The macroeconomic trends of ESG in packaging
We take a look at a recent report from GlobalData on ‘Environmental, Social & Governance in Packaging’ to consider the key macroeconomic trends that are driving ESG from packaging’s perspective.
nvironmental sustainability needs to be made a priority by packaging providers in order to attract capital and become the best performers in the market.
Activist shareholders are increasingly pressuring the management of packaging companies to take firmer action on ESG. BlackRock, the world’s largest asset manager, has promised to take voting action against companies that it feels are not doing enough on ESG.
Elsewhere, a report by conservation group Oceana estimated that in 2019, Amazon generated 210,000 tonnes of plastic packaging waste. Following the report, ‘As You Sow’, a non-profit organisation that promotes environmental and corporate social responsibility, called for Amazon to conduct an investigation into how much plastic packaging is attributable to its activities and what actions it has taken to tackle the issue. The proposal was supported by 35% of Amazon shareholders.
The impact of the pandemic on ESG has been twofold. Operationally, it increased health & safety risks for staff members often working in restricted, crowded spaces, forcing companies to develop contingency plans to minimise risks. From a consumer preference standpoint, COVID increased demand for product safety and traceability, heightening the need to develop and effectively communicate stringent health & safety protocols.
Furthermore, consumers are favouring small-size multipacks over large formats and dispensing systems, meaning there has been a significant increase in the pack units for the same volume packed. COVID has also caused environmental concerns to slip down the agenda, with consumers favouring disposable packaging for hygiene purposes.
As lockdown restrictions are cautiously lifted and the vaccine rollout progresses, ESG issues will regain their place as the most discussed theme in boardrooms.
‘Generation Hashtag’ makes up around a quarter of the world’s population. The demographic’s influence will only increase over the next decade as its members continue to enter the workforce. As a generation coming of age during recessions, fractured politics and exposure to ‘fake news’, consumers in this cohort are understandably cynical - even distrustful - of established institutions and corporations. Their consumption habits will reflect this, as they look to more rigorously hold brands accountable for their actions.
Tokenistic efforts to display social and environmental responsibility will no longer suffice. Consumers will choose brands that wholeheartedly embrace ESG through ethical business practices and a commitment to sustainability, transparency and philanthropy.
Many packaging firms are looking to acquire companies that are compatible with the circular economy to avoid falling behind as the importance of ESG to the wider sector is becoming clear.
In early-2021, for example, Italy-based biochemicals and compostable bioplastics producer Novamont purchased Norwegian packaging company BioBag Group, which specialises in low-impact solutions for waste collection and packaging. Novamont and BioBag complement each other as Novamont is focused upstream, developing its Mater-Bi supply chain, which ranges from agricultural raw materials, bio monomers, and bioplastics to low impact formulations. BioBag is focused more downstream, on the development and distribution of a range of compostable applications.
For further details on GlobalData’s ‘Environmental, Social & Governance in Packaging - Thematic Research’, click here.