Sustainable packaging in the US: From strategy to implementation

In early April, Rabobank attended Sustainable Packaging Coalition (SPC) Impact 2024 as a new member, alongside hundreds of influential consumer brands and packaging producers. With a theme of “less carbon, better packaging,” the three-day conference in New Orleans touched on a wide range of sustainable packaging themes, such as carbon in packaging, reuse programs, recyclability, and recycled content. Discussions focused heavily on extended producer responsibility, while compostability was largely absent this year, and conversations around microplastics stayed informal. We share some key takeaways from this event and our recommendations for players in this rapidly changing landscape.

From strategy to implementation

The agenda at SPC Impact featured insightful discussions on effectively addressing packaging, plastic usage, and extended producer responsibility (EPR), particularly in the US. Although these themes have been focal points in the industry for several years, the event sought to inject renewed optimism into the room. SPC Impact was not a conference for cutting-edge packaging technology but a platform for brands and packaging producers to work collaboratively on solutions under current US state legislation, infrastructure, and technology. While the conference encouraged the sharing of ideas and action points, many of the brands and producers in attendance are direct competitors, and solving the packaging problem could confer a competitive advantage. Below, we highlight three key areas of discussion.

No straight road to extended producer responsibility

EPR, a legislative tool that requires producers to take responsibility for the entire life cycle of their products, was a key theme throughout the entire conference, with multiple sessions dedicated to different aspects of it. As of April 2024, four US states (Maine, California, Oregon, and Colorado) have passed EPR laws for packaging and made notable progress toward implementation, and many more states (such as Minnesota, New York, and Tennessee) are actively working toward passing legislation.

Drawing inspiration from successful EPR laws globally, these state initiatives present brands and packaging producers with a series of challenges, requiring them to navigate the regulatory specifications of each state and to delineate the materials currently circulating in each state’s market. As an example, defining a material as key as “plastic component” could take months of debate before progress can be made toward the implementation of rules. Each producer must also submit comprehensive packaging specifications, details, and volume figures for thorough analysis in order to determine the specific EPR fees per package.

Eco-modulation, the practice of adjusting EPR fees based on the environmental impact and net recycling cost of packaging, also drew much attention. Essentially, the more efficiently and easily a package can be recycled, the lower the associated EPR fees. Packages that are harder to recycle incur higher fees. However, estimating these fees at such an early stage in the process is challenging and adds another layer of complication, as producers are setting their 2025 fiscal budgets currently.

Differences between each state’s EPR priorities add another layer of complication, particularly given the stringent mandates outlined in California’s Senate Bill 54 (SB 54). This legislation stipulates that by 2032 any packaging failing to meet recyclability or composability standards will be prohibited from sale. It also sets the first-ever source-reduction goal in US history, mandating a 25% reduction by weight and 25% reduction by plastic component by 2032. This development will shape industry practices and innovation strategies in the coming years. Other states may have different material exemption rules and thus EPR fee calculations, complicating the supply chain and sustainability reporting for producers with a national presence. The compelling dynamics of these unfolding developments may gradually move the federal government to implement a nationwide EPR framework.

Post-consumer recycled content

Considerable attention was also directed toward using post-consumer recycled (PCR) materials in packaging as a way to enhance circularity, especially in light of the impending PCR requirements embedded in many EPR laws. However, with only 350 material recovery facilities (MRF) across the US, numerous cities with populations ranging from 100,000 to 200,000 lack established recycling systems. This underscores the pressing need for substantial investment in the country’s recycling infrastructure, which has largely remained stagnant despite its 80-year history. A speaker from Berry Global shared its ambitious goal of having 10% PCR materials in its products by 2025; it currently sits closer to 3.6%. Many brands and packaging producers share this reality.

Adding to this challenge is a reluctance within the industry to utilize PCR materials in food packaging, primarily due to apprehension that substances of concern are not removed during the mechanical recycling process. The Recycling Partnership’s Paying it Forward report estimates that addressing this issue of infrastructure would necessitate investments of up to USD 17bn, highlighting the urgency for transformative action. To bolster PCR volume and purity, stakeholders are advocating for a range of solutions, including both analog (e.g., the How2Recycle label) and digital (e.g., QR codes or digital watermarks) on-pack initiatives, as well as the integration of machine learning and enhanced sorting technology at MRFs. These innovations are seen as crucial steps toward realizing a more sustainable and efficient recycling system.

Beyond recyclability: Carbon in packaging

The topic of carbon emissions in packaging is paramount across various industries. While some producers may attribute a significant portion of their carbon footprint directly to packaging, other producers, like many in agricultural sectors, contend with primary carbon concerns stemming from the field or livestock. Nonetheless, carbon emissions from packaging remain a significant focal point in the industry.

This highlights the importance of brands communicating their sustainability efforts, whether they revolve around addressing water pollution, promoting reuse initiatives, or mitigating carbon emissions; avenues exist for telling these sustainability stories.

With scope 3 emissions gaining widespread attention, there’s also a growing need for clarity within this category. Adopting recycled content or compostable packaging could increase the carbon footprint of packaging in some cases, while packaging material reduction generally reduces the amount of carbon, and possibly cost, needed throughout the supply chain. Brands must delve into their value chain to identify, prioritize, and address their most substantial and impactful contributors.

Retailers are making notable strides in this arena with their private-label products. Earlier this year, Walmart reported hitting its Project Gigaton goal six years early, having eliminated one gigaton of greenhouse gas emissions from its supply chain. Optimizing packaging design and reducing materials for both branded and private-label Great Value products were key contributors to achieving this goal. Kroger also disclosed significant progress with Simple Truth brand packaging. Given their generally smaller footprints and absence of longstanding legacies, private labels possess a unique opportunity to cultivate a robust brand voice particularly resonant with younger consumers seeking to support sustainable brands.

2025 is approaching. Act today!

With packaging usage directly linked to the sales growth of packaged goods and to the revenue growth of most public consumer packaged goods companies, the outlook for packaging waste reduction seems bleak. If we assume a conservative 1% growth in packaging use per year, a target to reduce packaging 20% by 2030 compared to a 2023 baseline could, in reality, be a 25% reduction. The industry may be up against a bigger hurdle than we thought. The uncertainties around EPR implementation and variability by state also left some attendees overwhelmed. However, we believe it is imperative for producers to take a proactive approach and act today before all the details of EPR laws are finalized. The first round of deadlines for many (mid-2025) is quickly approaching.

Despite all these challenges, we left the conference inspired. The event sought to inject renewed optimism into the room through several speakers, fostering resilience and fortitude while inspiring a collective determination to fight this uphill battle.

So what can producers do?

- Build a dedicated sustainability team (not just one or two people) that reports to the CFO and hold the CFO accountable for sustainability targets.

- Start with a truthful baseline assessment of products and operations (e.g., carbon footprint, water use, waste, etc.) as they stand today.

- Seek out new technologies and partnerships through pilot trials.

- Join alliances and invest collectively in recycling and local waste management infrastructure.

- Get support from financial institutions and investors to bridge financing needs during the transition period.