Supply Chain Packaging and the Circular Economy

Stephen DeAngelis

March 06, 2019

When members of the greatest generation and baby boomers were growing up, the milkman was a familiar early morning visitor to many homes. He would leave fresh milk on the porch and retrieve empty milk bottles for reuse. Milk bottles weren’t the only reused bottles. In the afternoon and on weekends, you could often children walking along roadsides looking for discarded soda bottles they could turn in to local grocers for deposit money to supplement their weekly allowances. Refilling and reusing packaging was much more of a norm back then than it is today. That situation could be changing as consumer packaged goods (CPG) manufacturers are experimenting with reusable packaging. Kate Gutmann, Chief Sales and Solutions Officer at UPS, writes, “A cultural shift is changing how businesses operate — and interact with customers. This seismic change was on full display at the World Economic Forum Annual Meeting in Davos, Switzerland, where I participated in a thought-provoking event on the future of consumer goods. Put simply: We saw the power of the circular economy in action. And we saw that what’s old is new again.”[1] She’s calls this sea change the milkman model.

What is a circular economy?

The milkman model is just part of what constitutes a circular economy. According to the Ellen MacArthur Foundation, a leading proponent of the circular economy, “The circular economy refers to an industrial economy that is restorative by intention; aims to rely on renewable energy; minimizes, tracks, and hopefully eliminates the use of toxic chemicals; and eradicates waste through careful design.” Former McKinsey analyst Markus Zils adds, “The circular economy aims to eradicate waste — not just from manufacturing processes, as lean management aspires to do, but systematically, throughout the life cycles and uses of products and their components. Indeed, tight component and product cycles of use and reuse, aided by product design, help define the concept of a circular economy and distinguish it from the linear take–make­–dispose economy, which wastes large amounts of embedded materials, energy, and labor.”[2]

Refillable and reusable packaging is part of product design element aimed at bringing the world a bit closer to a sustainable circular economy. A fully involved circular economy includes repairing, recycling, recovering, and/or reusing products. Gutmann notes many large manufacturers have recently committed to offer products “designed for delivery, then collected, cleaned, refilled and redelivered.” She adds, “It’s an exciting step toward reducing the use of disposable packaging and cardboard boxes.”

Manufacturers join the Loop

Gutmann reports UPS has joined a coalition of the world’s largest consumer product companies to test a system called Loop™. She writes, “Together, we unveiled an innovative new system designed to reduce single-use product packaging. Known as Loop, this breakthrough system provides consumers with direct delivery of a variety of products. The packages arrive not in a cardboard box — but in a customized, durable tote that can be reused again and again.” Alissa Marchat (@AMarchatShelby) further explains, “Loop is a global packaging and shopping circular solution which aims to improve the environmental performance and convenience standards compared to current e-commerce solutions through packaging that is collected, cleaned, refilled and reused. Loop offers the option to collect used products from consumers’ doorsteps for further recycling or reuse.”[3] Saabira Chaudhuri (@SaabiraC) reports, “The initiative, which will be run by recycling company TerraCycle Inc. and start with 5,000 shoppers in New York and Paris in May. The pilot will extend to London later this year and cities including Toronto and Tokyo next year, according to TerraCycle.”[4]

As Gutmann notes, UPS is not alone in this effort. Chaudhuri reports, “The world’s biggest makers of shampoo, detergent and packaged food will test selling their products in reusable containers, adopting a milkman-style model to address mounting concerns about plastic waste. Procter & Gamble Co., Nestlé SA, PepsiCo Inc., and Unilever PLC are among 25 companies that, this summer, will start selling some products in glass, steel and other containers designed to be returned, cleaned and refilled.”[4] Having manufacturers join the initiative is critical. While the tote products are delivered in is an important part of the Loop system, even more important than the tote is the packaging of the products themselves. Marchat reports progress is being on that front as well. She writes, “Procter & Gamble Co. is introducing reusable, refillable packaging on some of its most popular products as part of a new effort that aims to change the world’s reliance on single-use packaging and disposable waste.”

Unilever is also joining the Loop system. Marchat reports, “Unilever … has developed reusable packaging innovations across nine of its brands, including four new product formats. The new products will be trialed on Loop.” Those products include Ren Clean Skincare; Hellmann’s; Love Beauty and Planet; Love Home and Planet; and Seventh Generation. According to Marchat, these products will come in new reusable packaging made from aluminum and glass. She adds, “Three Unilever brands also will be the first to test new formats within the Loop system. Deodorant brands Dove, Degree and Axe will test a premium, refillable deodorant stick called minim. Made from stainless steel, the design is minimal, compact and sustainable, offering a new consumer experience without any unnecessary materials, says Unilever.”

The circular economy requires consumer buy-in

The success of these efforts depends on consumer buy-in. If consumers don’t buy the products or use them as designed, the program will fail. Gutmann explains, “This is a creative solution helping to shape how consumer goods companies interact with customers. This new system positions customers as partners in reducing package waste and shows the power of innovation to move us closer to a greener future.” The big question is whether consumers will become active partners in this effort. Consumers must be convinced a circular economy is good for their pocketbooks as well as for the planet. Currently, consumers pay to buy and pay to dispose of a product. Manufacturers can help them eliminate the cost of disposing of products, but it will take an educational effort to make that case. Chaudhuri writes, “Critics question whether the project will achieve scale in the face of high costs and entrenched consumer behavior. But, if successful, the companies say the efforts will reduce waste from single-use packaging. It could also be a way to woo eco-conscious consumers, glean data and foster brand loyalty.” Millennials and members of Generation Z are likely to be more open to these arguments than older generations; but, any movement towards a circular economy is welcome.

Concluding thoughts

Several years ago, a report published by the World Economic Forum (WEF) entitled “Towards the Circular Economy: Accelerating the scale-up across global supply chains,” stated, “Linear consumption is reaching its limits. A circular economy has benefits that are operational as well as strategic, on both a micro- and macroeconomic level. This is a trillion-dollar opportunity, with huge potential for innovation, job creation and economic growth.” It will be interesting to see if other CPG manufacturers join the movement. There is a business case to be made. Kris Timmermans (@KrisTimmer), Senior Managing Director at Accenture Strategy, explains, “In the circular economy, what would have been missed economic and business opportunity (e.g., lost resources and underused assets) becomes an engine for growth. … Beyond maximizing product use, the circular economy also presents a valuable opportunity for companies to enhance business strategy, as they re-examine everything from what they sell and what goes into making it, to the operations that underpin products and services.”[5] Let’s hope they get in the Loop.

Footnotes
[1] Kate Gutmann, “Why the Milkman Model Is the Future of Consumption,” Longitudes, 24 January 2019.
[2] Markus Zils, “Moving toward a circular economy,” McKinsey & Company, February 2014.
[3] Alissa Marchat, “P&G, Unilever Join TerraCycle’s Loop, Debut Reusable Packaging,” The Shelby Report, 25 January 2019.
[4] Saabira Chaudhuri, “The World’s Biggest Brands Want You to Refill Your Orange Juice and Deodorant,” The wall Street Journal, 24 January 2019.
[5] Kris Timmermans, “Gaining a Competitive Edge through Today’s Circular Economy,” Industry Week, 15 July 2016.