Packaging is big business — valued at nearly $900 billion globally. Historically, the principal goal of the industry was simple: provide protection for packaged goods in the most cost-effective manner. Today, there is much greater emphasis on sustainability and the environmental consequences of low recycle rates and poor waste management systems.
There is much debate about which is the most environmentally friendly form of packaging. While some uses of plastic are clearly valuable, there has been increasing analysis of the negative impact of single-use plastics, such as flimsy shopping bags and straws. Some countries are trying to curtail their use via a variety of measures. Businesses have also begun to respond, with multinationals such as Unilever — a holding in our sustainable portfolios — committing to 100% recyclable plastic packaging by 2025.
"It is estimated that three quarters of all aluminum ever mined is still in use today."
Heavy research into light containers
Analysis of the $60 billion beverage container market provides insight into the complexities of sustainability research. Exploring the efficiency of something as simple as a single-use bottle or can means in-depth research in areas such as transportation of raw materials and finished products, production processes, weight, form factor, recycling potential, and end-of-life scrappage value. This life cycle analysis forms the core of many carbon footprint studies and considers all steps in a product life cycle to identify ways to mitigate environmental impact and reduce all-inclusive economic costs.
So what's best for beverages?
While reusing a container is clearly the best solution, it is not always practical. With this in mind, and based on our analysis of glass, aluminum, and plastic containers, we found distinct advantages with aluminum. It is fully recyclable with no loss in quality; it already has high recycling rates; and it benefits from a low weight-to-volume ratio, which reduces transportation costs. These attractive properties give aluminum a high scrappage value, which incentivizes collection and reuse. In fact, it is estimated that three-quarters of all aluminum ever mined is still in use today. As a result, a typical can contains 70% recycled content, while a can made from fully recycled metal uses just 5% of the energy needed to produce a can made from virgin material.
Glass suffers from being the heavyweight option, which amplifies distribution-related emissions. Although glass can be fully recycled, it usually must be mixed with virgin materials to achieve desired quality and color. For plastic, the disadvantages are low scrappage values, which contribute to poor recycling rates and significant negative end-of-life externalities. For example, unlike glass, plastic will break down and pollute in ways that have significant environmental implications. Furthermore, its recyclable content is low, and material degradation means that plastic beverage bottles need to be made from virgin material.
"Exploring the efficiency of something as simple as a single-use bottle or can requires in-depth research."
Good for the planet, good for investors
How does this research translate into investment opportunities? One example is Ball Corporation, a holding in Putnam Sustainable Leaders Fund. Ball is a provider of metal packaging for beverages, food, and household products. The company's stock price has been fueled by meaningfully faster growth than that of its business peers. We believe this is partly due to Ball's sustainability initiatives. Rather than moving away from aluminum to plastic years ago, as many of its competitors did, Ball increased its focus on improving metal packaging and the flexibility of its production lines. The company works closely with suppliers and customers to increase recycling rates, reduce the energy intensity of aluminum production, and decrease the weight of its own products, making them more attractive than alternative forms of packaging.
Next: A rich pool of choices
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