Sustainability Matters: How Packaging Manufacturers Can Leverage ESG for Success

how packaging manufacturers can leverage esg
Leigh Ann Wilson, MBA
May 11, 2023

Manufacturing BitsAs a packaging supplier, the pressure to raise your organization’s Environmental Social Governance (ESG) is real. Consumers have become increasingly concerned (and vocal) about the environment, and the response has been stricter sustainability regulations that are coming with more and more frequency. Sustainability is huge in the packaging industry, and pairing that with the fast-changing regulatory environment can be complex and overwhelming.

How do packaging manufacturers respond to this new landscape? Flipping the narrative from burden to opportunity can be a game changer. Let’s look at how packaging manufacturers can leverage ESG regulatory changes to find opportunities.

FACT #1- Government regulations are not going away.

At Stambaugh Ness, we use a business model called The Anticipatory Organization from leading futurist Daniel Burrus. This model is based on three hard trends that influence the future, increasing regulations being one of them. Within the manufacturing industry, regulatory pressure is felt deeply with the push to reduce emissions and toxins, use recyclable materials, and improve reporting.

Staying agile with a strategic focus on innovation can accelerate your ability to stay ahead of the regulations. Packaging manufacturers are focused on the circular economy of their products. Each package must meet a specific purpose for the customer by using the best materials for the need, all while focusing on the product’s end of life. Companies that proactively balance regulations with innovation can secure an advantage in the marketplace.

Fact #2: There can be money in it.

As we noted previously, innovation can perfectly complement regulatory changes. But innovation takes significant effort and investment. Companies expend time and materials testing out new products or processes. The good (if not great) news is that you can make money as a result of those efforts – even if they’re not successful. The Research and Development (R&D) tax credit allows your organization to recapture some of your innovation investment.

Packaging manufacturers can reap significant benefits by leveraging this credit. The R&D tax credit is a dollar-for-dollar Federal credit designed to stimulate companies’ research and development activity by reducing their after-tax cost. Companies that qualify for the credit can deduct a percentage of qualified research expenditures above a base amount from their corporate income taxes. Think of how those savings could be re-invested in your business.

Fact #3- Environmental reporting can attract capital, customers, and talent.

While many companies may view environmental reporting as a burden, it can positively affect those looking at your company. ESG issues are becoming a priority for more than consumers; private equity firms are paying attention too. ESG-focused companies are more attractive and marketable targets for private equity firms to add to their portfolios.

For manufacturers who don’t desire outside investment and would prefer to grow organically, ESG can be an opportunity to stand out. Consumers are actively seeking out brands that help them minimize their carbon footprint. Showing your investment in sustainability gives customers more reason to choose you over the competition.

And when it comes to the ever-present issue of recruiting, if you have yet to notice, Generation Z and Millennials spend a lot of time discussing sustainability and environmental issues. As baby boomers continue to retire, the future workforce will challenge organizations to do better. Companies that showcase a positive environmental impact have a distinct advantage in attracting and keeping talent.

Next Steps

If you are interested in becoming the disruptor instead of the disrupted, let’s talk. By anticipating and planning for regulatory changes now, you can accelerate your organization’s future growth and profitability.

Let’s put cash back into your business with the R&D Tax Credit. Watch this webinar specifically designed to help manufacturers understand the R&D Tax Credit.

For an anticipatory look at how to proactively plan for upcoming tax changes, please join our Town Hall on May 24th.

Leigh Ann Wilson