The ‘green premium’ : Companies, consumers pay the price for more sustainable packaging

By Karen Hanna

The bag containing carrots you pick up at the grocery store isn’t fit for the circular economy.

But, at 64, the CEO of the company that likely made it is frustrated that a solution that can run at scale isn’t coming any time soon. The problem — as is often the case with sustainability issues — is price.

With regulations, consumer brands and consumers themselves demanding better, Kevin Kelly, the second-generation owner of Emerald Packaging Inc., warned that the industry is ignoring the clamor for change at its own peril: “I think that the industry has sort of a suicide pact with itself.”

Forget environmental sustainability; Kelly’s concerned about economic feasibility: Can companies like his continue to make packaging profitably, while heading off regulations that could put plastics on the chopping block?

PET finds success

With recycling rates of plastics persistently cited as around 9 percent, based on a 2018 U.S. Environmental Protection Agency (EPA) report, one aspect of the supply chain stands out: PET. If the industry makes progress in the green revolution, the beachhead was here.

“Sustainability is a very important factor,” said Srinivasan “Shankar” Prabhushankar, technical director for the National Association for PET Container Resources (NAPCOR). “It plays a role in making the right decisions, starting from machine design, selection of materials, incorporation of post-consumer recycled (PCR) content, lightweighting, energy efficiency, etc. As far as trends are concerned, we observe a positive trend in choices made by every player in the PET packaging value chain, including the choices being made by consumers, especially young consumers who care about sustainability.”

According to the 2022 U.S. Post-Consumer Plastic Recycling Data Dashboard, available from the Association of Plastic Recyclers, bottles — mostly made of PET, followed by HDPE, PP and other materials — made up the majority of post-consumer plastics recovered in 2021.

In 2023, the U.S. PET bottle collection rate was 33 percent, up 4 points from 29 percent in 2022, according to a NAPCOR statement. 

But recycling rates of plastics other than PET lag far behind.

According to the dashboard, 2.5 million tons of post-consumer plastics — bottles, rigid plastics, film and other plastics — were recovered in 2021. However, in a press release from 2022, the EPA and U.S. Department of Energy’s (DOE’s) National Renewable Energy Laboratory estimated annual plastic waste production volumes of around 35 million tons to 48 million tons — which translates to recycling rates of around 5 to 7 percent. 

Big goals, minor gains

Concerned by mounting pressure to reduce packaging’s impact on the environment, Kelly has tried to work proactively with customers to get ahead of regulations and consumer demand.

Several years ago, Emerald Packaging signed onto the Ellen MacArthur Foundation’s pledge to take steps to support green initiatives, such as boosting recycling infrastructure and the market for post-consumer recycled (PCR) material by increasing PCR use. It also joined the foundation in supporting a Global Plastics Treaty.

But good intentions ran into reality.

At the small scale they’re currently used and produced, PCR and novel, more sustainable materials, such as biomaterials, are simply too expensive to be attractive for general applications.

It’s the Gordian knot the MacArthur pledges intended to address — high prices suppress demand; low demand restrains investments in infrastructure that would increase production and lower costs.

“There’s some really novel, amazing materials, and sometimes they can cost 3 to 6x more expensive than traditional plastic,” said Chris Bradley, the chief marketing officer for packaging designer and supplier Veritiv, a nearly $7 billion company that deals with logistics, printing and packaging solutions. “So, that’s the challenge. Some companies are willing to pay because of their brand and they built their whole ethos of their brand around a sustainability message. ... But that green premium certainly still exists.”

Though many companies are dismissive of concerns about costs when brainstorming sustainable solutions, they often lose their fervor when it comes to picking up the tab, Kelly said.

For Emerald Packaging, that means more sustainable solutions often are a no-go.
“Everybody in surveys says, ‘We’ll take up to a 10 percent price increase for a sustainable material.’ And then you put an 8 percent price increase in front of them, and they drop dead,” he said.

Founded in 1963 by a handful of partners, including Kelly’s father, Emerald Packaging, based in Union City, Calif., employs about 250 people and does about $100 million in sales, Kelly said.

“In terms of flexible packaging, we’re probably the largest supplier to the produce industry in the country,” Kelly said of the company, which produces about 1.2 billion bags and packages a year.

About 98 percent of its Emerald Packaging’s business is for produce, such as potatoes, lettuce and premixed salads, and it relies heavily on PE, as well as some PP.
The per-pound price disparity between PE and recycled PE is eye-opening: “linear-low-density is in the 40 [cent range] and the food-grade PCR is well above a dollar,” Kelly said.

When it comes to sharing the cost of more sustainable materials, retailers, he said, “have made it clear that they ain’t going to pay for it.”

“You can’t afford to use compostable packaging, or even PCR is too much of an increase for some customers, which I find distressing because I think it’s the most economical for flexibles,” Kelly said.

In October, Kelly acknowledged he was over his skis when he had pledged as part of the MacArthur pact to use 12 million pounds of post-consumer recycled resin (PCR) by this year. “I’m at 1 million. I’d be able to get to 12 million, if anybody was willing to pay for it,” he said.

Emerald Packaging is hardly alone in falling short — Global Plastics Treaty talks collapsed in August, and signatories to the MacArthur commitments have largely backpedaled from their goals or abandoned them altogether. 

Not that Kelly or anyone else is giving up.

“I’m pushing PCR as much as I can. I’m talking to customers about it all the time. We do projects with compostables. There’s something always going on,” Kelly said, “but it’s a project. It’s a one-off.”

Reducing their footprint

Anyone who’s ever wrapped a hand around a thin-walled water bottle that immediately crinkled and collapsed knows firsthand some of the limits of sustainability efforts. For companies like Emerald Packaging, which deals with food wrappers, both form and function matter.

Recycling is only one part of the equation, said Kyla Fisher, director of regulatory affairs and sustainability for the Flexible Packaging Association (FPA).

“Packaging optimization is key — designing packaging that performs its job using the least material possible,” she said. “While many focus on recyclability, true sustainability involves balancing multiple factors like protection, usability and distribution. In areas such as food and health care, strict safety regulations may limit recyclability, but packaging optimization helps designers meet those requirements efficiently — using only what’s necessary to deliver safe, effective products.”

To enhance their products’ sustainability, packaging makers and users need to take into account myriad factors, including how well a package protects its contents and the strain it places on logistics, Fisher said, as well as its carbon footprint, according to Bradley and colleague Martha Issa, Veritiv VP of quality and corporate responsibility.

A narrow focus on recycling alone can distract from other factors that are important to sustainability, Fisher said.

"Current legislation over emphasizes recyclability, which is important but only part of the picture. For example, California’s SB 54 will eventually ban non-recyclable packaging, which may push shifts to heavier materials that increase carbon emissions or food waste," she said. The law deals with single-use packaging.

In light of both sustainability challenges and the requirements of individual packages, the plastics industry and packaging makers are pursuing a variety of strategies, including lightweighting and the use of alternative materials. In addition, Fisher said the industry continues to work to simplify packaging by using mono-materials and avoiding labels or additives that muddy the recycling stream.

One obvious strategy involves simply using less packaging. Enormous boxes filled with air containing only a new phone, for instance, are getting right-sized, as delivery companies increasingly fit the package to the product, Bradley said.

In some cases, packages reflect multiple approaches to the sustainability problem. For example, Bradley said, manufacturers of a plastic container might cut down on plastic without compromising strength by using crushed walnut shells to provide bulk.

That way, a strong grip doesn’t cause breakage.

It’s a balancing act, Fisher said.

“The real goal of sustainable packaging, however, is balance — designing packaging that protects products and minimizes environmental impact across the entire value chain,” she said.

Paper or plastic?

Though Veritiv is agnostic about the materials it uses, Bradley admitted he has some personal favorites: fiber and paper. In addition to lightweighting and right-sizing packaging to its contents, swapping other materials in for plastic is a sustainability strategy packaging makers — including Emerald Packaging — are pursuing.

But can fiber and paper really give plastic a run for its money?

Bradley doesn’t equivocate. “I hope so.”

According to the American Forest & Paper Association, recycling rates for waste paper and cardboard were between 60 and 64 percent and 69 and 74 percent, respectively, in 2024 — dwarfing plastics rates. 

The materials’ potential is attractive to Veritiv.

“We’re trying to identify those big problem areas where the market hasn’t generated [solutions], but we know these are the reasons why some of those people aren’t making their commitments, is because there aren’t ready solutions,” Bradley said. “So, we scour the Earth, represent all these amazing technologies, but we find pockets or greenfields where nobody is actually developing [a solution], and that’s where we try to step in and do our own innovations.”

As an example, he cited Veritiv’s R&D lab’s work developing paper-based deodorant sticks and squeeze tubes for health and beauty-care products.

“There’s a lot of really exciting work happening right now with barrier coatings and things where you can take fiber and you can make it perform very much like plastic. And, so, we’re doing things, we’re moving people from plastic films into paper-based films, paper-based containers, tubes and things like that,” Bradley said.

But not all of Veritiv’s trials with paper and fiber leave out plastics completely.

Some incorporate such minimal volumes of plastics, at levels as low as around 15 percent, that the resulting package still can be recycled in existing streams, Bradley said.

But, depending on the application, swapping out plastics is tricky.

While the industry is working to innovate with packaging that’s more recycling-friendly, Fisher and Kelly said multi-layer films — which are hard to recycle — still are necessary for safety and shelf life.

For companies like Emerald Packaging, which manufactures packaging that must keep food safe and fresh, making a product that’s both functional and sustainable is a tall order.

In some cases, Kelly said more sustainable solutions might provide just a fraction of the shelf life of traditional films.

“It has to have the particular balance between oxygen and carbon dioxide in the package or the product rots, and there’s no way right now to do that with compostable or PCR-based films,” he said.

For one application, the company has spent 16 months working to produce a fiber-based package that adequately protects products’ shelf life.

Due to issues controlling oxygen transmission, two rounds of trials have failed so far.
Kelly said he expects the work to take years.

“We’re lucky there. We have a customer who really is psyched about the project, and I think would pay for it. I’m sure they would pay for it, actually, because they want to push the frontier, too, but they’re one of the few customers who would,” he said.

At the same time, he said, regulators don’t fully appreciate plastics’ critical advantages.

“They don’t understand the function of it. And it’s not that they’re idiots, it’s just that it hasn’t been explained to them. And, so, I think, there’s two parts of the sustainable conversation that just get routinely overlooked, which is, ‘Who’s gonna pay for it?’ and ‘Will the regulators understand it?’ ” he said.

Brace yourself

Looking back on his company’s MacArthur commitments, Kelly conceded he made a mistake. The goals he’d set are more difficult, and the challenges more recalcitrant, than he’d anticipated. An FPA board member, he's worried that might force the hand of people outside the industry to take a stronger approach — as regulators contemplate new laws, such as Extended Producer Responsibility (EPR) mandates.

To them, he said, the missed targets might provoke a reaction: “ ‘Oh, the industry’s just been bullsh-----g us.’ ”

And, he said, he would understand.

“They better do something, and I don’t think they’re wrong. I just think that it should be such that they don’t drive people out of business.”

New laws already are having an impact.

For example, in its recent press release, NAPCOR credits voluntary brand commitments and laws, including mandated PCR rates, with spurring increases in usage of rPET, which between 2014 and 2017 had accounted for around 6 or 7 percent of container content.

“In 2023, the average amount of post-consumer recycled (PCR) PET, also known as recycled PET (rPET), used in U.S. bottles and jars was 16.2 percent, up 3 percentage points from 13.2 percent in 2022. This is the highest level ever and demonstrates increased demand for recycled PET nationwide,” Prabhushankar said.

FPA’s Fisher advised manufacturers to educate themselves about EPR.

“The more recyclable your design, the lower your fees,” she said. “Manufacturers should study state EPR programs to understand what’s considered recyclable and how design changes can reduce costs. A good place to start is Circular Action Alliance, your state environmental agency or your trade association.”

Kelly warned frustrated regulators might exact a toll that’s even higher than the increased costs associated with implementing at scale the strategies manufacturers have already tried, such as incorporating new, more sustainable materials like polylactic acid (PLA) and biobased polyhydroxyalkanoates (PHA).

While he worries that new laws could crush plastics, Kelly expressed pessimism that there’s a way to fund sustainable packaging, without brokering some agreement to share costs across the supply chain.

“Until the retailers and the customers come to some conclusion about who’s going to pay for it, I don’t think sustainable packaging has a super-bright future,” he said.
Plastics packaging manufacturers hoping to carry on business as usual won’t survive, Veritiv’s Issa predicted.

Instead, they should stay engaged and stay curious — because they can play a big role in a more sustainable future.

She’s optimistic that can happen.

“The landscape of what we’re using in packaging and how we’re designing packaging has significantly changed,” Issa said. “So, I’m sure we’re going to get there, and think that the [20]25 goals that we’re pushing out are mainly on emissions, but ... at least what we feel from our customers, their deadlines and their commitments to transform and reduce their packaging, that has remained constant.”

While Veritiv is helping manufacturers turn from plastics to paper and fiber, Issa said she believes plastics will eventually be seen as every bit as sustainable as other materials.

Until then, she and Kelly warned converters against burying their heads in the sand.

“What I would tell anyone in the packaging industry is to stay curious and innovative. ...” Issa said. “I’m 100 percent confident that there’s technology, and if we [are] all together working on new technology to recycle plastics and reduce amount of plastic that we need to make things that we still need, that we can completely transform the industry, because paper had the same stigma years ago — like, ‘It’s not sustainable, and you’re killing the trees.’ And look at it: It’s completely circular, you can recycle it perfectly. I think the same thing can happen in the plastics industry.”