How are CPGs financially justifying their investments into Sustainable Packaging?
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- Corporate strategy
I'm interested in your experiences. Are the CPGs really utilizing carbon reduction/energy savings/life cycle costs in their financial calculations to justify investments in sustainable packaging or are they using the "old" ROI calculations aimed at short term gains? Please share your views with me.
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ROI based on the triple bottom line
jbuteau
It is starting slowly but surely ! In fact, the manufacturing companies (at least the ones that I have worked with during the past year or so), are not only taking in account economical criterias to justify their investments but also the social dimension (feedback / perceptions from the consumers, market shares changes...) and the environmental dimension ( the carbon footprint of their packaging solutions). However, this third dimension is the one that companies are not in their confort zone since it is a quite new language for them. One of them, who is a Walmart supplier, has just started the process of gathering data to update the sustainable packaging scorecard. They still see it as the "flavor of the month" instead to see it as a business opportunity. Based on one of my recent experience, the evolution that will have to take place is that ROI will have to be expected on a longer term vs short term; then these companies will be allowed to clain for sustainable development. Fortunately, that last project that I have completed with a local SME in the food proceessing industry can claim for a sustainable achievement ! So yes, the mind sets are starting to evolve but it will take time.
Material reduction seems to be the main focus
cbray
What I see are aggressive goals being set for material reductions in current packages. Many times this creates an opportunity to design a better package with less material that provides added benefit to the consumer. It also allows the CPG's to remain faithful to their short term financial goals while achieving sustainability objectives for the long term. Our firm has worked on several projects in which the designs we put forth reduce material up to 50%, but actually use more expensive material combinations to promote less material consumption or recyclability.
I have also seen a switch from cost centric analysis to brand equity centric analysis. CPG's are discovering new products and new branding avenues that equal increased sales and consumer loyalty through the development of sustainable solutions.
From a supplier standpoint to the CPG's, we are seeing a lot of raw material suppliers and processors engaging in a lot of intellectual property development and license agreements in order to offer solid solutions, but also increase their shareholder value and meet their goals.
I hope this helps.
I think as this process continues, it will create real opportunity for forward looking companies that create new business models focused on IP and brand equity at least from the supplier standpoint. I have presented this line of thinking to several companies including Wal-Mart, P&G, General Mills, and others and it has met with real interest and generated a lot of new projects.
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