The global need for sustainable packaging

Sustainable packaging has been trending due to the accelerated e-commerce boom driven by the pandemic, but how does this impact real estate?

March 30, 2022

Almost every product you buy comes in some form of packaging that plays multiple roles. It protects the product, provides useful information, and even works as a marketing attraction for consumers. E-commerce has significantly increased the number of additional layers in packaging, adding to carbon emissions from the increased volume and frequencies of shipments1.

E-commerce has become a key contributor to climate change due to its rapid growth and market penetration worldwide. Both regulators and consumers have begun to raise concerns demanding that retailers be eco-friendly. The global revenue of Amazon, the world’s biggest retailer outside of China, reached USD 470 billion in 2021, up 21.7% from 2020. As Amazon’s sales increased, so did its carbon emissions – most recently by 19% in 2021, according to its sustainability report2.

This trend from recent years has led to many retailers making environment-conscious decisions for their businesses, for example, ecological product makeovers, reducing supply chain emissions, and focusing on sustainable packaging. The main element of sustainable packaging is that it helps decrease leakage of non-recycled material into the environment. In addition, it reduces carbon emissions and creates more circularity by using more recyclable packaging materials.

The two biggest factors driving the changes in packaging are the need for products to be easily shipped between warehouse and store or warehouse to consumer and sustainability targets. Ron Delia, the CEO of AMCOR (amongst the top-5 world’s biggest packaging companies), says that e-commerce has created higher demands on packaging standards to ‘withstand’ the e-commerce channel. A key example is a transition or migration from glass to plastic, happening across many types of goods such as glass bottles and jars for storing food and drink because of cost, environmental footprint, and practicality. Today, technology allows most plastic packaging to be made with recycled material that is composted at the end of its life cycle3.

In terms of the impact of sustainable packaging on real estate, the current strong demand for e-commerce-centric industrial assets and the repurposing of retail from goods to services, social and experiential uses are expected to continue. Sustainable packaging also provides plenty of benefits to warehouses and retail spaces that interact with them. For example, sustainable packaging results in less wastage when breaking bulk. It is more space-efficient for stocking and has a longer shelf-life. Packaging innovations have also led to more sustainable practices such as reducing the need for temperature control (which reduces carbon emissions) for some goods, reducing the number of transport trips required for certain goods, and the overall reduced use of resources in general4.

With the growing awareness of consumer understanding of how connected packaging improves sustainability, global sustainable packaging standards will be inevitable. These standards represent a quintessential frontier in the general sustainable practice of consumption and real estate. Retailers will be focused on driving more sustainable packaging over the next few years as they advance their ESG agenda while responding to changing consumption patterns. Real estate-wise, sustainable packaging will lead to more sustainable performing industrial and retail spaces.

[1] Bain & Company, Retailer’s Challenge: How to cut carbon emissions as ecommerce soars, 18 April 2017
[2] Amazon, Q4 Earnings Presentation, 3 February 2022
[3] McKinsey, Creating good packaging for packaged goods, 17 February 2022
[4] DHL, Why adopting green packaging makes good business sense, 18 February 2020