Eco-Friendly Packaging in Supply Chain

Suyog Dharmadhikari*
The issue of packaging wastage is important because supply chain as an entity is facing a new challenge nowadays. Not only a companys supply chain needs to ensure that right product is delivered at the right time and at right cost to the customers, but there is also an added responsibility of fulfilling the environmental requirements. With stricter regulations, scarce resource availability and more aware and demanding customers, the supply chain fraternity is slowly but definitely taking cognizance of the environmental aspects in day-today operations. The scope for eco-friendly packaging in India is very high. According to the data offered by the Indian Institute of Packaging, the total packaging waste in India is around 32 million metric tons per year. In developing countries, about 25-30% of packaging wastage occurs in supply chain due to the practice of shipping products in multiple boxes or in boxes far larger than their dimensions. Additionally, the products and supplies are packaged, unpackaged and re-packaged at each stage of the supply chain, generating more wastage and cost. This cost may range as high as up to 12% for product categories such as soft drinks to as low as 0.5% for pharmaceuticals. The success story of Wal-Mart augments the need for eco-friendly packaging. It uses packaging scorecard system by offering preferred supplier status to suppliers who aim to reduce packaging waste by 5%. It offers a lesson to the supply chain community in India, where the disposal and biodegradability is a major issue, to focus on sustainable packaging.

Introduction
Packaging can be defined as an art, science and technology to protect, preserve, and present the products effectively to satisfy the consumers (Altekar, 2005). Packaging plays an important role in supply chain by minimizing the losses and damages to the product at various stages of distribution by conveying the product details such as size, weight, color, and content to the customer, changing product density and facilitating efficient storage and handling. Traditionally, the function of packaging was guided by logistical and marketing considerations. However, community concerns, government regulations, and increasing environmental awareness among customers have driven companies to focus on the environmental aspects of packaging. The issue of sustainable packaging demands attention because of the cost and environmental impact associated with packaging wastages, as shown in Figure 1. The objective of this paper is to build a case for implementing eco-friendly packaging in the Indian companies. A study done by the Associated Chambers of Commerce and Industry of India (ASSOCHAM) states that the eco-friendly packaging sector is growing at about 25% per year as compared to the overall packaging industry which is growing at about 20% annually (ASSOCHAM, 2011). This shows that there is a potential market
* Assistant Professor, International School of Business & Media, Ashoka Plaza, Nagar Road, Viman Nagar, Pune 40014, Maharashtra, India. E-mail: suyogdharmadhikari@yahoo.com Eco-friendly All Rights Reserved. Chain 2012 IUP Packaging in Supply . 7

Figure 1: Packaging Cost and Carbon Emission for Different Industries

14 12 10 Cost (%) 8 6 4 2 0 Soft Drink Breakfast Cereal Cookies Footwear Computers Pharma- Automobiles ceuticals Packaging Emission Packaging Cost

Source: Accenture Report

for companies trying to implement green packaging. As a matter of fact, certain Indian companies such as Blue Dart and GUCCI are already using recycled packaging for their operations (Economic Times, 2010). However, when compared to their counterparts in the US and Europe, Indian companies have not been able to realize the complete benefits of eco-friendly packaging (More, 2011). There are operational and business constraints which prevent companies from switching over to green initiatives. This paper attempts to explore those constraints. Some success stories have been discussed by the author with regard to eco-friendly packaging. The paper concludes with recommendations to companies.

Green Packaging
Green packaging mainly refers to the packaging made from eco-friendly/biodegradable/ compostable materials that can be broken down and assimilated by natural means back into common earth elements like carbon, oxygen and hydrogen. The international standards, such as CENs EN13432, DIN V54900 and ASTM D64099, define biodegradable and compostable plastics as single polymers which degrade 60% in soil within 180 days, and multipolymers which degrade 90% within 180 days (Altekar, 2005).
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The topic of green packaging has attracted a lot of attention in green supply chain management in recent times. Companies are increasingly focusing on making their packaging more environment-friendly and disposable. There are compelling reasons for companies to opt for green packaging in the supply chain. Some of them include significant cost savings through reduced packaging and use of renewable materials, reduced carbon emission through less shipping loads and packaging wastages and enhanced visibility among consumers in the market. The worldwide demand for green packaging is projected to rise 5.7% per year to $212 bn by 2015 with Asia-Pacific region accounting for $79 bn of the total demand. This growth in Asia Pacific region will be mainly due to its large food and beverage industries, which represent the main green packaging application. Some of the fastest growing nations in the Asia-Pacific region will be India, China and Indonesia (The Freedonia Group, 2011).

Types of Packaging
Companies may implement eco-friendly practices through different ways. Some of them include minimizing packaging requirements and choosing recycled, reusable or biodegradable material for packaging. The choice of method depends upon product physical characteristics, availability of recycling centers, volume of packaging wastage, recyclable content and the overall cost associated with the recycling operations. The different methods of sustainable packaging are explained below.

Minimizing Packaging Amount (Weight and Volume)

The amount of packaging required for product can be reduced by making the product lighter. For that, companies should measure the ratio of packaging material used to the amount of product delivered. This reduction in material used in packaging components results from design or material innovation. For example, Unilever introduced a laundry detergent in 2006 that was three times more concentrated than regular detergents. By reformulating the liquid content, consumers could wash the same volume of clothing with one third of the product, reducing the package from 100 to 32 ounces and more stocking of products on shelves (Atkinson, 2008). Similarly, packaging which is more bulky in nature makes stacking of goods difficult. Maintaining optimum weight volume ratio facilitates more stacking of goods, thereby maximizing the amount of cargo shipped in fewer trips. In early 2007, Hewlett Packard redesigned its print cartridge packaging to reduce packaging material. The new cartridge packaging uses 45% less packaging material by weight, which reduces shipping volume by 30%. A standard shipping pallet which once held only 144 cartridges can now hold 203 (Atkinson, 2008). Figure 2 shows the impact of increased packaging on environment.
Eco-friendly Packaging in Supply Chain 9

Figure 2: Excessive Packaging Versus Environmental Impact

Negative Impact

Optimum Pack Design Minimum Impact

Under-Packaging

Over-Packaging

Minimum Material

Increased Material

Source: Accenture Report

Recyclable Material
The environmental impact of packaging waste can be minimized by introducing more recycled content in packagingcorrugated paper, Polyethylene Terephthalte (PET) bottles, polypropylene plastics and recycled aluminum. Companies like Evergreen extensively use recyclable cartons in their stores. These cartons are recycled from 31 million households. More than 50% of the energy used to make the paper in Evergreen packaging cartons comes from biomass, a renewable source (Progressive Grocer, 2011).

Biodegradable Materials
Packaging made up of biodegradable materials such as starch, corn, sugarcane, unbleached powder and synthetic biodegradable polyester can be broken down and assimilated by natural means back into earth unlike plastics which take a long time to degrade naturally. Polylactic Acid (PLA) which is derived from corn can be used as a natural substitute for petroleum-based plastics and polyester products. Biopolymers are finding applications in many businesses nowadays. Proctor & Gamble, for example, is using sugarcane-derived plastic packaging for its Pantene Pro-V brand in Western Europe region. The raw material for packaging is made in a process that transforms sugarcane into ethanol through fermentation. The ethanol is further converted into ethylene through the process of polymerization and subsequently into high density polyethylene plastic. The plant-based plastic reduces greenhouse gas emission by 170% and consumes 70% less fossil fuel than petroleum-based plastic.
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Drivers of Sustainable Packaging

Cost Reduction
Sustainable packaging can help companies optimize their supply chain cost as it is more energy-efficient, reusable and produces minimum wastage. Reduced packaging layer results in smaller and lighter shipment which costs less to transport, and greater quantities can fit in pallets, in shipping containers, warehouse and retail shelves. According to a study conducted by Accenture, companies can realize a 3-5% supply chain cost saving by switching over to green packaging initiative (Sundip et al., 2011). Companies are slowly realizing the cost benefits of sustainable packaging. Intel, for example, has reduced the overall package size by replacing all Polyvinyl Chloride (PVC) inserts with thermo formed Amorphous Polyethylene Terephthalate (APET), thereby achieving a reduction of 2.5 million pounds of materials. Similarly, Household Essential LLC, a US-based company, managed to reduce its transportation cost by 30% by replacing the plastic outer wrap of its ironing board cover with a sewn in cloth pouch. This replacement reduced the packaging weight of iron boards by 14%, making the shipment lighter and space-efficient (Ibanez, 2011). Similarly, Wal-Mart has managed to cut down its cost by $3 bn ever since the company rolled out a packaging scorecard for its suppliers.

Induced Buying Behavior

As consumers are becoming more educated about the ecological issues associated with packaging wastages, their buying pattern is changing to more eco-friendly products. Datta and Ishashwini (2010) suggested that environmental concern is a likely predictor of green buying behavior in developed countries. Pangea Organics, the Colorado-based makers of skin care products, started selling products to customers in biodegradable plantable packages in 2006. After unwrapping soap, customers are supposed to plant the package in the ground which results in sprouting of flower or herbs. Within a year of introduction to plantable packages, the sales quadrupled. The company credits their package innovation for this increase (Barrett, 2011a and 2011b).

Brand Awareness
Implementing eco-friendly practices in packaging helps companies to enhance their reputation in the market. For companies, packaging is a direct medium for communication with the customers. Providing eco-friendly packaging option to consumers can build the reputation of the brand among steadily growing segment of the customers who care for these issues. For example, Kraft Foods focus on sustainability saw its retail value rise by 4.3% (Neilson Total Retail sales Value) in 2011. A survey which was conducted by IPSOS, a global market research company, in 2011, described brand Kraft as ethical as compared to other brands of soluble coffee (Wholesale News, 2011).
Eco-friendly Packaging in Supply Chain 11

Environmental Sustainability
Not only there exists a business case for companies to switch over to sustainable packaging, but also the environmental considerations. Sustainable packaging helps companies minimize the packaging footprints and save resources. For example, in 2010, General Mills saved an estimated 6.2 million pounds of paper board by using 13% less carton material for its granola bars product. The company achieved this savings by shrinking the width of its carton by half an inch and depth by a quarter inch, while maintaining the same size of granola bars (Packaging News, 2011).

Market Potential
Sustainable and green packaging is slowly but definitely gaining prominence in the global packaging market. According to a study conducted by Pike research, sustainable packaging will grow to 32% of the total world market by 2014, up from 21% in 2009, nearly doubling its revenue from $88 bn to $170 bn within the same period (Modak, 2011).

Success Stories
Unilever Life Cycle Analyses
Life cycle analysis is an approach to understand and assess the environmental impact associated with a product or service covering all stages in a products life from procurement to production, distribution and disposal. This is a very robust method to assess and compare the environmental results for different packaging systems based on quantified data. Unilever, for example, conducted an extensive lifecycle analysis for its 1,600 products across 14 countries accounting for 70% of sales. This exercise helped Unilever gain insights about packaging wastages across the different categories and accordingly prioritize their efforts in reducing them (Matusow, 2011).

Wal-Mart Supplier Green Scorecard

Companies like Wal-Mart have introduced packaging scorecard system to evaluate suppliers performance in terms of maintaining packaging sustainability. The key attributes of this scorecard are remove, reduce, reuse, recycle, renew, revenue and read. The objectives of this initiative are to reduce packaging by 5% by 2013, reducing of 70,000 tons of CO2, and saving 67 million gallons of gasoline fuel (Durkalski, 2007). The scorecard rates suppliers efforts according to the following criteria.

15% reduction in material value; 15% product to package ratio; 15% cube utilization; 10% recovery value; 10% transportation; and 10% recycled content.
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UPS Eco-Packaging Program

In the US, United Parcel Service (UPS) established the eco-responsible packaging program in order to recognize customers who are committed to helping the environment through sustainable packaging (UPS, 2012). Safco Dental Supply became the first company in the US to be certified under this program (Pierce, 2012). To qualify for this certification program, companies need to meet the following criteria in three areas which are:

Damage prevention. The product should be shipped and delivered in an intact condition with
minimum damages. Excessive product damages or returns mean more packaging wastages.

Right sizing through product to package ratio. Packaging size should be reduced by using boxes that effectively hold the
product and minimize empty spaces as well as amount of fill material to protect the content.

Environment-friendly material content. The material used for packaging should be recyclable, biodegradable or
reusable. There should be minimum impact of packaging material on biotic resources. Safco was able to meet all the criteria laid down by UPS. The boxes were evaluated by SGS group, a third party company in inspection, testing and verification. Ever since Safco participated in the UPS eco-responsible packaging program, the company managed to bring down its product damage rate by over 50%. The new packaging allowed Safco to deliver products, including fragile ones, to customers in good condition, avoiding the hassles of arranging a replacement for a damaged product and the resulting delays.

Challenges and Barriers

Finding the Right Supplier and Manufacturer
A company often faces the major challenge of finding a reliable supplier when it switches to green packaging initiative. Low supplier awareness, coupled with limited number of qualified suppliers, may act as a deterrent for companies trying to implement the green initiatives. Countries like the US and Europe have certification programs, such as sustainable forestry initiative for suppliers, which assure businesses that the raw material for packaging has been harvested and produced according to the sustainability standards. Companies prefer to do business with these certified suppliers as they believe that these suppliers can be a valuable asset in their quest to become more environmentally responsible. In the absence of any such programs in India, it becomes difficult for the companies to find the right suppliers and verify their performances.
Eco-friendly Packaging in Supply Chain 13

Business Considerations
Most companies truly embrace the sustainability initiative when they see a direct connection with the Return On Investment (ROI). Executives may find it tough to justify soft savings such as increased customer satisfaction or conformance to environmental legislation as a reason to implement sustainable packaging (Hanacek, 2008). To quote Srivats Ram, Managing Director of Wheels India Limited, the difference between an Indian firm and a foreign firm is that an Indian firm would invest in sustainability if there is clear return and favorable economics (India Carbon Outlook, 2011). At the same time, for companies operating in India, the alternative to going green may not necessarily translate into increased sales as the pro-environmental concerns among Indian consumers are less compared to developed countries. A study done on the green buying behavior of Indian consumers shows that consumers in India are actually reluctant to pay premium prices for eco-friendly products despite the fact that they are knowledgeable about environment-related issues (Datta and Ishashwini, 2011).

Lack of Packaging Standards

Manufacturing companies in India do not have standard packaging formats unlike their counterparts in Europe (India Carbon Outlook, 2011). The European packaging standards mandate recovery through composting and biodegradation. Additionally, in India different customers have specific requirements with respect to packaging, which makes it all the more challenging for the manufacturing companies to make any changes in the packaging designs.

Lack of Government Incentives

Government regulations and penalties are often major factors which force companies to implement sustainable practices in their operations. However, currently, in India companies who are following eco-friendly practices in packaging are doing it out of their own wish and not out of compliance or legal requirements (India Carbon Outlook, 2011). Eco-friendly packaging sometimes could be an additional expense for the companies and in the absence of any tax incentives by the government, companies do not find any merit to bear this additional cost.

Recommendations
Market Awareness
Even though the market segment for eco-friendly packaging is not very large in India, there is an opportunity for green marketers to focus on educated customers in urban areas. A right mix of eco-friendly products, sales, marketing, PR and management expertise is required to target and attract consumers who are willing to buy eco-friendly products. Organizations like the Confederation of Indian Industry (CII) and ASSOCHAM can collaborate with advertising agencies and create more awareness about eco-friendly packaging through promotional campaigns.
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Holistic Approach
Companies stand to benefit the most from the green initiative when they adopt a holistic approach to sustainability, which means reducing wastages across different stages in the supply chain and not just focusing on packaging alone. Steps such as reducing production defects, proper handling and storage in warehouse and minimizing transit damage could go a long way in reducing packaging wastages. Conversely, too much reduction in packaging with increased product wastage would be counterproductive. Hence, packaging optimization decisions should follow a multifunctional approach that involves all departments from procurement to packaging, transportation and warehousing.

Increasing Supplier Awareness

Indian manufacturing companies are slowly but surely taking cognizance of eco-friendly packaging. In a survey of 1,000 industry representatives conducted by ASSOCHAM, nearly 45% of the manufacturers acknowledged that they are adopting renewable packaging technologies and environment-friendly light material for their packaging operations. The survey also highlighted rising environmental concerns, scarcity of natural resources and waste reduction targets as key growth drivers of green packaging innovations in India (ASSOCHAM, 2011). However, there is a large untapped market in the form of Small and Medium Enterprises (SMEs), where eco-friendly packaging could be a valueadded factor. What is required now is to aggressively promote the concept of eco-friendly packaging among the medium and small scale companies through greater interaction and collaboration. The academicians, nongovernmental organizations and consumer groups can definitely play a major role in creating more awareness about the benefits offered by eco-friendly packaging.

Forming Industry Body

Countries like the US and Europe have industry groups which are dedicated towards encouraging eco-friendly practices among businesses. The sustainable packaging coalition in the US and European Association of Plastics Recycling and Recovery Organization in Europe are some of the groups which support businesses with knowledge resources and help them build sustainable packaging systems. On similar lines, an association can be formed in India to share the best practices and resources and equip Indian companies to implement cost-effective eco-packaging solutions.

Government Support
As discussed earlier, lack of tax incentives is still a major factor which discourages companies from going green. Some government initiatives such as reduction in tax duties for eco-friendly packaging materials, offering tax incentives for recovery centers and applying differential tax rates depending upon energy usage in packaging may encourage industry players to look favorably towards eco-friendly packaging.
Eco-friendly Packaging in Supply Chain 15

Conclusion
Eco-friendly packaging offers a vast potential for the Indian manufacturing companies in terms of cost reduction and resource conservation. With a growing consumer demand, limited resource availability and high wastage rate (40%), manufacturers will have to focus on sustainable packaging alternatives. While some progressive steps have been taken by companies in this direction, the sector is still at a very nascent stage in India. The packaging companies in India have the potential to innovate and develop sustainable practices. A high degree of awareness about eco-friendly packaging among industries as well as consumers coupled with government support would certainly give an impetus to the companies to work in this direction.

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10. Environmental Leader (2011), P&G, Coke, Intel, Heinz, GSK Among Sustainable Packaging Award Winners, June 14, available at http://www.environmentalleader.com/ 2011/06/14/pg-coke-intel-heinz-gsk-among-sustainable-packaging-award-winners/ 11. Hanacek A (2008), ROI of Sustainability, The National Provisioner, April, available at http://www.highbeam.com/doc/1G1-177636146.html. 12. Ibanez N (2011,), Business Leaders: Dupont Packaging Diamond and Gold Winners, June 14, available at http://www.businessreviewusa.com. Retrieved on January 24, 2012, from Business Review, USA. 13. India Carbon Outlook (2011), Indian Firms Would Invest in Sustainability if There is a Clear Return and Favorable Economics, August 9, available at http:// india.carbon-outlook.com. Retrieved January 24, 2012, from India Carbon Outlook. 14. Matusow J (2011), Green With Envy, April 4, available at http://web.ebscohost.com. Retrieved on February 1, 2012, from EBSCO. 15. Modak P (2011), Sustainability Out of Box, Green Purchaing Asia, December, available at http://www.greenpurchasingasia.com/content/sustainability-out-box. Retrieved January 28, 2012. 16. More A (2011), Industry wants Scientific & Functional Packaging, August 16, available at http://www.fnbnews.com/article/detnews.asp?articleid=30377&section id=1. Retrieved January 28, 2012, from Food & Beverage News. 17. Packaging News (2011), General Mills to Reduce Packaging, April 2, available at http://web.ebscohost.com. Retrieved January 19, 2012, from EBSCO. 18. Pierce L M (2012), Safco and UPS Deliver Eco Responsible Packaging to Dental Practices, January 25, available at http://www.packagingdigest.com. Retrieved January 31, 2012, from Packaging Digest. 19. Progressive Grocer (2011), What makes Evergreen Packagings Cartons EcoFriendly, March, available at http://web.ebscohost.com. Retrieved January 21, 2012, from EBSCO. 20. Sundip N, Michael W, Gary G and Gary H (2011), Simultaneous Sustainability and Savings: Why Companies Should Invest in Sustainable Packaging, April 12, Accenture, available at http://www.accenture.com/us-en/Pages/insight-simultaneoussustainability-savings-summary.aspx. 21. The Consumer Goods Forum (2010), Packaging Sustainability Indicators and Metrics Framework 1.0, April, available at http://center.sustainability.duke.edu/sites/default/ files/documents/packaging_indicators.pdf
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