The Future of Fibre
By Nate Pajka
Why fibre-based packaging is poised for long-term growth in global shift to the Circular Economy business model
In a world with steady population growth and urbanization, the need for packaging is constantly growing. At the same time, packaging requirements are becoming more numerous, with environmental sustainability emerging as a common denominator.
To succeed in the packaging industry, nearly every idea a company invests in must consider how it will reduce a product’s environmental impact.
Sustainability can no longer be considered “just a trend,” as it was when the concept was first popularized. Consumers demand it on a global scale and our planet relies on its comprehensive implementation so it can operate naturally.
Understanding the appropriate path forward for fibre-based packaging—in our quest to minimize the industry’s impact on the planet—must start on a macro level before homing in on specific actions that can be undertaken thoughtfully, but with due urgency.
As with nearly any industry, the paperboard packaging market is impacted by both global and local trends. Globalization, and the ease and speed at which consumers digest information, has forced companies to think about more than what is directly related to paperboard.
According to Mintel’s PESTEL analysis in their Global Packaging Trends 2023 report, there are several categories of global trends that we can monitor, including political/legal, economic, social, and technological.
The most notable recent political event that affects this industry is Russia’s attack on Ukraine and the ensuing war.
The war has soured international relationships, negatively affecting trade, as sanctions were placed on Russia and its allies by countries in neighboring Europe and around the globe.
Before the war, Russia, Ukraine and Belarus were supplying close to 25 per cent of Europe’s timber and forest product needs, with that percentage since dropping to essentially zero. Not only has this created a shortage of fibre in general, but it has also forced suppliers to change their fibre mix without access to certain tree species.
Russia was also a major supplier of energy to the EU (European Union) and the rest of the world, and without their contributions energy costs skyrocketed—resulting in increased production costs that get shuffled down the value chain to the consumer.
Political polarization has been rampant since the height of the COVID-19 pandemic, creating divisions among consumers and a volatile purchasing environment. Today, every company seems to be one public relations nightmare away from a full-scale boycott of their products.
The upcoming U.S. election should exacerbate divisiveness, as campaign promises and subsequent conversations echo through living rooms across America. Because legislators believe they can make change through enacting new laws, we should expect to see a strict and dynamic regulatory environment moving forward.
A principal issue in the packaging industry is centered on dealing with plastic waste, so we can expect investments in recycling infrastructure, deposit return schemes, more widespread extended producer responsibility legislation, and closer attention to the PFAS ‘forever’ chemicals.
From an economic perspective, the report discusses the following trends directly affect the packaging industry: economic uncertainty, the rising cost of goods, supply chain challenges, labour shortages, the threat of a global recession, and inflation.
As a result, a premium has been placed on value-based options. Industry members need to consider how their packaging can help consumers stretch a budget without compromising quality, safety, sustainability, convenience, or freshness.
Considering social factors is incredibly important in an era where information travels expeditiously across the globe via different media channels.
Consumers today trust companies, governments and institutions less than ever, and as such they believe they bear the obligation to act responsibly.
Now that consumers are a few clicks away from company and product information, transparency is key.
This can be done through clear, third-party verified on-pack labeling that communicates the company’s purpose. This will also require being honest about challenges the company faces and how they will be addressed.
Consumers will also buy from brands that hold similar values, so they pay attention to how a brand responds to controversial topics.
With consumers spend more time on line than ever before, there has been a strong push towards enhancing digital experiences. Influencers have influence, so companies must be ready to respond when emerging trends are broadcast to vast impressionable audiences.
For all the misery it caused, COVID -19 did accelerate many technological advances. One of them is the adaptation of the so-called ‘smart labeling,’ whereby a QR code can be used to communicate product details left off-pack.
Narrowing our focus to corrugated packaging, we see some notable trends.
The market is continuing to grow, but the proportion of fibre-based packaging is actually decreasing. This is due to higher growth rates in production and usage of other fibre-based products, coupled with light-weighting of the board itself.
In 2023, factors such as inflation, destocking, near-recession conditions, and poor agricultural conditions are shrinking current demand, but it is expected to bounce back in 2024.
In the long-term, corrugated packaging will remain a valuable product in high demand—primarily because consumer purchasing has been transitioning to online ordering and home delivery.
From a sustainability perspective, corrugated board is becoming more lighter-weight as producers are using different combinations of liners to reduce board-specific carbon footprints and material use. Moreover, corrugated board is widely recycled, while often being made from 100 per cent renewable raw materials.
Consumer attitudes about sustainable packaging are constantly changing.
Leading global management consultancy McKinsey & Company has published results from studies in two new reports—titled Sustainability in Packaging: U.S. Survey Insights and Sustainability in Packaging 2023: Inside the Minds of Global Consumers—which help us understand these attitudes.
The studies found that the top buying criteria for packaging are price, quality, and convenience. Over two-thirds of consumers cite inflation as their top concern, as the price criteria has increased in importance by 11 per cent since the onset of COVID.
The studies also show that environmental considerations depend heavily on demographics, whereby Millennials, Gen Z and folks living in urban areas tend to care more about environmental considerations than do those in older generations, or people living in rural areas.
In terms of packaging characteristics, the studies found that hygiene and food safety are highest-rated attributes, but they have also become less important to consumers since the height of COVID.
Nearly 40 per cent of the survey respondents said that environmental impacts were either very or extremely important, which is down four per cent since 2020. This is likely due to the price increases causing consumers to prioritize other characteristics, but as the global economy normalizes, we should expect to see environmental impact regain significance to the consumer.
Identifying a sustainable packaging type is difficult for most consumers, but compostable and plant-based packaging types tend to indicate to consumers that the package is sustainable, according to the study. Conversely, aluminum-foil and multi-material packaging are seen as the least sustainable options.
These studies also showed that consumers are willing to pay more for sustainable packaging.
According to survey results, four to seven per cent of consumers are willing to pay over a 10-percent premium for sustainable packaging, while only five to eight per cent said they would not pay any premium. But about 50 per cent of consumers said that they would pay a one- to three-percent premium for sustainable packaging.
So what will the future look like? We will continue to see product protection being paramount, because the least sustainable packaging is in fact the packaging that does not protect the product from being damaged or spoiled.
Environmental impacts will be defined at the design phase, with material efficiency, designing for convenient recycling, and minimizing the environmental impact of the package across the entire value should be the principal considerations.
We will also continue to see strong demand for fibre-based packaging because it is recyclable, lightweight, and made from renewable raw materials.
While plastic is becoming a substrate of the past in many applications, it will be still difficult to replace outright for a number of characteristics, including high barrier properties, transparency (seeing the product inside), and affordability.
That said, the right messaging can help fibre-based packaging close the gap.
The future for fibre-based packaging is bright, and as we continue to innovate, this industry has the opportunity to make significant contributions to mitigating climate change and realizing a truly circular economy. Understanding where the industry has been, where it is, and where it could be can be used to forge a more sustainable future.