Modern definition of sustainability has broadened the scope recognizing the interconnectedness between environmental health, social prosperity and economic well-being. The “Triple Bottom Line,” coined by John Elkington in 1994, describes a sustainability framework that encompasses a company’s impact on planet, people and profit. More recently, the United Nations Global Compact extended this sustainability triad to supply chains in explaining that the objective is to “create, protect and grow long-term environmental, social and economic value for all stakeholders involved in bringing products and services to market.”
Lasting economic value creation is essential for success with a sustainable supply chain. The challenge is that economic impact can be difficult to fully assess when determining the right products and processes to adopt for more sustainable distribution of goods. In the Harvard Business Review in 2018, Mr. Elkington acknowledged a shortcoming with the Triple Bottom Line when limited by corporations as an accounting tool to meet and report financial metrics rather than a “systems change for tomorrow’s capitalism.” A company’s short-term focus on profits may overlook or underestimate the range of economic opportunity associated with transformational action on sustainability. This is especially the case with companies still operating in a linear economic model, where disconnected supply chains and organizational silos do not reach beyond their boundaries to ascertain the accumulated effects and value from the systems change.
Reusable packaging offers a good example of a transformative systems change that can lead to both immediate financial returns and long-term economic value creation. However, in many cases, transitioning to a reusable system is dismissed as an option or not prioritized in management due to an incomplete picture of the greater sustainability potential. To help put the broader economic benefits from reuse into perspective, here are seven profit-growing areas that can be tapped into with a reusable packaging system for a sustainable supply chain:
- Regenerative Economics: Reuse Is an Inner Loop Activity in a Circular Economy
- ESG Investing: Sustainability Is Now a Financial Benchmark
- Capital Returns: Reuse Pays Back Repeatedly Over Time
- Resource Stability: Reduce Reliance on Volatile Commodity Markets
- Durability Over Disposability: Reuse Extends Value; Recycling Diminishes Value
- Systems Thinking: Solve Interrelated Problems and Discover Better Methods
- Operational Efficiencies: Improve Processes and Save Money
1. Regenerative Economics: Reuse Is an Inner Loop Activity in a Circular Economy
The concept of a circular economy is an economic model, not a sustainability framework. The core principles of designing out waste and pollution, keeping products and materials in use, and regenerating natural ecosystems certainly have favorable environmental outcomes, but the aim of a circular economy is to achieve enduring economic growth. This is done by decoupling growth from the consumption of finite resources, maintaining product values at their highest, and building market resilience to source material disruptions. It is estimated that the circular economy offers $4.5 trillion of value from new growth and innovation opportunities, and the world today is only 8.6% circular. As a preferred inner loop activity in a circular economy, reusable packaging systems are designed and engineered to excel when continuous waste creation and resource depletion limit economic growth.
2. ESG Investing: Sustainability Is Now a Financial Benchmark
Corporations are facing greater scrutiny for access to capital and investment. Environmental, Social and Governance (ESG) factors are playing an increasing role in the measurement and acceptance of a company’s financial risk and societal impact. The world’s largest money manager, BlackRock Inc., announced recently that it will incorporate sustainable investment principles firmwide, integrating ESG considerations into their investment processes. ESG investing grew to more than $30 trillion in 2018, and that number will keep rising from consumer trends and investor demands for transparency. Adopting reusable packaging systems for supply chains would be a clear demonstration of a company’s commitment to sustainable operations, lead to a risk-lowering future in the distribution of goods, and satisfy criteria from the investment community.
3. Capital Returns: Reuse Pays Back Repeatedly Over Time
A barrier to reusable packaging can be the upfront capital required to manufacture the necessary quantity of packaging assets to manage an uninterrupted flow of goods. Companies may decide that investments should be deployed elsewhere in the business instead of building or buying a pool of durable packaging products for continuous use in the supply chain. Transitioning to a reusable packaging system is a strategic decision for a company. The higher spend on packaging today for lower costs tomorrow becomes a part of a company’s short and long-term operating strategy. Simple financial modeling can reveal the timing of returns on the reuse investment. Once the payback threshold is reached, the elimination of single-use packaging expenses becomes the financial gift that keeps on giving. New packaging procurement costs can be eliminated for years. Keep in mind that for many businesses there are options to rent or lease reusable packaging to overcome capital constraints while still pursuing a transformative and more sustainable supply chain with packaging reuse.
4. Resource Stability: Reduce Reliance on Volatile Commodity Markets
Supply and pricing for raw materials used in the manufacture of packaging products can fluctuate widely. A company’s exposure to supply disruptions and unforeseen increases in costs can have an adverse impact on market fulfillment and financial performance. Similar economic hardships can occur when unpredictable market forces create unstable or unaffordable conditions in the recycling of packaging, such as the world is witnessing today after a single country began to refuse import of recycled scrap waste. When utilizing a reusable system, packaging products are designed to last and break the linear cycle of re-supply, re-manufacturing and recycle after each use. With reuse, the influence of raw or scrap material markets only come into play for inventory replenishment or end-of-use recycling activities, and this may not even be necessary if the product needing replacement provides the recycled material for the new product. As a result, packaging supply and pricing become stabilized and predictable for business planning and execution.
5. Durability Over Disposability: Reuse Extends Value; Recycling Diminishes Value
Durability offers more value than just product reuse and elimination of packaging cost. A product with the design and strength to last can consist of feature-rich properties that enhance the customer application and experience, such as data capturing and transmitting devices, ventilation for improved temperature control, and ergonomic characteristics for safe handling. A reusable packaging system is about creating and extending economic value in the supply chain, and companies are sidelining these opportunities by not pursuing durable reuse solutions. In contrast, disposability limits a product’s value offering. A product with the design and makeup intended for single use prioritizes lowest cost inputs and minimal worth outputs. Recycling perpetuates the acceptance of disposability and “only starts at the throwing-away stage; a process that is not made to preserve or increase value nor enhance materials.”
6. Systems Thinking: Solve Interrelated Problems and Discover Better Methods
Supply chains are increasing in complexity and pace of change. There is no greater example than the metamorphosis taking place in the retail sector as companies strive to meet consumer demands for both physical and digital points-of-sale and multiple order pickup and delivery options. Supply chains are also based on a series of disjointed points that need to be connected, as seamless as possible. These transactional connections are subject to the laws of unintended consequences and can encounter disguised interconnectivity with other processes. Problems arise, but in turn opportunities are presented. Systems thinking, like the design and management of reusable packaging, can help to identify broken or underperforming areas and to establish the foundation for process change and continuous improvement. Reusable packaging built and operating in a complete system of reuse can be an instrument to bridge and advance the connections, collaborations and performance in the supply chain.
7. Operational Efficiencies: Improve Processes and Save Money
Last, but not least on the economic impact scale, reusable packaging systems can deliver immediate financial gains by optimizing processes in the storage, handling and movement of goods. Strong packaging will protect products, preserve quality and reduce shrink. Stable packaging will build taller and safer unit loads to increase space utilization and reduce transportation costs. Ergonomic packaging will support worker safety and production. Consistent packaging will conform with automation and robotic equipment. Smart packaging will be equipped with data-generating devices for asset management, predictive analyses and inventory planning. Attractive packaging will appeal to customers. Recoverable packaging will eliminate time and expenses associated with waste disposal. All these cost-saving and value-creating attributes and more can be designed with reusable products and enabled in reusable systems.
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President & CEO
Reusable Packaging Association