Many brand manufacturers have set themselves ambitious climate targets. At the same time, Brussels and the national states are constantly increasing the targets and quotas in the climate sector. In order to achieve these targets and their own goals, brand manufacturers are dependent on the packaging industry. This is because packaging is a relevant factor in the corporate and product carbon footprint. CO2 is on its way to becoming its own currency in our industry. For companies in the packaging industry that face the challenges in a transparent and scientifically sound way, this opens up great opportunities. In our newsletter, we present the background, measures, prerequisites and consequences of this situation in 10 key statements.
The realization that climate change poses the greatest threat to people and economies is no longer limited to experts and regulators, but is gaining consensus among the global population.
The 1.5 degree target
In order to at least limit the extent of the associated damage, countries agreed to the 1.5-degree target at the UN Climate Change Conference in Paris in 2015. But the bar is high. To achieve the target, we need a linear reduction in harmful greenhouse gases of 4.2 percent annually at global level.
Politics and business react
The European Union is responding to the challenges with massive regulatory intervention. But the industry is also moving forward. Nearly all major brand owners and retailers have committed to ambitious climate targets.
The packaging is relevant.
To achieve their goals, brand owners depend on the packaging industry. This is because packaging is a relevant factor in the corporate and product carbon footprint. In 10 key statements, we look at the background, measures, prerequisites and consequences.
#1 – The failure of climate action is the greatest risk to humanity – and Europe is a high-risk area.
Every January, leading figures from business, politics and science meet in the Swiss mountain village of Davos for the World Economic Forum (WEF). As part of a risk mapping exercise, the forum then also reports on the greatest risks to humanity.
The 2023 forecast is based on a survey of around 1,200 business and political leaders and shows a clear result: the greatest long-term risk for humanity is climate change and the failure of climate protection measures. In the assessment for the next decade, climate and environmental issues take six of the top ten places.
#2 – The Green Deal will reshape Europe – as an economic strategy.
National and European regulators are responding massively to the threats of climate change. The EU’s Green Deal, unveiled in December 2019, claims to lead the way in saving the climate on a global scale. The goal: decouple growth from resource use and become the first carbon-neutral continent. The deadline: 2050.
This no longer relies on voluntary action. The regulators are getting serious about a multitude of directives and regulations.
At the same time, the Green Deal is designed as a business model. As an economic strategy, it is intended to secure the competitiveness of companies and turn them into technology leaders.
As funding, “at least 1 trillion euros” has been earmarked for the Green Deal.
#3 – Regulation as a driver of climate protection – at all levels.
In terms of climate, three major packages are at the heart of the Green Deal – combined with one additional measure.
The European Climate Change Act of 2021, with a target of reducing CO2 emissions by 55 percent by 2030 and achieving climate neutrality by 2050 (both compared to 1990 emissions).
The expansion of emissions trading. The 2021 “Reform of the European Emissions Trading Regulation” is not least about being able to charge for the costs (environmental damage) arising from climate change.
The draft of a European Carbon Border Tax. The European Commission’s Carbon Border Adjustment Mechanism (CBAM), presented in 2022, aims to prevent value creation from simply migrating to other, non-regulated countries. To this end, imports that do not meet the EU’s CO2 reduction targets will be subject to a CO2 tax.
The extension of the reporting obligations (EU CSRD – Corporate Sustainability Reporting Directive on reporting in consideration of the EU Taxonomy Criteria) creates, as a further measure, the obligation for companies to also account for their own climate impacts and effects within the scope of corporate reporting. Key questions:
- How do the products affect the climate? Are they harmful to the climate or not?
- How does climate change affect production and the business model? Is the company resilient and fit for the future in the face of change?
#4 – The relevance of industry to climate protection.
According to McKinsey calculations, industry in Germany contributes a total of just under 23 percent to GHG emissions (Green House Gas). If we look at the packaging industry, its products account for around 120 kg of CO2 per year and inhabitant, according to “worldwatchers”. In relation to the Paris climate target for 2030 of 2,500 kg CO2 per person per year, this is almost 5 percent of the total.
It is clear to national and European regulators that the decarbonization necessary in the course of the required transformation must not only be demanded, but also promoted.
#5 – Central building block climate strategy – and how to create it.
The days when a company could define its own climate targets with its own parameters and calculation methods are over. In terms of transparency, comparability, traceability and credibility, scientifically based climate targets are now the industry standard.
The Science Based Targets Initiative (SBTi), which was established in 2019, plays a prominent role in this context. With its help, companies can set science-based climate targets and put their climate strategies on a firm footing.
In addition, the SBTi translates the findings of climate science into concrete minimum annual reduction rates. As of 2022, the world needs a linear reduction in greenhouse gases of 4.2 percent per year by 2050, the only way to meet the goal of limiting global warming to 1.5°.
#6 – UN initiative “Business Ambition for 1.5°C” – Pharmaceuticals and FMCG lead the way
In 2019, the “United Nations” (UN) launched its “Business Ambition for 1.5°C” initiative. Under the slogan “Join the Campaign for Our Only Future” and the direct address “Dear Business Leaders” it states:
“We are calling on you to step up and commit your business to set science-based targets aligned with limiting global temperature rise to 1.5°C above pre-industrial levels.”
With the core goal of climate neutrality by 2050, the most renowned companies have joined the Business Ambition for 1.5°C in recent years. Pharmaceutical and FMCG companies have taken a leading position.
The big players in the brand sector in particular have set themselves ambitious climate targets in recent years – which they cannot achieve under their own steam, but only with the entire value chain as a partner.
#7 – Climate footprint in the focus of brands – and CO2 as a new additional currency.
Climate neutrality is increasingly becoming a powerful argument for marketing. If the scientific basis is given, it can be communicated excellently and becomes a powerful differentiator.
Because consumers are prepared. According to a recent study by the Federal Environment Agency (UBA), 63 percent of Germans see the cause of climate change in human actions. Accordingly, the willingness to become active here as a consumer is growing.
With this in mind, leading brands are increasingly looking at the climate footprint of their products – from the ingredients used, to production and handling, to transportation and packaging.
The “Climate Leaders” not only increase their investments in climate protection measures, but also work with an internal CO2 price for purchased products and services. This is incorporated into the calculation of investment projects and improves the return on investment (ROI) for climate-friendly investments.
Soon, CO2 as a currency will be as inseparable from a product as its price.
#8 – The share of packaging in the corporate carbon footprint – and low carbon packaging
Packaging and packaging machines are relevant factors for climate protection and the climate targets of brands. Depending on the segment, the share of the packaging carbon footprint in the corporate carbon footprint is between 4 and 30 percent.
“Low carbon packaging” is becoming a new buzzword – and measures to reduce the CO2 footprint of packaging are becoming internal key performance indicators (KPIs) subject to meticulous monitoring.
At the same time, brands see climate potential in packaging that can be leveraged with almost no effort on their part. After all, the corresponding requirements can be passed on directly to the partners in the value chain.
This happens quickly – and ultimately has no alternative. For example, if a brand wants to address the carbon footprint of its packaged product, it can only do so in the packaging sector through its suppliers – packaging suppliers who can in turn switch to “green energy” and supply climate-friendly packaging, or packaging machine manufacturers who provide resource and energy-efficient machines.
#9 – Distributors bring transparency to the chain – with the Carbon Disclosure Project.
The Carbon Disclosure Project (CDP) is a non-profit organization founded in 2000. Within its framework, companies undertake to report on environmental data and climate targets on an annual basis. The number of participating companies is growing rapidly and exceeded the threshold of 13,000 in 2021.
The publication of data on climate-damaging greenhouse gas emissions or water consumption creates public transparency with regard to the commitments made.
The CDP reporters are actors who bring products to market. Through them, the commitment to transparency and reporting reaches the entire value chain in a “snowball effect” – and thus also covers the area of packaging, which is a relevant factor for the climate footprint of products and companies.
#10 – Team play in the supply chain – the climate footprint can only be improved together
The snowball effect described is not only desired, it is also necessary. After all, cooperation in the supply chain is the key to improving the climate footprint.
If packaging accounts for up to 30 percent of a product’s carbon footprint and packaging machinery has a direct influence on the footprint of production through its products, then it is imperative that both sectors do their part.
It is crucial that the results can be presented transparently according to the scientific criteria. If this succeeds, new opportunities will open up for the packaging industry.
The opportunities of change
Anyone who sets their own climate targets as part of the packaging value chain and can credibly demonstrate their results will become – or remain – a preferred supplier and partner to their customers. Because with its products and services, it pays directly towards its customers’ climate targets. This is a weighty asset that can be used to make a difference in the competitive environment.
However, a large proportion of companies in the packaging value chain are not yet sufficiently aware of their role – and the opportunities it presents. To seize the opportunities, a transparent climate strategy based on recognized scientific methodology is essential.
As a leading management consultancy for the packaging industry, we at B+P Consultants already developed the first climate strategies for customers in 2007. In addition, in our business area “Sustainability and Innovation” we also help, for example, with the creation and improvement of Eco Vadis ratings, the development of a sustainable product portfolio and introduce systematic sustainability management based on sound materiality analyses.
We would be happy to support you in making your contribution to combating climate change and increasing sustainability, and in positioning your company as a future-proof sustainability partner for your customers. Your contact is Matthias Giebel, Partner for Sustainability & Innovation at B+P Consultants.