Sustainability's Dominance in Packaging

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"Sustainability remains the number-one topic across the packaging value chain,"

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Mckinsey's global survey of packaging purchasers across industries highlights that approximately 75% of organizations have made significant sustainable-packaging commitments.

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However, less than 30% are adequately prepared to meet these commitments, be they regional or internal. Furthermore, fewer than 30% of organizations possess clear metrics related to recyclability, sustainability, or recycled content.

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This presents a considerable challenge. To address these issues and amplify the focus on sustainability, McKinsey recommends a holistic approach that employs five pivotal levers across organizations.

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A Growing Focus on Sustainability

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"Sustainability efforts are increasingly becoming a focus, with many end-user segments in the consumer spotlight,"

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Consumers now prioritize sustainably sourced and manufactured products, resulting in 2.7 times faster growth for sustainable products compared to traditional ones, despite their higher price.

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Policymakers are also responding to this shift in consumer sentiment by implementing regulations related to single-use packaging and extended producer responsibility (EPR). These trends indicate that sustainable packaging is gaining traction as a key focus for sustainability efforts.

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Sustainability Commitments and Packaging

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Corporations are making significant sustainability commitments that apply to packaging, which represents $1 trillion in annual global spending. These commitments predominantly revolve around three areas: emphasizing recyclability and increased recycled content (60% of commitments), reducing overall plastic usage (26 percent), and promoting innovation and change in packaging usage (14 percent).

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However, these commitments face new challenges in the post-pandemic landscape, including supply chain disruptions, geopolitical upheavals, and rising global inflation.

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Progress on Sustainability Commitments

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McKinsey's global survey reveals that 75% of companies have made sustainable-packaging commitments. Notably, B2B and industrial companies have given less attention to packaging sustainability compared to consumer goods companies.

However, the survey also highlights that fewer than 30% of organizations are adequately prepared to meet their commitments.
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Challenges in Achieving Sustainable-Packaging Goals

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Companies encounter four significant challenges in fulfilling their sustainable-packaging commitments:

• Cross-Functional Collaboration: Awareness of sustainable-packaging commitments varies significantly between functions, including product development, manufacturing, and marketing. Effective solutions require collaboration across all functions.
• Meaningful Incentives: Fewer than 20 percent of organizations have sufficient incentives to drive sustainable solutions across all functions. Aligning goals and incentives is crucial for fostering sustainable mindsets and behaviors.
• Clear Sustainability Metrics: Less than 30 percent of organizations have established clear metrics related to recyclability, sustainability, or recycled content. Well-defined metrics provide clarity on performance and goals.
• Lack of Upskilling: More than 80 percent of companies lack up-to-date training programs to upskill employees for executing sustainable-packaging solutions.
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Five Levers for Sustainable Packaging

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McKinsey highlights five critical levers to drive sustainable packaging without compromising cost, sustainability, or brand value:

• Use Less: Reduce packaging, including secondary and tertiary use, to minimize overuse.
• Refresh: Leverage customer insights and industry best practices to update packaging designs.
• Transport: Improve pallet efficiency and pack-to-product ratios to reduce emissions and transportation costs.
• Materials: Use sustainable materials with lower life-cycle emissions.
• Circularity: Optimize waste management by reusing and recycling materials.

The these levers combined can lead to substantial sustainability benefits, cost savings, and increased customer value. McKinsey emphasizes that leadership commitment, cross-functional alignment, clear metrics, and upskilling are key factors for success in implementing these levers across the organization.

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Conclusion

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Sustainability is a strategic issue within the packaging value chain. McKinsey's insights, based on their comprehensive survey and industry expertise, highlight the urgency for companies to fulfill their sustainability commitments. Delaying action may result in significant challenges, especially as capital allocation increasingly favors sustainable and high-performance companies.

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Companies that successfully meet their sustainability commitments while driving cost efficiency and revenue growth are positioned to thrive in the evolving landscape of sustainable packaging.

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Read the full study from McKinsey here.

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