Financing gaps slow sustainable packaging adoption

High machinery costs, financing constraints and skills shortages are making it harder for packaging manufacturers to turn sustainable material innovations into commercial-scale production.

Packaging manufacturers need more than innovative materials to make the transition towards sustainable packaging. They also need the equipment, funding and technical expertise to produce new formats reliably and at scale.

Lightweight films, recyclable mono-material structures and fibre-based alternatives offer opportunities to reduce material use and improve recyclability. However, adopting these materials can require significant changes to production lines, quality control systems and manufacturing processes.

For smaller packaging converters and independent contract packagers, the investment can be difficult to justify or finance. Equipment costs, limited access to affordable credit and shortages of skilled workers can delay upgrades, even when suitable packaging technologies are available.

The effects can ripple through the supply chain, restricting manufacturers’ ability to meet changing customer requirements and slowing the commercial adoption of alternative packaging formats.

New materials, new machinery requirements

The shift towards sustainable packaging is placing new demands on manufacturing equipment.

Thinner plastic films can reduce material consumption but may be harder to handle, form or seal consistently. Depending on the application, manufacturers may need more precise tension control, temperature management and inspection systems.

Switching from multi-material laminates to mono-material structures can also require adjustments to sealing equipment, film handling systems and processing parameters.

Fibre-based alternatives bring different challenges, particularly where barrier coatings, forming processes or specialised converting equipment are involved.

Not every material change requires a new production line. Some alternatives can run on existing machinery with modifications, tooling changes or process optimisation. Others demand substantial investment in automation and quality control.

The challenge is to ensure that new materials meet performance specifications without compromising production speed, reliability or operating costs.

The cost of upgrading packaging equipment

Machinery investment extends well beyond the purchase price.

Manufacturers may also need to pay for installation, commissioning, software integration, production trials and employee training. Infrastructure modifications and additional working capital can increase the total cost.

Installation-related disruption adds further pressure, particularly for businesses operating on tight margins and demanding delivery schedules.

Uncertain customer demand makes investment decisions more difficult. Although modern machinery can increase productivity, reduce waste and lower operating costs, the returns depend on production volumes, equipment utilisation and material performance.

Manufacturers must weigh these potential benefits against the upfront expenditure and financial risks.

When the returns are uncertain, businesses may extend the working life of existing equipment rather than invest in newer technology. This can delay the introduction of packaging formats that require different manufacturing capabilities.

Financing constraints hit smaller manufacturers

Access to external finance can determine whether a packaging manufacturer proceeds with an equipment upgrade.

Bank loans, equipment leasing and hire purchase offer ways to fund machinery purchases. However, borrowing costs, collateral requirements and repayment terms can make investment difficult, particularly for smaller businesses.

Specialised equipment designed for new materials or production processes can present additional financing challenges.

Unlike conventional machinery, such equipment may have a limited resale market, potentially reducing its value as collateral.

Funding the machine itself may not be enough. Equipment finance arrangements can leave manufacturers responsible for installation, commissioning, training and other project expenses.

A business may therefore secure financing for machinery but still lack the capital needed to bring it into commercial operation.

What the evidence reveals

Research into small and medium-sized enterprises (SMEs) illustrates how financing conditions can influence investment decisions.

A Bank of England survey of 2,885 UK SMEs, conducted in 2023 and published in 2024, found that 22% believed they had underinvested during the preceding three years.

Among businesses reporting underinvestment, 20% cited an inability to access finance on reasonable terms, while 29% pointed to insufficient internal funds.

Half of the surveyed businesses financed investment entirely through internal resources, while around 70% preferred slower growth to taking on debt.

The findings suggest that underinvestment can reflect both difficulties obtaining finance and businesses’ reluctance to take on additional financial risk.

However, the survey covered UK SMEs across multiple sectors. It does not establish how widespread financing constraints are among packaging manufacturers or show that lenders are systematically rejecting viable sustainable packaging projects.

Conditions also differ between markets, depending on interest rates, banking systems, industrial policies and available funding mechanisms.

Nevertheless, the findings highlight a broader investment challenge: even commercially promising projects can be delayed when financing costs or perceived risks outweigh expected returns.

Skills shortages add to investment pressures

Financing is only one part of the machinery modernisation challenge.

Advanced packaging equipment requires skilled operators and technicians who can manage machine settings, production processes, maintenance and troubleshooting.

Introducing unfamiliar materials can increase these demands, particularly when equipment settings must be adjusted to maintain seal integrity, dimensional accuracy and consistent performance.

Workforce shortages can therefore make machinery upgrades more expensive and difficult to implement.

Research published in 2025 by PMMI, the Association for Packaging and Processing Technologies, identified persistent difficulties recruiting skilled operators and technicians.

Its Inside the Workforce Gap report also highlighted challenges involving employee onboarding, knowledge transfer and maintenance capabilities.

For smaller manufacturers, training existing employees can be difficult to accommodate alongside production commitments.

Automation can reduce repetitive tasks and improve process consistency, but it does not eliminate the need for technical expertise. Manufacturers still require staff who can maintain equipment, interpret production data and resolve faults.

Without the necessary skills, businesses risk commissioning delays, unplanned downtime and lower-than-expected productivity.

Machinery investment must therefore be accompanied by workforce development.

How underinvestment affects sustainable packaging adoption

Delayed machinery upgrades can have consequences throughout the packaging supply chain.

Brand owners and retailers depend on suppliers that can meet their material specifications, quality standards, production volumes and delivery schedules.

Yet the commercial availability of a sustainable material does not necessarily mean sufficient manufacturing capacity exists to support widespread adoption.

A packaging format may perform well in laboratory tests or pilot production but require further development before it can be manufactured consistently at industrial speeds.

If converters and contract packagers cannot finance the necessary upgrades, customers may face fewer suppliers, longer qualification periods and higher production costs.

This creates a gap between packaging innovation and its commercial application.

Smaller manufacturers may also struggle to compete with larger packaging groups that have greater access to capital and technical resources.

Over time, differences in investment capacity could influence which businesses are able to participate in emerging packaging markets.

However, new machinery does not automatically guarantee better environmental outcomes.

Packaging sustainability depends on factors including material consumption, product protection, manufacturing impacts, transport efficiency and the availability of collection and recycling infrastructure.

A technically recyclable package may deliver limited benefits where suitable recovery systems are unavailable. Similarly, lightweight packaging must still protect products adequately to avoid increased damage and waste.

Manufacturers must therefore balance environmental objectives with technical performance and commercial viability.

Alternative routes to machinery financing

Packaging manufacturers have several potential options for funding equipment upgrades beyond conventional bank borrowing.

Equipment leasing and hire purchase can spread expenditure over an agreed period, reducing the immediate cash requirement. However, businesses need to assess financing costs, contractual obligations and ownership arrangements.

Machinery supplier financing may offer staged payments or other arrangements through equipment manufacturers and their financing partners. Availability and terms depend on the supplier and project.

Customer-backed investment can reduce uncertainty over future demand. Longer-term supply agreements, minimum-volume commitments or co-investment arrangements with brand owners may strengthen the business case for specialised machinery. These agreements require realistic forecasts and clear allocation of commercial risks.

Public and development finance may provide support through government-backed lending, development banks or industrial investment programmes. Eligibility and funding availability vary between countries.

Phased machinery upgrades offer another approach. Pilot trials, tooling modifications and targeted automation can help manufacturers establish technical feasibility before committing to a larger investment.

Where practical, incremental upgrades can reduce upfront expenditure while allowing businesses to gain experience with new materials.

No single approach will suit every manufacturer. The appropriate financing model depends on equipment requirements, project economics, financial capacity and commercial risk.

Making the investment case

Securing finance requires a clear assessment of the operational and commercial benefits of machinery modernisation.

Manufacturers need to consider five areas:

• Production requirements: Expected volumes, material specifications, quality standards and customer commitments.
• Total investment costs: Machinery, installation, tooling, software, training and working capital.
• Operational benefits: Potential gains in throughput, material efficiency, energy performance and equipment reliability.
• Financial returns: Projected revenue, cost savings, financing obligations and investment payback periods.
• Implementation risks: Commissioning delays, material availability, workforce capabilities and changing customer requirements.

Closer collaboration between machinery manufacturers, material suppliers, converters and brand owners can also help reduce investment uncertainty.

Material trials can establish whether existing equipment can process new formats or requires significant modification.

Machinery suppliers can identify technical limitations, while customers can provide greater clarity on expected production volumes and performance requirements.

This cooperation can strengthen investment proposals and reduce the risk of costly equipment decisions.

Bridging the gap between innovation and production

The transition towards sustainable packaging depends as much on manufacturing capacity as it does on material innovation.

For smaller converters and contract packagers, access to affordable finance can determine whether promising packaging formats progress from trials to commercial production.

However, financing constraints are part of a wider challenge involving machinery costs, technical capabilities, workforce shortages and uncertain customer demand.

Addressing these barriers requires investment strategies that account for the full cost of modernisation rather than equipment purchases alone.

Flexible financing, targeted workforce training, phased upgrades and closer supply chain collaboration can help manufacturers manage the risks of adopting new technologies.

Ultimately, sustainable packaging must be commercially viable as well as technically achievable. Without the capital, machinery and skills to produce alternative formats reliably and at scale, even promising material innovations may struggle to gain a foothold in the market.