“Breaking the silo sink to close cycles”

The concept of recycling management is regarded as the economic model of the future, says Pia Schnück, Senior Manager Sustainability Services at the auditing and consulting firm PricewaterhouseCoopers GmbH.

How long has the retail trade been on the right track when it comes to sustainability? What does this look like in Germany and in an international comparison?

Trade in Germany – but also internationally – has been dealing with the topic of sustainability for several years now. What has changed in the last two to three years, however, is the intensity and strategic orientation with which topics such as climate protection or plastic waste are dealt with. In the meantime, sustainability has reached the retail sector across the board and is being implemented strategically. Sustainability is no longer primarily a communication issue, but is changing business processes and business models.

The circular economy is a good example of this. For some time now, we have been seeing across almost all sectors that there has been more intensive interest in recycling management approaches. In the retail sector, the focus is naturally on packaging and plastics. Regulations such as the Circular Economy Package or the EU plastics strategy and the new Packaging Act, which will replace the Packaging Ordinance in Germany on 1 January 2019, are certainly additional drivers here. But consumers’ desire for more sustainability is also giving the topic a boost.

According to a representative PwC survey, three-quarters of supermarket customers make sure that as little packaging as possible is purchased when shopping. But at the same time, more and more customers are shopping online, which means more packaging. A contradiction?

DScience speaks of this phenomenon as the “rebound effect”: Efficiency is achieved, for example through ever lighter packaging – but the savings are more than eaten up by more and more consumption. The booming online trade is a good example. And other changes in consumer behavior also contribute to this. For example, ever smaller packaging and pre-portioned products are causing mountains of rubbish to rise, thus polluting the environment. Business models, production, consumer behaviour – in the discussion about sustainable packaging strategies, everything must be taken into account.

What do consumers want?

Every German throws away more than 220 kilograms of packaging every year. This makes us the European champion in packaging waste. The effects of the increasing mountains of waste on the environment are devastating. Our representative survey on the subject of sustainable packaging shows: Consumers are aware of this problem – and want less packaging waste. Three-quarters of supermarket customers make sure they buy products with as little packaging as possible. Almost one in three would even do without a product because it is packaged too much or not sustainably.

For many products, less packaging material would suffice – this is what consumers unanimously say (94 percent). In the case of drugstore and hygiene articles in particular, many consumers complain that manufacturers are exaggerating with the packaging material. Customers have a concrete idea of what the ideal packaging should look like: The overwhelming majority, 95 percent, are in favour of reducing the amount of material to a minimum and using material that is easy to recycle. 92 percent advocate largely dispensing with plastics.

What can online retailers do, what does they want to do?

There are different approaches to online trading solutions, such as reducing packaging quantities or reusable systems. A deposit model is also conceivable for the latter. In addition, the ecological effects of packaging in the context of logistics and associated emissions must also be taken into account. It cannot therefore be said in general terms that reusable shipping packaging is generally better. However, a serious recycling management strategy actually follows the approach of replacing disposable systems. A critical mass is often required in order to achieve ecological benefits as a result. For this reason, what often applies to the topic of circular economy applies to online trade: solutions lie in industry approaches and cooperation along the value chain.

Our study has shown that consumers are definitely open to reusable systems for shipping packaging. Three quarters would approve of a reusable system in online retailing. Seven out of ten respondents would even be prepared to pay a deposit for such reusable shipping packaging.

What are the environmental impacts of the packaging?

The extent and nature of the environmental impact depend to a large extent on the type of packaging involved, the material the packaging is made of and where the packaging is produced, usually after a short period of use. The production of packaging materials such as glass, aluminium or plastic is sometimes very energy-intensive and causes emissions. In regions where we do not have the disposal structure as in Germany, packaging waste also has an impact on biodiversity. Today, around eight million tons of plastic are already discharged into the sea every year – not only, but also through packaging. Experts assume that 150 million tons of plastic are currently floating in the oceans. By 2050, more plastic could be swimming in the sea than fish. Of course, this will have a considerable impact on marine ecosystems and, consequently, on our climate and people. Oceans have many different functions: They are food sources for humans and animals and regulate the earth’s climate, temperature, carbon dioxide and oxygen balance.

Packaging is produced along the entire value chain of a product: Packaging waste is generated as early as the extraction of raw materials and production. Packaging is also used at every step of the supply chain – from transport to sales to service. The value contribution of packaging is rather low: consumers buy the product, the wrapper quickly ends up in the garbage. This pushes the volume and environmental effect even higher.

What has to happen on the disposal side to close the cycle?

In Germany, we have an established take-back system for packaging that creates the conditions for recycling. Nevertheless, the recovery rates could be higher. And recycling is generally associated with “downcycling”, the material generally loses quality. A holistic circular economy approach should therefore start earlier. New concepts are aimed at avoiding packaging and keeping it in circulation longer through smart reusable approaches.

As far as recycling and disposal are concerned, there is plenty of additional potential. If packaging cannot be avoided and reused, it should at least be recycled. In Germany, the new Packaging Act, which will introduce higher recycling quotas, will apply from 1 January 2019. This is an important step. The retail sector can contribute to meeting these targets with cooperation agreements or its own solutions. In principle, companies in this situation are naturally faced with the question of which topics – such as packaging design, take-back and recycling competence – they would like to strengthen themselves, and which challenges can perhaps be solved by other means such as cooperation or industry standards.

In order to really close cycles, the “silo thinking” must be broken. Trade, industry and the disposal side must work together to strengthen the recycling economy.

Is it currently even possible to manufacture packaging in accordance with the idea of recycling?

In principle, that is possible, yes. But of course it has to be carefully considered under which circumstances which recycling concept makes sense. Let us take the example of reusable concepts: Many reusable packaging, for example for beverages, does not work in regional cycles. This can lead to a better eco-balance for disposable packaging under certain circumstances. However, one could think about industry standards that can be used for different reusable packaging (not only for beverages) and that would achieve the critical quantity to run the packaging in a regional cycle.

With regard to material recycling, too, there are already packaging today that corresponds to the closed-loop concept and is also manufactured using recycled material.

What influence does the idea of recycling have on trade?

Recycling management is a promising approach, also for trade. The concept is regarded as the economic model of the future and follows the idea of using the raw materials used longer and more frequently. The circular-flow economy thus makes it possible to extend the life cycle of a product and thus use it more efficiently. This not only protects the environment, but also provides companies with the basis for new business models. Digitization makes it easier to implement recycling concepts such as sharing approaches today than in the past.

The idea of circular economy also has an influence on trade and the consumer goods industry. On the one hand, this applies to the food sector, where the circular-flow economy can provide the basis for concepts to avoid packaging materials and food waste. But manufacturers and retailers from the non-food segment can also make use of ideas from the environmental service branch to make their products, business models and packaging more sustainable.

Pia Schnück is a sustainability expert in Sustainability Services at PwC. In this function, she is responsible for the Retail & Consumer industry sector with a view to sustainability issues and is an expert on circular economy. Her work focuses on the development of sustainability strategies and sustainability concepts as well as the verification of environmental and sustainability information.