Consumer eco-consciousness notwithstanding, there are several major influences on the coming global wave of sustainable packaging. The biggest growth region will be Asia-Pacific, as emerging middle-classes in developing nations will create demand for packaged goods but also social pressures on manufacturers.
Environmental concerns among consumers and governments are pushing the sustainable packaging agenda and encouraging the introduction of legislation to minimize the impact of packaging. The global market for sustainable packaging is forecast to reach $244 billion by 2018, according to a new market report, The Future of Sustainable Packaging to 2018, by Smithers Pira. What is the current state of the market, and what are other reasons for this growth?
In the recycled material packaging segment, paper packaging is the largest market, followed by metal, glass, and plastic. The demand for recycled plastics remains strong, but the material faces several challenges, including lack of infrastructure for collection and sorting, international market competition for existing recovered materials, and compliance with requirements related to food and drug content.
The biggest growth comes from the Asian market, driven by demand for sustainable packaging in countries like China and India. There, boosted by growing middle-class populations that are increasingly becoming affluent and conscious of health and environmental issues, the demand for sustainable practices is driving greener packaging. In 2018, Smithers Pira forecasts that Asia will be the largest market for sustainable packaging, accounting for 32 percent of the global market.
According to the study, the issue of sustainable packaging will continue to grow in importance over the next decade and is predicted to become the number-one challenge facing companies, beating cost and other issues by 2023.Why?
Consumer Conscience Drives Demand
Environmental awareness among a growing population of consumers is fueling demand for sustainability and the reduction of the impact of packaging on the environment. Consumer attitudes toward sustainability have changed dramatically in the last decade, and this is set to continue in coming years. This greater environmental consciousness and concern for the general good of society, as well as the well-being of future generations, is leading to ethical purchasing behavior.
There is a general consensus among consumers that packaging is a major contributor to waste. According to a survey by social research company Ipsos MORI, 36 percent of consumers believe products are "a little over-packaged" and 43 percent believe they are "very over-packaged." We can see that a significant proportion of consumers are now considering social and environmental benefits as part of their calculations of product value and purchasing decisions.
Despite this, consumer demand can be complex and conflicting when it comes to everyday consumption, which is still mainly driven by convenience, habit, and price. Often, consumers are not willing to pay more for sustainable packaging. While sustainability may not be a primary purchase motivator for most consumers, they nevertheless have increasing expectations of brands to incorporate greener business practices.
Government Legislation Has Proactive Effect
Government legislation around the world is one of the leading drivers for the sustainable packaging agenda and is putting considerable pressure on manufacturers to up their game. The concepts of reduce, reuse, and recycle are being embraced as much by government agencies as consumers. Examples of legislation aiming to reduce the environmental impact of packaging are the EU Packaging and Packaging Waste Directive implemented in 1994 and the Plastic Bag Ban in China in 2009.
Government legislation is expected to impact consumer packaging more than other sectors such as bulk or industrial packaging in order to maximize the impact. Consumer packaging reaches the largest population and hence will have the biggest impact on sustainability. In this way, food and beverage packaging will likely see the greatest regulatory impact.
In addition to enacting legislation applying mainly to businesses, governments have also provided assistance directly to consumers to mitigate the environment-degrading effects of packaging. For example, local governments provide waste and recycling services for residents, and they may also become involved in waste-education programs.
Firms Reap Lower Costs and Higher Profits
Companies are becoming increasingly aware that resources are limited and the materials that they have traditionally discarded possess value. For example, recycling an aluminum can to make a new one rather than making it from virgin materials has helped to significantly accelerate aluminum recycling.
However, for many companies, the link between recycling and profitability has not yet been made, and sustainability initiatives have yet to be integrated into their day-to-day business practices. Interestingly, a survey of 141 top companies that are part of the World Business Council for Sustainable Development found that companies that used sustainable strategies performed better in almost every market segment than their respective counterparts. On average, the sustainable companies returned about 4 percent higher margins.
Increasing recycling also carries the potential for creating and expanding new recycling and secondary materials markets. Polyethylene terephthalate (PET) plastic has the highest commodity value, an estimated $2.9 billion, followed by high-density polyethylene (HDPE), aluminium, and paper, all of which are worth over $1 billion.
Sustainability programs are increasingly being seen as a source of innovation that can help in differentiating a company by appealing to the consciences of consumers. These programs also serve as a platform for new product and market development. There are definitely opportunities out there for companies to gain competitive advantage through the development of an environmentally friendly strategy without sacrificing product quality or consumer convenience.
Based on primary research and expert analysis, The Future of Sustainable Packaging to 2018 details market sizes, projections, and five-year market forecasts to 2018. The study focuses on key drivers, trends, and technologies shaping the sustainable packaging industry. It also breaks down sales by type, end-use market, and geographic region and provides comprehensive coverage of the global market and supply chain.
Smithers Pira is the worldwide authority on packaging, paper and print industry supply chains. Established in 1930, the company provides strategic and technical consulting, testing, intelligence, and events to help clients gain market insights, identify opportunities, evaluate product performance, and manage compliance. For more information, visit www.smitherspira.com.