With low oil prices continuing to foster uncertainty in Canada’s resources sector, the value of the Canadian dollar has declined rapidly, reaching a thirteen year low in January when it traded at $0.68 cents USD. While the dollar has rebounded since that time, exchange rate fluctuations are expected to continue to affect many Canadian companies throughout the remainder of 2016. Particularly hard hit are food and beverage manufacturers that import goods or source products from the United States. Not only are they dealing with an unpredictable dollar, increasing commodity prices continue to squeeze profit margins.
During times of economic hardship it is reasonable for companies to look for cost cutting opportunities and eliminate non-essential investments. Investments in sustainable packaging, however, shouldn’t be among the items on the chopping block. More and more companies are realizing that achieving sustainable packaging objectives can translate into cost savings while increasing brand equity driving greater sales and associated profits.
The Power of Sustainable Packaging
Efforts to make packaging more sustainable are wide-ranging. Making packages lighter or reusable, opting for shelf-stable packaging, and using materials that are renewable, biodegradable, compostable or recyclable are just some of the ways companies are reducing the environmental impact of their packaging choices. A primary motivation behind these efforts is reducing costs.
Take Sony for example. They thought inside the box to get the most out of their packaging choices. Previously, they had used standard size shipping boxes for warehousing, packaging and returns. Space inside the boxes was often unused and even required additional material to fill the voids and protect the product during transport. This wasted space was a waste of money and material. The solution involved redesigning the box to suit the size and amount of products. Sony created transport efficiencies and preserved resources by looking at their packaging through a new lens. “Smart sizing” initiatives like Sony’s aim to minimize waste by sizing the package to fit the product(s) contained within and meet the needs of the consumers that ultimately buy them.
Companies seeking cost savings through sustainable packaging have a host of attributes to choose from – the key is figuring out which choices will maximize environmental returns, best suit their products and logistics, while continuing to appeal to their customer base. For instance, lighter weight packages require fewer resources to make them and less fuel during transport thereby reducing costs and emissions. Opting for shelf-stable packaging for food and beverages reduces both the potential for spoilage and the energy needed for refrigeration during transport saving money, reducing waste and minimizing the emissions profile of the product. The appeal of both recycled materials and responsibly-sourced renewable materials is that they shouldn’t experience the same volatilities as finite resources. This is especially true for plastic. According to Trucost, “research in the UK identified 10-20% cost savings with the use of some recycled plastics, as well as supply chain security benefits and protection against future fluctuations of oil – a dwindling resource that is likely to become increasingly expensive.” As every CEO knows, a failure along the supply chain can be massively disruptive.
Capitalizing on the Informed Consumer
An investment in sustainable packaging is about future-proofing the supply chain with the added bonus of appealing to the eco-conscious consumer. Tetra Pak market surveys continue to indicate that consumers are willing to pay more for socially and environmentally responsible products, provided that brand owners are able to communicate these attributes effectively. In 2015, a survey conducted by Nielsen found 66% of respondents were of that persuasion. Environmental awareness among consumers is growing, leading to a preference for packaging that takes a smaller toll on the environment.
The connection between cost savings and sustainable packaging is fairly straightforward. Driving sales, on the other hand, is a little trickier. Use of sustainable packaging can be a way to enhance market share and sales revenue. Some companies may even be able to charge a premium for sustainably-packaged goods depending on their marketing strategies. But bridging the gap between a consumer’s good intentions and their point-of-sale actions remains a challenge. Industry must do more to educate consumers on what sustainable packaging really is and why a consumer’s hard-earned dollars should support it. Perhaps the more urgent need is tackling consumer confusion.
Consumers are bombarded with inconsistent and technical messaging when it comes to sustainable packaging claims. This creates both confusion and unintended consequences. A well-intentioned resident may toss a package stamped ‘compostable’ into their curbside organics bin not knowing if their community composting system is capable of handling it and may inadvertently contaminate the material stream creating sorting challenges at the composting facility.
In the US, GreenBlue’s Sustainable Packaging Coalition (SPC) is working on an on-package label to make composting packaging easier for consumers. According to Anne Bedarf, Senior Manager of SPC, one of the main goals of How2Compost “is to help educate those needing to source-separate food scraps and compostable packaging, to help combat this trend [contamination].” Collaborative efforts like this one have the potential to alleviate consumer confusion and by doing so maximize the return on investment in sustainable packaging.
Companies are increasingly on the hook for the environmental costs of their business decisions – a trend that is guaranteed to continue even in times of economic hardship. Investment in sustainable packaging offers companies an opportunity to reduce their own costs and increase market share in the long run while reducing environmental costs borne by society immediately. According to Trucost, the soft drink sector alone could deliver $1.3 billion in benefits by switching to algae-based plastic. It’s time to make the switch.