The Unintended Consequences of Europe’s New Packaging Mandates
The regulation may lead to increased use of plastic packaging and higher prices for consumers
Europe is working on major changes to current packaging and packaging waste requirements. The Packaging and Packaging Waste Regulation (PPWR) is a revision of existing law that governs requirements for recycling in Europe.
The goals of this revision are to improve environmental outcomes, prevent the production of packaging waste, and promote reuse and recycling of packaging waste. As part of this process, both the European Commission (EC) and the European Parliament developed proposals during 2023.
In December 2023, the EC adopted their proposal for creating tighter standards for packaging in Europe. The European Parliament also adopted new rules that outline proposed changes to existing requirements in late 2023. Both proposals will be used as a basis for 2024 negotiations to determine the final policies adopted in Europe.
While negotiations are progressing, some aspects of the regulations could create unintended consequences for companies and should be addressed. The one-size-fits-all maximum empty space requirement is too restrictive for some products, and reuse requirements are logistically complex, potentially leading to some unintended consequences.
The maximum empty space requirement is too restrictive for some products and may lead to unintended consequences
ShipBob, a leading ecommerce fulfillment service, describes the most frequent causes of shipping damages in ecommerce. According to their blog, ‘too much empty space in the package’ and ‘not enough cushioning material’ are the top two reasons for shipping damage in ecommerce.
Empty space could encompass packaging outside of the manufacturer’s packaging but within the shipment packaging. If so, materials inside the box used to mail the product but outside the manufacturer’s packaging — bubble wrap or recycled packing materials — would count as empty space. This makes the 50% empty space maximum even more restrictive for companies, especially those shipping easily-damaged products.
Additionally, if packing materials that are used to fill empty space between manufacturer packaging and shipment packaging are deemed to count as empty space, then damage to goods seems much more likely to occur, given these are some of the main causes of shipping damages.
Another important area the PPWR negotiations should consider is how various types of products are affected by empty space maximum. Difficult to damage items (socks for example) need much less packing material in order to ship safely, while other items more prone to damage need more cushioning material in order to ship safely. If packing material is deemed to count as empty space then businesses selling easier to damage goods will have a harder time shipping products without damage.
So, which goods are most prone to damage? These include; ornaments, glassware, servingware, and electronic items like cameras, game systems, and laptops.
How might companies selling these goods respond if the 50% empty space ratio becomes law? They will try to minimize packing and packaging materials in order to comply with the mandate, which will likely lead to product damage during shipment.
One way companies could respond would be to ship in their packaging directly. This will likely lead to some packaging damage. Product damage is also a possibility regardless of whether companies choose to ship in their manufacturer’s packaging or to minimize existing packaging.
In the long run, if customers receive damaged goods numerous times from the same company, they will stop shopping with that company. If packing materials are considered part of ‘empty space’, then companies selling more fragile items may face brand loyalty issues at a disproportionate rate.
If companies are unable to to minimize packaging without damaging products, they may choose to use more durable packaging materials like plastics. This result would be counterproductive to the goals of the PPWR.
The reuse mandate is logistically complex, and may lead to higher prices for consumers
The PPWR proposals also include reuse requirements that would require companies to utilize reusable packaging. Reuse mandates could create logistical issues, especially for products that are not bought on a regular basis, like phones, tablets, computers, etc.
Let’s consider a single purchase of a smartphone. Once a customer receives their phone they remove it from the packaging designed to support the phone during shipment. Now, in order for the packaging to be reused the customer must return the packaging to the company they bought it from. This can be done in a variety of ways, for example shipping the packaging back to the company or dropping the boxes off in-store.
The issue that arises is that some customers will not complete this process. Why?
People purchasing electronics are very likely not doing so multiple times a month, possibly not even multiple times a year. Alternatively, products purchased regularly that have reuse mandates could see higher rates of packaging return. Consider milk that is packaged in a glass jug. If milk is purchased each week, eventually the glass reuse process becomes familiar and customers remember that this is required. That habit of returning the packaging may not develop with products purchased as infrequently as electronics.
Additionally, rates of packaging return could vary depending on time of year. For example, electronics are popular gifts during the holiday season. Gift recipients may be unfamiliar with or unaware of the packaging reuse mandates. This could then translate into fewer boxes returned.
Given the uncertainty around how much used packaging will return for potential reuse, logistics costs will likely increase. Logistics costs include any costs incurred in order to move products from one location to another.
First, companies will need to estimate how many customers will actually return the reusable packaging. These rates of return could vary across demographics and at different times of the year. Second, they will need to have enough usable inventory on hand to fulfill new orders. Finally, if some of the returned packaging is damaged, that portion will not be available for reuse.
Companies typically pass cost increases onto consumers, so consumers will likely see higher prices as logistics costs increase. In November 2021, the United Nations Conference on Trade and Development (UNCTAD) wrote specifically about consumer prices increasing as the cost of transporting goods increased in their, “Review of Maritime Transport 2021” Report. They estimated that increased shipping costs would likely raise consumer price levels globally.
Conclusion
As negotiations related to the PPWR continue, regulators could adjust policies to address some inequities across industries while still achieving the intended goals of the PPWR.
The maximum empty space requirement may lead to inequities across companies selling different goods. It could also incentivize some companies to choose more durable packaging and shipping materials, like plastics. The reuse requirement is logistically complex and may lead to higher prices for consumers. The good news is, there’s still time for both issues to be fixed.
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