FEATURE: INDUSTRY - Packaging
EPR, OPRAH AND THE POWER OF POSITIVE THINKING
Is South Africa’s packaging industry fit for the future, or is it gasping for breath as it puffs uncertainly over bumps in the road ahead? Jodie Davies-Coleman attended the Institute of Packaging of South Africa’s 1st Annual National Congress to find out.
In the words of David Williams, Congress Facilitator and Associate Deputy Editor of the Financial Mail, “if enough people talk about how similar today is to the Great Depression, then we will create the right environment to have a Great Depression all over again.” Indeed, the last year has seen the smallest ounce of hesitation and negative thinking by investors collapse entire markets.
Luckily, the impact of positive thinking is just as powerful. It was perhaps with this motivation that IPSA themed their first Packaging Congress as “Fit for the future” – a theme that willed delegates to think positively about the future of the packaging industry and, in doing so, create a positive structure to work from.
“The people who are going to be successful are those who are brave enough to consider success in a recession,” remarked Keith Pearson, President of World Packaging Organisation (WPO), in his talk at the Congress. He argued that each business within the packaging industry needs to take the lead and predict its own future, and then plan towards it. “As an industry, we cannot continue to remain unknowing and unprepared,” says Pearson. “We need to be the ones who decide what our future will be, before government and legislation do it for us.”
Key challenges to the packaging industry’s “fitness levels” not only include rising pressure from government legislation such as the new Waste Bill, but also cover growing competition from imports and a critical need to reduce costs. In between all this, packaging manufacturers must grapple with the all-powerful consumer, the risk of over-packaging and a lack of positive public feedback. Does the customer really know best?
Good business savvy has embellished the saying: The customer always knows best. But when it comes to the average customer’s understanding and appreciation of packaging, the IPSA Congress was clear in showing that they do not.
As Andrew Marthinusen, Executive Director of PACSA (Packaging Council of South Africa), pointed out, a recent Collect-a-Can survey showed that over 90% of South Africans see litter as our greatest environmental threat. With approximately 6-10% of that litter made up of packaging waste, the public therefore view packaging as a significant contributor to the extinction of our environment. This is an entirely unrealistic mindset which shows, Marthinusen argues, that not only is our nation clueless as to the real environmental issues facing us but that the packaging industry needs to drastically promote the benefits of packaging to the general public as well.
But consumers are notorious for acting on emotion rather than fact. For example, Keith Pearson states that Oprah and Wal-mart have more influence over US consumers’ purchase decisions than what he refers to as “the frustratingly deliberate considerations of science”. It seems no matter what your sustainability report says, if Oprah places a free sample of your packaging product under the seats of her screaming audience members, it... will... sell.
But in a country where the only access to Oprah’s “retail mind power” is in the form of out-dated repeats on SABC3, does South Africa really have a big enough (and educated enough) consumer base to influence packaging trends?
Pick ‘n Pay General Manager: Sustainable Development, Tessa Chamberlain, does not think we do. But she’s determined to change this. Pick ‘n Pay has found that educating consumers about why and how products are packaged has helped increase consumer support. Chamberlain pointed out in her talk at the Congress that there remains a vital need on the part of retailers to research and educate consumers – and influence them too.
For the power of the consumer is growing. “The future of our packaging industry is dependent on individual consumers,” says Keith Pearson. This is worrying as consumer spending (which drives around 50% of most developed countries’ economies) is declining – more so than during the last global recession of 2001, in which consumer demand growth slowed down but did not decline. This has resulted in commodity cycles becoming shorter and more extreme, explains Pearson.
Environmental pressures
The power of the consumer is certainly growing with regards to the considerable environmental pressure that consumers place on packaging manufacturers. “The South African packaging industry is under pressure to examine the wider environmental impacts of packaging materials,” Mike Arnold (President of PACSA and CEO of Consol) argued in the panel discussion hosted on the second day of the Congress.
We are moving into an era where “Cost trumps price” - where the initial price of a packaging product is overshadowed by its cost to the environment over its lifetime. More than ever, consumers are looking at the impact of packaging materials on the carbon footprints of downstream products, explains Arnold. The search for substrates that are recyclable, reusable and biodegradable is on, with resource efficiency becoming a key-driver in future markets.
Biopackaging in particular has been heralded as an environmental success by millions, but it remains a sagging beer-boep in the packaging industry’s fight for future fitness. The IPSA Congress highlighted the threat it poses to the recycling industry in particular. Recycling forms an important source of employment for a number of otherwise destitute South Africans.
“There is a place for biopackaging, but not now. We’re not looking at ‘bio’ options, just innovative ones,” said Chamberlain. Andrew Marthinusen, Executive Director of PACSA, also warned that the industry must not implement biopackaging until each business has confirmed with the Plastics Federation that it is viable and possible for each product range.
Are we over-packaged?
Consumers are also beginning to reject products that they feel are ‘over-packaged’ – guided by the (mis)belief that this poses an unnecessary waste of environmental resources. Chamberlain shares the view of many South African consumers that “we are an over-packaged world” – a fact that she believes the industry urgently needs to address, and one that sent a shockwave of furious mutterings through delegates. Pick ‘n Pay has managed to reduce their in-house packaging by 60% - an achievement that would not be possible if products were not over-packaged to begin with, she argued.
But Chamberlain pointed out that reducing the extent of product packaging will not threaten the packaging industry, as the industry remains essential for safety, hygiene, nutrition, information and transport. “We’re just going to reinvent ourselves,” Chamberlain explains. In other words, Pick ‘n Pay will be reducing the weight and volume of their packaging and the extent of raw materials used in their packaging – similar to the environmental steps that Woolworths has taken as well. Pick ‘n Pay’s latest environmental project, incorporating the controversial tag line, “Let’s make plastic bags extinct”, has been another step in reducing their packaging impact down the supply chain.
Extended Producer Responsibility
Soon the responsibility for reducing waste will move beyond consumers and retailers such as Pick ‘n Pay, and sit on the shoulders of the manufacturers themselves in the form of Extended Producer Responsibility (EPR).
The South African government has recently signed off the National Waste Bill, which introduces EPR into South Africa for the first time. The Waste Bill is based loosely on the EU model, the EU Packaging and Packaging Waste Directive (first implemented in 1994). David Perchard (Perchards Ltd UK) explained that the EU bill sets up a legal obligation on producers to either meet the recycling targets themselves or join an organisation which will fund collection on its members’ behalf. In 25 EU countries, says Perchard, a national ‘recovery organisation’ from the private sector collects funds from brand-owners according to the amount of packaging they place on the national market. The Waste Bill will be adjusted somewhat to the South African context, as material producers rather than brand-owners will initially pay the levy and “pass the cost down through the chain”. Because of this material-based focus, non-packaging paper will also be placed under levy.
According to Perchard, producers will pay for the additional costs of collection, sorting and delivery to a recycler, as well as the most cost-effective operating methods. Although the bill is meant to reduce the strain on municipalities, there is now more (legal) pressure on municipalities to collect waste from households and to pay any extra costs in the operating methods of recovery – should the municipality want to “gold-plate” the recovery process, as Perchard puts it.
The actual levy rate remains undecided for now, although European levies for corrugated board, for example, range from R51/tonne (Turkey) to R1088/tonne (Bulgaria). According to Perchard, South African levies will be most similar to those of Turkey. Collection of the levy will begin in 2010, once an outline plan has been submitted by PACSA and RAG (the Recovery Action Group) to the Department of Environmental Affairs and Tourism (DEAT) in July 2009 and an organisational structure in the form of an umbrella body is established by the end of 2009.
According to Perchard, it is now up to DEAT to:
• incorporate the outline plan in an application to the Treasury to use unspent Buyisa funds for pilot projects in 2010. (Buyisa, the plastic bag product tax, raked in R90 million/year but only a very small percentage of that money made its way to environmental groups)
• consult the competition authorities on the plan
• consult industry on appropriate recycling targets
• include the targets in a National Waste Management Strategy to be prepared over the next two years
• draft regulations imposing legal obligations on all producers
Spread the word
It is obvious that the two bodies that will determine how fit for the future the packaging industry will be are the government and the consumer: two bodies that are in the dark regarding the environmental, economic and health benefits of packaging.
Therefore, perhaps the most salient challenge to the future fitness of the packaging industry is its lack of self-promotion. For example, packaging producers are increasingly asked not how they meet the “triple bottom line” (‘for the profit’, ‘for the planet’, ‘for the people’) but whether they meet it at all. Over and above promoting the economic and health benefits of the industry, packaging manufacturers desperately need to actively promote the environmental gains of their products. As Andrew Marthinusen commented, “We can’t be defensive about our industry – we ignore the words of Tessa [with regards to her comment that the world is over-packaged] at our peril. However, we need to let people know the steps that we have taken”.
For example, few consumers realise that “over-packaging” is often more environmentally friendly than the subsequent food wastage of less packaging. Marthinusen gives the example of British consumers who throw away 6 million organic tonnes of food/year (a third of all food bought), which results in methane gas pollution that far outweighs the ‘pollution’ required to produce packaging that would protect the food to begin with. In fact, Marthinusen quotes that the energy used in packaging is on average only one tenth of that used to make the packaged product.
Beer-boep or 6-pack?
Going forward, “the industry needs to continue to argue its case in the court of public opinion” says Keith Pearson. It all comes back to positive thinking – or positive promoting, by shifting public focus to the many positive and necessary aspects of the industry. This will go a long way in easing the concerns of consumers, suppliers and government.
With the uncertainty of EPR looming in the near future, the 1st Annual National IPSA Congress was essential in building a positive platform from which to decide the industry’s own future and work towards it. In essence, delegates began the long (but undoubtedly possible) haul of trading in their beer-boep for six-packs and ultimately facing a fitter future.
SIDEBAR:
How to manage your business in a recession
Taken from the presentation made at the 1st Annual National IPSA Conference by Keith Pearson, President of the World Packaging Organisation.
1. Reset priorities to face the new reality to face the new reality, and adopt a more frugal attitude.
2. Keep investing in the core: Employees, Product, Innovation, Design, Customer service.
3. Increase communication, to ease the concerns and worries of employees, customers, suppliers and communities.
4. Listen to customer needs: New needs require new solutions. Redefine value for the customer.
5. Promote the value of packaging in the current environment.
