May 29, 2023 | Procurement Strategy
The rising concern in the consumer-packaged goods (CPG) industry revolves around sustainability and conservation. The continuous use of plastic, long a staple of packaging, has come under severe scrutiny. Governments and NGOs expect CPG companies to prioritize and deliver on Environmental, Social, and Governance (ESG) goals. But can the CPG industry transition from plastic to eco-friendly packaging solutions, balancing customer expectations, governmental regulations, and economic viability?
Recent volatility in oil prices, leading to shock increases in costs for plastics converters and significant surcharges for polymer producers, is nudging CPG companies to recalibrate their strategies. The rising costs necessitate a strategic rethink – from securing supply chains to accelerating the shift away from plastics.
France’s recent ban on using plastics for packing fruits and vegetables, which may soon echo in other countries, embodies a mounting international push towards sustainability. Around 175 nations are developing a legally binding agreement to limit plastic pollution by 2024, endorsed by the United Nations. This pressure presents an opportunity for CPG companies to pioneer new, sustainable approaches to packaging.
But the journey to sustainable packaging isn't an overnight process; it's a systematic, strategic shift. CPG companies must collaborate with material suppliers, institutions, and converters, pooling resources and knowledge to innovate and produce sustainable packaging alternatives.
Leading CPG companies like Mars, PepsiCo and Unilever among others are already setting the precedent by increasing investments in packaging solutions based on the circular economy. They demonstrate that transitioning away from plastic is not just environmentally responsible but can also be economically viable.
As we pivot towards a sustainable future, digital technology will play a fundamental role. Next-gen tools and software can provide real-time visibility into ESG KPIs and metrics, enabling companies to track, monitor, and improve their sustainability performance.
Investing in these technologies is no longer an option, but a necessity. Leveraging software that tracks ESG metrics empowers organizations to collect invaluable data and, in turn, improves ESG practices. Additionally, procurement cost models can illustrate the tangible economic value and long-term benefits of transitioning away from plastic packaging.
Business leaders need to recognize this necessity and champion the cause. By consistently investing in these technologies and cost models, they can demonstrate the actual value of ESG efforts and make a compelling case for further investment.
The path towards sustainability requires a collective effort, a shared vision and an unwavering commitment to change. In the face of rising costs, environmental concerns, and evolving stakeholder expectations, the CPG industry must turn these challenges into opportunities to innovate, improve and invest in a sustainable future.
To go deeper, listen to the GEP podcast How CPG Can Do Away With Plastic Packaging and Meet ESG Goals