Packaging industry grapples with complex sustainability mandate, McKinsey report finds

The global packaging industry faces a formidable challenge: balancing the immediate consumer demands for price, quality, and convenience with an accelerating, yet complicated, push for environmental sustainability, according to a new analysis by experts from McKinsey & Company.

The report, authored by David Feber (senior partner), Daniel Nordigaarden (partner), and Anne Grimmelt (senior expert), highlights that while the desire for sustainable packaging is real, achieving it requires a more systematic approach across the entire value chain.

The consumer conundrum: care versus cost

McKinsey's recent survey of 11,000 consumers across 11 countries confirmed that recyclability is the most important factor in sustainable packaging for shoppers globally. Materials like glass and paper also ranked in the top three in every country surveyed.

However, this environmental concern often stops short of affecting the wallet:

• Price and quality remain king: when consumers were given seven different packaging options, quality and price took the top two spots in importance, with environmental and social impact ranking in the bottom two.
• Willingness to pay is low: while consumers are overwhelmingly in favor of sustainable packaging — with a significant proportion of young people citing it as a factor in their purchasing decisions — only a minority would be willing to pay more.
• The narrowing gap: despite the preference for price, products with credible environmental and social (ESG) attributes saw an average 28% cumulative growth from 2018–2023, compared to 20% for products that made no such claims, suggesting the gap between consumer values and purchasing habits may be closing.

"It’s complicated," the authors note. "Consumers do care... It’s just that they may not want to trade off price, quality, or appeal. The challenge for industry, then, is how to deliver attractive, sustainable packaging at comparable cost".

Regulation and supply lag innovation

The industry has seen considerable progress in upstream innovation, such as the development of mono-materials for plastics and substrates, as well as processors' ability to create thinner, yet strong, containers.

Yet, these efforts are not enough:

• Commitments versus readiness: in 2022, three-quarters of global packaging companies had made some kind of sustainability commitment. However, only 28% were prepared to meet local requirements, and even fewer were ready to meet their more ambitious internal goals. Less than a third reported having clear metrics.
• Regulatory avalanche: The regulatory landscape is growing increasingly complex. More than 60 pieces of packaging-related legislation have been proposed in the U.S. alone in the last two years, with similar efforts worldwide.
• Recycled material shortages: the demand for high-quality recycled materials, particularly food-grade recycled polyethylene terephthalate (rPET), is rapidly increasing, but collection rates have stagnated. To fulfill their current recycled content commitments, US brands alone would require a tripling of the rPET supply. This scarcity drives up costs and risks supply shortages in the short term.

The report urges companies to view sustainability not merely as an ESG issue, but as a strategic necessity given the evolving consumer behavior and stringent regulatory environment. To push sustainability forward, future efforts must be more systematic and comprehensive, for example, by considering packaging sustainability before a product concept is finalised, which is not currently the norm.

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