The trend to sustainable consumption gives high performance businesses the opportunity to place sustainability at the heart of their supply chain strategy.
Packaging is a highly visible consumer marketing tool, but it is also a significant cost to the supply chain, accounting for up to 12 percent of the cost of many typical consumer goods.1 This combination creates an ideal opportunity for businesses to drive both brand growth and supply chain cost reduction by moving to a more sustainable approach for packaging strategy.
Consumer goods firms and retailers can use sustainable packaging programs to create value in four main ways:
Reduce supply chain costs by using smaller amounts of less complex packaging, thereby cutting sourcing, production and distribution costs. For instance, Wal-Mart plans to reduce packaging by 5 percent by 2013, with an expected net saving of $3.4 billion. The retailer predicts that if 10 percent of the US retailers cut packaging similarly there would be a net industry saving of $11.0 billion.2
Achieve sustainability targets through significant reductions in raw material consumption, carbon emissions and waste. This is especially relevant at a time when new standards such as the Climate Change Act in the United Kingdom, the Carbon Labeling Standard in Japan and California's AB32 legislation are beginning to impact.
Enable customer intimacy by refocusing brand identities towards sustainability. The affluent and growing LOHAS consumer segment is worth more than $500 billion a year globally. Consumers in other segments also increasingly prefer more sustainable products.3
Create goodwill for key brands with consumers, retailers and wholesalers as well as internally within the business. Accenture research has shown that 64 percent of consumers are prepared to pay a premium for products and services that help reduce carbon emissions.4
The Value of Sustainable Packaging
Packaging plays a vital role in the commercial strategies of the consumer goods and retail sectors.
Transit packaging such as pallets and cartons mitigates product damage through the supply chain and enables cost-effective handling. Consumer packaging has a more complex role, additionally supporting brand development on the retailer's shelf, communicating information and making consumer access easier. Examples include portion or gift packs.
Both types of packaging come with both a financial and environmental cost. Put simply, either too little or too much packaging can waste money, send the wrong marketing messages and could potentially impact sales. Firms must know both what they need their packaging to do for them and what their customers expect of their packaging.
The challenge for firms is to find the optimum balance in their packaging strategy among:
- Cost.
- Product protection.
- Consumer marketing.
- Communication.
- Environmental impact.
Well-designed sustainable packaging programs must create commercial value while simultaneously helping to achieve corporate social responsibility targets, especially the reduction of consumer waste and life cycle carbon emissions from the product.
Value creation in a sustainable packaging initiative stems from collaboration across several areas of the organization and wider supply chain:
- Research and development
- Product and packaging design
- Marketing strategy
- Supply chain process design
Responding to customer feedback, Amazon has teamed with suppliers to design out plastic wrapping across the end-to-end supply chain, substituting with recyclable cardboard boxes.5 The world's largest online retailer expects to see significant benefits, including increased customer satisfaction, a more sustainable corporate profile and a direct boost to the company's bottom line.