Ka-ching for sustainability – and innovations

Source. Unsplash – Towfiqu barbhuiya

Many companies shy away from additional costs to make their packaging more sustainable. Yet numerous studies now show that consumers are willing to pay more for sustainable packaging. We have calculated what is in it for you and which scenarios can ensure that sustainable packaging can nourish itself. There is a lot at stake, because the pressure for more sustainability is increasing and there are good reasons to tackle the necessary changes sooner rather than later.

 

The consumer, his wallet and sustainability

If you look at the statements of intent made in surveys, more and more consumers are paying attention to sustainability and are also willing to dig deeper into their pockets for it. In recent years, numerous surveys and studies have come to this conclusion. Four brief results should be given as examples:

  • As early as 2019, 77% of respondents in a study by the market research institute Ipsos said they would like to buy products that use as little packaging material as possible.
  • A study conducted by Simon-Kucher & Partners in 2021 shows that almost three quarters of respondents attach importance to sustainable packaging.
  • Another result of the study: 83% are willing to pay more for sustainable packaging.
  • On average, respondents would accept a “sustainability surcharge” of as much as 6.5% for the appropriately packaged product.

 

Just crumbs or a piece of the pie?

Of course, there is a gap between the statements of intent in surveys and actual purchasing behavior. Nevertheless, based on the above-mentioned “sustainability surcharge” of 6.5%, interesting calculations can be made for different scenarios.

These are made particularly interesting by the results of a sustainability study conducted by Inverto in 2020, according to which a whopping 95% of packaging manufacturers, consumer goods producers and retailers surveyed expect additional costs when introducing sustainable packaging.

The basis of these estimations is that the packaging share of the product in question ranges between 5 and 10% of the total price and that the 6.5% mentioned is actually only used for packaging.

  • In an extreme scenario, this would mean that almost twice as much money is now available for packaging. The assumption here is that the product previously cost €1 and that the packaging share today corresponds to 5-10 Cents. The “additional sustainability price” of 6 Cents therefore goes entirely to the packaging.
  • In a much more realistic scenario, we assume that the additional expenditure of around 6% is distributed across the entire value chain. According to this scenario, packaging accounts for between 6 and a maximum of 25%, i.e. around 0.5 to 1.9 Cents.

 

Sustainable packaging without additional costs?

Even the realistic scenario can represent a real challenge for packaging and an enormously big lever. Because when it comes to packaging, cents often make all the difference.

Take, for example, the 20-30% price difference between virgin plastic and recyclate of comparable quality cited in the Röchling Foundation’s Polyproblem Report. If the additional revenue from the “sustainability surcharge” covers this price difference, the more sustainable packaging is a financial zero-sum game.

The decisive factor for more sustainable packaging will be that the surcharge that customers are willing to pay for more sustainable packaging actually reaches the relevant packaging companies. The additional revenue from the higher selling price of the product must not be scooped up by other stakeholders as it moves through the value chain.

The additional money raised must actually be invested in the sustainable optimization and adaptation of packaging. If, on the other hand, it is retained as profit by other stakeholders in the chain, this will noticeably slow down further innovations in the field of sustainable packaging.

 

Better to invest sooner than later

Consumers, like regulators, are exerting ever-increasing pressure on packaging. Everyone expects more sustainability. The requirements for material properties are increasing, quotas for the use of recyclate are being set, recyclability is without alternative, there are no ways out.

It is therefore better for companies to react early and switch to sustainable packaging. The alternative is to be caught cold by difficulties caused by regulatory or demand developments. Good advice, if at all possible, is then even more expensive.

It would be desirable for politicians to be willing to provide important funds for research. If, for example, recycled material becomes cheaper than virgin material, the rethinking among packaging manufacturers will virtually take place by itself.


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