The Future of Packaging Conference, co-hosted by L.E.K. Consulting and Smithers Pira, has been postponed until April 27, 2021. In lieu of this year’s conference, we are releasing four Executive Insights based on virtual interviews with conference panelists, which cover the following topics:
- Packaging M&A: Where Is It Headed?
- Meeting Sustainability Goals: How Are Brands’ Strategies Evolving?
- U.S. Recycling: How Are Converters Satisfying Brand Owner Sustainability Demands?
- Innovation in Packaging: Opportunities and Challenges
Meeting Packaging Sustainability Goals: How Are Brands’ Strategies Evolving?
Over the past decade, sustainability and responsibility reporting has gained in popularity. According to the Governance & Accountability Institute, 86% of S&P 500 companies now publish these reports. Many brand owners have also publicly announced environmental, sustainability and governance goals (see Figure 1) that they hope to achieve between 2025 and 2030. These are often substantial commitments that will require step changes in packaging.
Sustainability efforts, including packaging initiatives, can be an important part of a company’s overarching mission to operate as a responsible business. The broad appeal of sustainability among diverse customer groups can also drive brands to focus on sustainable packaging.
The purpose of sustainable packaging varies both by product and package type, but maintaining product safety and having an environmentally conscious end of life are key. Sustainable food packaging is especially challenging because it must keep products fresh and safe while also serving its unique purpose at each stage of its life cycle.
Developing sustainable packaging in the U.S. can be especially challenging given the uneven state of the U.S. recycling system and lack of credible standards for sustainable materials. Furthermore, sustainable packaging must have buy-in from stakeholders, provide a consistent customer interaction and meet a minimum level of performance similar to other packaging formats.
Finally, it’s impossible to talk about sustainability and packaging right now without considering the impact of COVID-19. The pandemic has caused brands to reprioritize their initiatives as they turn their attention to maintaining core operations, reducing costs and ensuring food safety. As a result, sustainability initiatives are likely to be on the back burner in the near term. However, over the longer term, sustainability is expected to remain an important initiative for brands. Furthermore, the increased focus on food safety can create opportunities for innovative sustainable packaging.
As part of our virtual Future of Packaging Conference, L.E.K. recently held an in-depth conversation with Jennifer McCracken, Director of Sustainability at HAVI, and Jeffrey Yorzyk, Director of Sustainability at HelloFresh. Excerpts from our wide-ranging discussion can be found below.
L.E.K.: Why is sustainability in packaging important to your brand?
Jennifer McCracken (HAVI): A commitment to sustainability by HAVI is essential to operating as a responsible business and is woven into our company philosophy. HAVI is committed to creating enduring value for customers by facilitating the wise use of resources across their supply chains. We are a trusted partner to brands with bold aspirations for sustainability, including packaging.
Jeffrey Yorzyk (HelloFresh): A major component of our mission to change the way people eat forever is creating a more sustainable food system, which includes sustainable packaging. We’re finding that our customers care about this subject as well. Maybe five to 10 years ago, you could say that only younger consumers cared about sustainable packaging, but that is not the case anymore. With “The Blue Planet” series came the advent of the “Attenborough effect,” which sensitized the public to packaging issues and changed the landscape for sustainability initiatives pretty quickly. The Shelton Group did a fascinating study in 2019 that indicated consumers felt their choices could more directly reduce marine plastic than climate change. People see wildlife suffering from materials that they’ve directly handled before, like a drinking straw, and they’re able to draw a line [to] ocean plastic [in a way] that they’re not able to do directly with climate change.
Consumers of all ages and segments are pushing for sustainability today. Our customers tell us they dislike packaging waste, especially plastic waste. As a result, we aren’t pushing sustainability to target a particular customer segment; we are promoting sustainable packaging to meet the needs and concerns of all our customer segments. It is consistent with both our goals as a company and our customers’ feedback.
L.E.K.: What do you view as the key purpose of sustainable packaging?
Jeffrey Yorzyk (HelloFresh): The primary consideration for our sustainable packaging is its intended function at each stage of its life cycle — transit, customer interaction and end of life. During transit and customer usage, the packaging has to keep food fresh and safe. The crux for sustainable packaging is balancing the need to maintain food quality and safety with the desire for minimal and highly circular materials that come from a recycle stream, and can be recycled, composted, etc., at their end of life. There are trade-offs, but packaging absolutely must keep food safe and fresh, first and foremost.
From an end-of-life perspective, the perfect sustainable packaging can do what it’s supposed to do no matter what the customer does. It can be accepted into a landfill or degraded in a compost pile. If it ends up in the ocean, it can degrade and not have a harmful effect on the environment or wildlife. For our shipping box and insulation specifically, we think about circularity and how do we help on the customer end by making it curbside recyclable and using recycled content. In our Green Chef brand, we introduced a sink-safe ice pack that makes it easy to dispose of the contents, so you can clean and dry it and get it to a drop-off location easily.
Jennifer McCracken (HAVI): The purpose of your sustainable packaging varies by its application: What are you asking that packaging to do for you? Functionality is key; if packaging doesn’t fulfill the task it was designed for, it may contribute to undesirable outcomes. For example, there are different performance requirements for front-of-counter (e.g., takeaway containers) versus behind-the-counter (e.g., food/ingredient packaging) food service packaging. As a lot of front-of-counter packaging is filled on-site, it doesn’t need to preserve food or extend shelf life to the same degree it does for behind-the-counter or grocery packaging. What is key for front-of-counter packaging is the ability to secure and preserve food quality from when the order is filled to when it is transported and eaten.
Regardless of the packaging type, the fundamental purpose of food packaging is to keep food at a high level of hygiene and quality. If that can’t be guaranteed, sustainability outcomes are jeopardized.
Brands must also design packaging that takes into consideration responsible sourcing practices and disposal options at end of life during the development phase. This is true for both front-of-counter and behind-the-counter packaging. Ideally, sustainable packaging will be acceptable for collection through local programs such as recycling and composting.
L.E.K.: What external and internal operating challenges do you face, as a brand owner, in pursuing renewable packaging goals?
Jeffrey Yorzyk (HelloFresh): There are two components to the recycling issue in the U.S. First, brands and convertors need to enable the U.S. recycling system to work by creating sustainable packaging recyclers want. If we don’t make packaging that is sustainable and recyclable, then there is no future — brands need to enable the recycling system for it to work properly. Brands are responsible for making the product recyclable, and as they are incentivized to do so, there is greater push for the system to be able to handle it (and justify recycling investment).
Second, the recycling system and infrastructure need to work properly to process the materials and packaging from brands and convertors. Consumers expect the U.S. recycling system to work, and they are increasingly realizing that it is not working very well. These consumers want to do the right thing, but they also need some training on how to sort and recycle different materials properly.
So the challenge lies in developing sustainable packaging that works within the constraints of the U.S. recycling infrastructure and the gaps in consumer knowledge about recycling. This involves using materials that are easily recycled based on the regional collection system rules in the U.S. and labeling them clearly for consumers to understand how to recycle or dispose of them properly.
Jennifer McCracken (HAVI): When achieving renewable packaging goals, challenges differ depending on the material. For example, internally, implementing a responsible sourcing program for tree-based paper could be limited to a procurement-directed process that engages suppliers to implement chain of custody claims for existing products. Whereas, a renewable plastics goal would likely require a broader organizational engagement involving product engineers and quality teams to validate new materials, in addition to procurement that ensures supply. So internal challenges may include prioritization of renewable goals compared to other business objectives that compete for resources. Likewise, externally, credible standards are long established and commercially available for tree-based materials, but are more in an emerging phase for renewable plastics.
Essentially, tree-based renewable paper goals may not impact the packaging functionality, whereas this is not a given for renewable plastics, which may change material properties. Whatever changes are made to achieve renewable plastic goals, these changes require buy-in and support from a variety of internal stakeholders within a brand, which can be challenging. And ultimately, these changes must be embraced by customers. Switching to a more sustainable packaging option is tricky. If the changes to the packaging are so significant that they make it difficult or frustrating to use for a customer, it’s a nonstarter.
Finally, scalable solutions are paramount to success. This applies to any renewable material goal. Since traditional fossil-fuel-based plastics are dominant, they have an advantage over emerging technologies.
Jeffrey Yorzyk (HelloFresh): One of the key challenges for sustainable packaging is the performance level of the material. Sustainable packaging needs to be able to perform at the same level as other packaging formats and materials so that it is easy to use and provides a seamless customer experience. In the end, products and their packaging need to positively resonate with customers for the business to be successful.
Over the past couple of years, sustainable packaging and materials have been narrowing these performance gaps. The sustainable shipping insulation we currently use is ClimaCell® by TemperPack, which is based on a proprietary bio-foam kind of like corn starch, and it meets a lot of the end-of-life performance requirements we have in terms of doing the right thing no matter where it goes. We’ve been experimenting with different thicknesses to get the performance right based on the customer climate zone. Materials like that are increasingly coming into the stream.
L.E.K.: What impact does COVID-19 have on your near-term (one to two years) and longer-term (five to 10 years) perspectives on sustainability?
Jennifer McCracken (HAVI): COVID-19 is changing our focus in the immediate near term. We are dedicated to getting through the pandemic to recovery and discovering what the new normal looks like for us. As we move through the pandemic, we are focused on maintaining our business operations, which means there is likely to be some increased sensitivity on the cost side. This impacts sustainable packaging through increased cost pressures. At the same time, we are committed to achieving commitments to sustainable packaging goals.
Jeffrey Yorzyk (HelloFresh): Since the onset of the pandemic, the number of customer questions we have received around food safety has definitely grown. Customers want to know how we are handling and packaging our meal kits.
We don’t have enough data yet to see changes in packaging or use of sustainable packaging, but there is the potential for sustainable packaging usage to be impacted as a result of increased focus on customer and food safety. We remain steadfast in our commitment to food safety as we navigate new considerations influencing packaging choices.
Jennifer McCracken (HAVI): Due to COVID-19, we are focusing on new customer needs, which are largely around food safety and hygiene. That means for any packaging we have, we absolutely must enable safety and hygiene first and sustainability may be more of a secondary consideration in the immediate near term.
Jeffrey Yorzyk (HelloFresh): If food safety is a lasting concern for customers coming out of COVID-19, then it will be another voice in the room, but there’s no need to compromise sustainability for safety or vice versa. There is an opportunity to have packaging that is both sustainable and retains the element of increased focus on food safety.
Jennifer McCracken (HAVI): I think it’s too early to discern the broader impact on sustainability initiatives and tailwinds, but for any new sustainable packaging, maintaining food quality and hygiene is even more important now. This isn’t unsolvable; rather, it creates an opportunity for more creative and innovative solutions. For example, there are moves away from bulk cutlery that isn’t wrapped in plastic film. However, options exist in the form of cutlery dispensers that dispense a single fork or spoon without a wrapper. If we can put a man on the moon, we can create sustainable packaging that incorporates high levels of food safety and hygiene.
Jeffrey Yorzyk (HelloFresh): I think the consumer-driven push for less packaging, biodegradable materials, recycling and sustainability is here to stay, and COVID-19 is not likely to cause a 180-degree reversion due to food safety. For example, plastic debris in the ocean still causes a really strong consumer reaction in favor of more sustainable solutions, and I would say it doesn’t seem to be going anywhere. I think packaging sustainability is similar in that way to climate change — it’s not going away as an issue.
L.E.K.: Thank you both for these invaluable perspectives. To sum up, sustainable packaging goals may be facing some headwinds in the short term, as brands focus on maintaining their business and cutting costs during a period of economic contraction. But given consumer support for sustainable packaging — as well as the current focus on food safety — there are opportunities in this space. The challenge will be to develop sustainable packaging that works within the constraints of the U.S. recycling system where consumer understanding is still less than optimal. Nevertheless, these are challenges that can, and will, be addressed.
Jennifer McCracken is Director of Sustainability for HAVI’s N.A. Packaging service line. In her role, she is responsible for N.A. leadership for HAVI Sustainability, including strategy, alignment and services. Before joining HAVI, Jennifer consulted for major multinationals, assisting them in complying with environmental packaging and product regulations, at Environmental Packaging International. She also participates in working groups focused on sustainability issues such as the Sustainable Packaging Coalition (SPC), the Foodservice Packaging Institute’s Paperboard Recovery Alliance (FPI PRA) and AMERIPEN.
Jeff Yorzyk has more than 20 years of experience in sustainability across a broad range of sectors, and has held leadership roles in both commercial and consulting companies that spanned program development, strategic management systems, product sustainability and life cycle assessment. As the Director of Sustainability at HelloFresh, he is enjoying the unique opportunity to build a sustainability program for the global leader in the meal kit category. Jeff is also a member of the Board of Directors at ISSP, the International Society of Sustainability Professionals.