Consumers take packaging for granted; most have little idea of the technology, innovation, and complex supply chains that wrap the goods they order online or pile into their shopping carts. Packaging industry leaders, however, cannot afford to be complacent. They need to meet the immediate needs of consumers, including price, quality and convenience. At the same time, they need to address the concerns of shareholders and employees, while anticipating future trends. And they need to do all this while complying with an ever more complex regulatory environment.
It’s a tricky balance, and sustainability—meaning reducing packaging’s environmental leakage, such as plastic waste and increasing recyclability and the use of recycled materials—is a critical element. But it’s complicated.
Earlier this year, McKinsey surveyed 11,000 people from 11 countries on four continents. Consumers in every country surveyed ranked recyclability as the most important factor when considering sustainable packaging. In addition, glass and paper both ranked in the top three in every country surveyed. The traits associated with circularity—that is, whether the packaging is recyclable, made of recycled content, and reusable—performed strongly, ranking in the top four for every country except India.
But there are also significant differences. For example, respondents in the countries with the highest polyethylene terephthalate (PET) plastic collection rates—Germany, Sweden, and Japan, at 80 percent plus--ranked PET as a top three sustainability priority. Countries with the lowest collection rates (such as the United States, at 33 percent) ranked PET much lower.
In more regulated markets, actions with fewer obstacles, such as reducing waste and materials usage, is underway. There has also been considerable upstream innovation, for example in the development of mono materials for plastics and at substrate producers such as resin producers. Finally, there has been progress in the ability of processors to make thinner wall containers while maintaining the strength-to weight-ratio.
All this is promising—and yet, not enough. In 2022, three-quarters of global packaging companies had made some kind of sustainability commitment. But only 28 percent were prepared to meet local requirements, and even fewer their more ambitious internal goals. Less than a third reported having clear metrics.
To push sustainability forward, future efforts should be more systematic and comprehensive, ranging from inputs to marketing to after-sales responsibilities. For example, most companies do not consider packaging sustainability until after the product concept has been finalized; thus limiting the options for effective action. And all along the value chain, costs need to be contained.
In this context, becoming more sustainable is challenging, but the effort also presents growth opportunities. In reuse and refilling, new business models and technologies should continue to evolve. For example, major beverage leaders and hotels are experimenting with replacing single-use glass with fully re-usable, closed loop packaging to transport spirits and wine.
When determining where to invest, incumbents should seek to align with those areas that matter most to regulators and consumers. However, putting that into practice may be more difficult. In terms of regulation, more than 60 pieces of packaging-related legislation have been proposed in the U.S. alone in the last two years, and there are similar efforts all over the world. In some markets, implementation of extended producer responsibility (EPR), in which producers—not consumers, local governments, or waste managers—must take care of collecting, recycling and disposing of products is gaining traction, with plastics and packaging often included in EPR mandates.
As for consumers, our insights highlight that they are overwhelmingly in favor of sustainable packaging; a significant proportion, particularly among young people, say it is a factor in their purchasing decisions. But only a minority would be willing to pay more. Recent McKinsey research dug into consumer attitudes toward packaging and the results were consistent with those from 2020 and 2023. Given seven different options, quality and price took the top two spots and environmental and social impact the bottom two. The gap, however, may be narrowing. From 2018-23, products with credible environmental and social (ESG) attributes averaged 28 percent cumulative growth versus 20 percent for products that made no such claims.
So, it’s complicated. Consumers do care; about half say the environmental impact of packaging is important. 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. There is no single winner. Preferences differ based on region, product category and specific consumer segment.
A major European beverage company, for example, has begun to roll out different types of packaging for different brands—aluminum for one, paper for another, specialty glass for a third. Achieving the right balance is not always straightforward, but testing consumer preferences is key.
Another issue is that recycled materials can be scarce, driving up costs. Collection rates have stagnated for high-quality recycled materials, such as food-grade recycled polyethylene terephthalate (rPET). Supply shortages, at least in the short term, cannot be ruled out. For US brands to fulfill their commitments on recycled content, the supply of rPET would have to triple. The demand for recycled polymers is rapidly increasing—but capacity announcements are lagging. And while new bio-degradable materials are promising in terms of sustainability, they also cost more. It’s a familiar conundrum: scaling up could help lower the price, but the economic incentive to do so may be weak.
Packaging accounts for $1 trillion of annual global spending. In terms of creating a cleaner, greener future, it matters. Given evolving consumer behavior and increasingly stringent regulations, the industry would do well to see sustainability not as an ESG issue but as a strategic necessity.
David Feber is a senior partner in McKinsey & Company’s Detroit office. Daniel Nordigaarden is a partner in Toronto. Anne Grimmelt is a senior expert in Darien.