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February 23, 2022

ESG in Packaging: Macroeconomic trends

Citizens, governments, regulators, and the media are demanding action from corporations to address environmental, social, and governance (ESG) challenges. Packaging companies that fall behind the competition in ESG will see an exodus of customers moving to a more sustainable packaging provider and a drop in profits far sooner than expected.

Listed below are the key macroeconomic trends impacting ESG performance, as identified by GlobalData.

ESG and activist shareholders

Activist investors buy significant stakes in a public company and then use voting rights to apply pressure on the company’s management. ESG issues are increasingly at the top of the agenda for activist investors. BlackRock, the world’s largest asset manager, has promised to take voting action against companies it feels are not doing enough on ESG.

Reportedly, Amazon generated 210,000 tons of plastic packaging waste in 2019. As You Sow, a non-profit organisation that promotes environmental and social corporate responsibility, disclosed its total plastic packaging and planned actions to tackle the issue. The proposal was supported by 35% of Amazon shareholders.

Generation Hashtag

Generation hashtag makes up around one quarter of the world’s population, and its influence will only increase over the next decade as its members continue to enter the workforce. Consumers in this cohort will choose brands that embrace ESG from ethical business practices and a commitment to sustainability, transparency, and philanthropy.

Eco-friendly packaging is one of the most influential features for environmentally conscious consumers. It is significant that for younger consumers, information about water footprint is deemed to be slightly more important than that relating to carbon footprint, reflecting improved consumer awareness about the need for sustainable water consumption.

Mergers and Acquisitions (M&A)

Many packaging firms are looking to acquire companies that are compatible with the circular economy to avoid falling behind on ESG issues. For instance, in January 2021 biochemicals and compostable bioplastics producer Novamont acquired packaging company BioBag Group, which specialises in low-impact solutions for waste collection and packaging.

Earlier, in August 2020, Sonoco boosted its portfolio of sustainable packaging by acquiring Can Packaging, a privately owned designer and manufacturer of sustainable paper packaging and manufacturing equipment, for $49m.

This is an edited extract from the ESG – Top Trends by Sector – Thematic Research report produced by GlobalData Thematic Research.

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