New packaging rules will require fundamental refocus of business models
By Dom de Ville, former Director at Sancroft.
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A panel comprising Judith Batchelar, director of brand at Sainsbury’s, Adrian Hawkes, policy director of leading environmental compliance scheme Valpak, Andrew Green, CEO of packaging reprocessor Berry bpi Group and Felix Gummer, director at Sancroft, led a Sancroft breakfast briefing on how the changing plastics and packaging landscape will impact business.
New fees and taxation on the UK’s use and disposal of plastics and packaging will require companies to fundamentally rethink the way they do business in order to stay competitive and retain their customers.
This was the key message from the panel of business leaders at Sancroft’s most recent breakfast briefing which examined the drivers for change in the use of plastics and packaging, and the actions that businesses should take.
While consumer backlash against plastic has already started to influence how businesses have used packaging in the past 12 months, rising costs and new regulations are pressuring businesses to move faster in order to reduce their impact on future profitability.
The ballooning cost of packaging
Figures from environmental compliance scheme Valpak put this challenge into perspective. They cited an eightfold cost increase over the last two years in Packaging Recovery Notes (PRNs) – the compliance fees that companies must pay towards the collection and disposal of packaging waste. For perspective, this means a company that spent £50,000 on plastic PRNs in 2017 will have seen costs of around £400,000 in October 2019.
This is not all. The arrival of a plastics tax in 2022 will introduce a new cost burden. One year on from this in 2023, planned Extended Producer Responsibility (EPR) system reforms will require producers and users of packaging to pay the full next cost of recycling, pushing bills up even more. With conservative estimates suggesting an overall scheme cost of £1.5bn per year, businesses look set for a 21-fold increase in their packaging costs by 2023 (vs 2017 figures).
Time for business to act is right now
These cost increases will have a fundamental and far-reaching impact on the way businesses use plastics and packaging in the future.
In short, packaging will change from being a manageable marginal cost to one which could easily undermine the commercial viability of businesses who do are unprepared for what one panellist described as the “the biggest shift in how we use plastics since their introduction.”
So how can businesses prepare?
Our panellists highlighted four areas of action:
The first is to understand, in detail, the planned new packaging rules, when they come into play, and how they will apply to your business. Doing this will equip you with the information you need to start modelling cost impacts from today.
The second is to engage and inform your board. Plastics and packaging is no longer an issue for procurement and finance alone. Moving forward, your plastics and packaging strategy must be core to your business strategy. This is not just about mitigating costs, but rather embedding sustainable business practices which will ensure consumers and supply chain partners want to do business with you in the future.
The third is to avoid short-term, knee-jerk actions which are either expensive, unsustainable or counter-productive in the longer term – for both your business and the environment. We have seen this happen across the FMCG sector in the last year where businesses have banished plastic and subsequently adopted less sustainable, more damaging or more carbon-intensive alternatives.
Finally, businesses must collaborate to find new ways of reducing plastics and packaging. This might involve working with supply chain partners or with new external partners to identify and adopt alternative technology and / or materials in the future.
If there is one thing every business should not do, it is to take a ‘wait and see’ attitude, reacting only when necessary.
There may be uncertainty on many fronts for business, but one thing we can be sure of is that we are already well on our way to a future where the businesses who thrive are the ones whose business models are built around minimal use of plastics and packaging.
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Sancroft has produced two reports around plastics and packaging:
‘Unpacking the savings in a game-changing landscape for business’ provides an overview of the drivers for change and the implications for business leaders and managers.
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‘From disruption to business opportunity: A blueprint for business transformation’ provides an outline of the actions that businesses should take in order to prepare themselves.
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