carrefour; and others.
• Apple has been reducing its packaging footprint since 2017 and continues to reduce waste further.

As these corporate leaders put “Reduce, Reuse, Recycle” into practice, they’re setting the bar higher for everyone else. These industry giants can also afford to promote their brands as sustainable and environmentally-conscious, and smaller organizations must position themselves accordingly.

How Consumer Behaviors Around Sustainability Are Influencing What They Choose to Buy

Consumers are making more informed choices on how they spend their money. That’s not just about the provenance or carbon footprint of manufacturing and logistics, excessive packaging is also a significant turn-off.

Here’s what studies show about consumer buying choices when it comes to sustainability:

• 43 percent of U.S. consumers cited environmental impact as extremely or very important for packaging.
• 38 percent of U.S. consumers say packaging is an important factor in their purchasing decisions.
• 70 percent of “purpose-driven” shoppers will pay an added premium of up to 35 percent more for sustainable purchases.
• 40 percent of consumers are willing to pay a premium for more sustainable packaging.

The global pandemic is changing behavior, too. Concerns around hygiene, ease of sanitization, and product origins all influence consumer choices. In particular, the move to online shopping is shifting environmental concerns away from local stores and towards Amazon and other industry giants.

“COVID-19 has increased consumer awareness and commitment to buying sustainably: 67% of consumers said that they will be more cautious about the scarcity of natural resources due to the COVID-19 crisis, and 65% said that they will be more mindful about the impact of their overall consumption in the “new normal.” — Vending MarketWatch: COVID-19 Has Impacted Consumer Awareness About Sustainability.

So, how will this legal, corporate, and consumer oversight impact the packing approaches and create greener supply chains in the future? 

How Packaging is Changing to Become Smarter and More Sustainable

We believe that there are several major packaging trends that will influence supply chains over the next few years.

Reduce Use of Conventional Packaging Materials and Seek Alternatives

• New packaging designs that require less material and focus on alternatives like moving away from virgin wood and paper towards recycled products, fiber-based packaging, and similar.
• Consumers having access to personalized, reusable shopping containers that they keep at home and take with them to the store to maintain the freshness and quality of products. 
• Ecommerce-led packaging and logistics, which could lead to increased use of centralized collection centers and the rethinking of “last-mile” distribution.
• Edible packaging made from vegetables and starches that could be eaten by a consumer or fed to a companion animal.

Innovation and Customization for Packaging

• Temperature and other environmental monitoring on packaging that could react to storage conditions and other factors so consumers are more informed about product quality and use-by dates. 
• Interactive packaging including RFID or other scannable factors that can provide additional information like recipes or complementary ingredients or products.
• Personalized packaging aimed at specific consumer segments and their requirements, for example, easy instructions on reusing, recycling, or composting.

More Efficient Packaging for Reducing and Recycling

• Packaging designed around consumer convenience and affordability, with more customizable products and greater numbers of SKUs.
• Hygiene-centered packaging design to help reduce concerns about contracting COVID-19.
• Ecommerce ship-ready packaging for direct-to-consumer models.
• Micro-supply chains to allow goods to be produced and distributed close to the end consumer and have reuse and recycling built into the model.

For further reading, we recommend these McKinsey reports.

Now we know about the current and future trends in packaging, how can your business take advantage?

What Companies Can Do to Enhance Packaging in the Supply Chain

However you’re involved in the supply chain—as a packaging converter, manufacturer, retailer, or brand, you can take decisive action on your new packaging options.

Understand How Your Business is Currently Using and Consuming Packaging

Your business already has a packaging baseline, and you need to start by getting insight and transparency for your packaging data. You can achieve this through:

• Auditing and analyzing all the goods and products that pass through your business and reviewing the packaging involved in receiving, storing, and sending out each item. Even if you don’t have the materials and compositions yourself, you will be able to obtain them from upstream suppliers or packaging converters.
• Capturing all of your packaging information on a centralized platform, so you can compare packaging across different SKUs, providers, geographies, and more, through every part of the supply chain.
• Identifying the most wasteful packaging and materials that consume the most resources.

Work with Upstream and Downstream Supply Chain Partners to Create Less Wasteful Packaging

Now you understand your current packaging usage, it’s time to focus on more sustainable options:

• Talk to packaging converters about existing options for more sustainable packaging, focusing on your products that have the greatest packaging overhead.
• Explore different types of materials you can use to reduce the environmental impact while protecting goods in transit.
• Engage with packaging designers and manufacturers to create new options for sending out products. Review some future packaging trends to see how you can incorporate them into your designs now.
• Incentivize your upstream providers to change their packaging processes and make suggestions for improvement.
• Fund business initiatives to get new packaging in place.

Use Data Analysis to Drive Further Improvements

Continue to collect data on your packaging and incorporate it into packaging development. This might include:

• Materials analysis based on the type and amount of products you’re receiving and sending, then linking that with reduced environmental impacts and carbon footprints.
• Consumer sentiment towards your products and packaging, and linking that with a desire for greater sustainability.
• Quality audits of packaging processes and approaches to identify ways to streamline distribution without compromising sustainability.
• Cost and Return on Investment tracking to compare new packaging solutions against regulations, competitors, and reduced consumer demand. 
• Logistics expenses due to reduced packaging that leads to lower rates.

Ultimately, developing sustainable packaging and reducing waste requires closer relationships throughout the supply chain. This provides some great opportunities to expand your supply chain further, so packaging becomes a starting point for greater partnerships and business growth. 

Topo empowers you to monitor, inspect, and analyze the different stages of your sourcing, product development, production, quality, and sustainability processes within your supply chain. The Topo Platform boosts transparency and productivity while decreasing your operational cost.