The FMCG Race to Zero: Policy
May 11, 2023
Following the recent United Nations Climate Summit (COP27) and Biodiversity Conference (COP15), the world is wondering whether countries and companies are doing enough in the fight against climate change. From fossil fuels to food systems, great transformations are required to tackle the scale of the challenges we face.
To address environmental issues, consumer goods companies influence the design of products placed on the market, and play a part in ensuring its recyclability. Retailers determine which products are placed for sale and what happens to unsold goods such as food.
Consumer goods brands and retailers have begun to take considerable action to reduce emissions across their operations. However, given the scale of the climate crisis, even the best intentions may fall short of what is necessary. If the market is not sufficiently solving a problem, policy intervention is often required. This article will highlight policies and regulations relating to three FMCG carbon hotspots: deforestation-free commodities, circular packaging and food waste.
Almost a quarter of global greenhouse gas emissions comes from agriculture, forestry and other land use.
According to the U.N. Food and Agriculture Organisation, the conversion of forest into cropland accounts for more than half of global forest loss.
Key ingredients in everyday consumer goods such as palm oil, paper and board, tea, soy, meat, sugar, coffee and cocoa are the crops most often linked to deforestation and the conversion of natural ecosystems to farmland. The sourcing of commodities is responsible for 65% of one FMCG giant’s impact on land, and makes up 71% of another leader’s carbon footprint. Across the European Union, UK and USA, proposals have been actioned to reduce commodity-driven deforestation.
European Union
The European Union agreed a new law to minimise the risk of deforestation and forest degradation associated with products that are imported into, or exported from, the EU— palm oil, beef, timber, coffee, cocoa, rubber and soy. The rules also apply to various products derived from these commodities such as chocolate, furniture, printed paper and selected palm oil based derivatives - for example, those used as components in personal care products.
United Kingdom
The United Kingdom will prohibit large businesses from using commodities whose production is associated with illegal large-scale forest loss, including cocoa, beef, soy, coffee, maize and palm oil.
USA
The United States of America plans to prohibit import of products made wholly or in part from certain commodities produced on land undergoing illegal deforestation — palm oil, soybeans, cocoa, cattle, rubber and wood pulp.
What are companies doing?
Many FMCG giants have ‘zero deforestation’ policies for key commodities; however a barrier for change is the lack of transparency in complex, global supply chains. Companies leading the way are working to improve transparency throughout supply chains.
At the 2020 World Economic Forum in Switzerland, former Unilever CEO, Paul Polman said that “a lot of people think if you outsource your value chain, you can outsource your responsibilities…we need to be at the forefront of change.” The CDP ‘A’ list for environmental transparency and performance on deforestation include L’Oréal, Unilever, Beiersdorf, Danone, and LVMH.
59% of global plastic waste is made up of packaging and consumer products.
Alongside sourcing of ingredients, packaging is a key carbon hotspot amongst FMCG companies. Packaging-related emissions are responsible for 43% of Coca Cola’s carbon footprint, 38.1% of ABinBev’s and 24% of PepsiCo’s.
In order to fund the circular economy for plastics and packaging, various countries have implemented Extended Producer Responsibility (EPR) Schemes. The concept of EPR is that the ‘producer’ — such as manufacturers, distributors, and/or retailers — should fund the collection and recycling of a product or packaging at its end of life. EPR is mandatory in South Africa for paper and packaging products, the EU recently adopted EPR requirements for a range of single-use plastic items and the UK is introducing EPR for packaging.
European Union
Many EU countries have deposit return systems (DRS) in place for beverage containers. The scope of each legislation varies by country. Croatia, Denmark, Estonia, Finland, Germany, and Lithuania’s system includes PET plastic bottles, aluminium cans and glass bottles. Sweden and The Netherlands include PET bottles and aluminium cans. Malta, Slovakia and Latvia began implementing a DRS in 2022, while Austria anticipates to roll out in 2025.
The EU single-use plastics Directive targets common single-use plastic items including plastic bottles, food packaging and wrappers, introducing measures to reduce consumption, boost recycling and limit littering.
New EPR requirements have been introduced for food and beverage containers, cups, packets and wrappers, lightweight carrier bags, and tobacco products with filters. Producers will cover the costs of waste collection and litter clean-up, data gathering, and/or awareness-raising initiatives.
Readers in the EU may have noticed coffee cups now feature an image of a turtle with a warning of the presence of plastic, while wet wipes now include direction not to flush down the toilet. This is a result of the ‘compulsory marking’ measure of the Directive. Specified items including wet wipes, tobacco products with filters, and beverage cups must display a visible marking on either the packaging or product itself to inform consumers about the presence of plastics in the product, the negative environmental impact of littering, and appropriate waste disposal options.
Certain items such as plastic cutlery, plates, straws, cotton bud sticks, beverage stirrers, food and beverage containers made of expanded polystyrene, and products made from oxo-degradable plastic will be completely banned from the EU market.
New design requirements for plastic bottles were also introduced. Single-use plastic PET bottles should contain at least 25% recycled plastic in their manufacture by 2025, and all plastic bottles should contain a minimum of 30% recycled plastic by 2030. To boost recycling of plastic bottle caps, it will be mandatory for caps and lids to remain attached to the container during the product’s use-stage. Coca Cola have already begun introducing bottles with caps that remain attached.
Canada
Canada’s Single-use Plastics Prohibition Regulations prohibits the manufacture, import, sale and export of checkout bags, cutlery, foodservice ware, ring carriers, stir sticks and straws. British Columbia has implemented EPR requirements for packaging and paper products, and beverage containers. Cities such as Vancouver are also taking action by banning plastic shopping bags and adding a charge to consumers for disposable cups, paper bags and reusable bags. 12 of Canada’s 13 provinces and territories, with the exception of Nunavut, operate deposit return systems for various beverage containers.
USA
In the USA, the REDUCE Act imposes an excise tax on any taxable virgin plastic resin. The bill also establishes a Plastic Waste Reduction Fund to carry out activities related to plastic waste reduction and recycling, marine debris reduction, detection, monitoring, and cleanup activities, and addressing environmental justice and pollution impacts from plastic products. 8 US States have also implemented single-use plastic bag bans. Several US States have had deposit return systems in place for beverage containers for a number of years, dubbed ‘Bottle Bills.’ The scope of California’s Bill will extend to include wine and distilled spirit bottles by 2024.
United Kingdom
The UK is introducing a plastic packaging tax (at £200/tonne) on plastic packaging with less than 30% recycled plastic which is manufactured or imported into the UK. The UK’s Environment Act is also paving the way for charges on single-use plastics as well as a DRS for beverage containers. In Scotland, a DRS will be implemented later in 2023; covering drinks containers made from PET plastic, glass, steel and aluminium. A DRS for plastic, aluminium and steel will roll out in England and Northern Ireland by 2025, and the scheme in Wales will also include glass bottles.
What are companies doing?
Approximately one third of all food produced globally for human consumption is lost or wasted — the equivalent of 3.3 billion tonnes of CO2e emissions.
Food waste occurs at every stage along the value chain — including at the manufacturing facilities of consumer goods companies and in-store at food retailers such as supermarkets. It perhaps comes as no surprise that this is an issue requiring urgent, standardised direction.
European Union
Across the European Union, all food waste must be separated at source by 2023. This means that any unsold, unused or damaged food products in supermarkets, grocers or manufacturing facilities will be separated for appropriate redistribution or disposal, instead of being mixed in with waste destined for landfill. France already prohibits supermarkets from throwing away food, instead mandating that unsold food be donated to charity, while Spain has drafted a Bill to cut food waste.
United Kingdom
The U.K. will introduce mandatory separation of industrial and commercial food waste from 2023 and Scotland’s requirement for large retailers to separate food waste has recently expanded to include smaller retailers.
USA
The United States introduced the Model Good Samaritan Food Donation Act — establishing protection from liability for donors of food which has been donated in good faith. This provides a solution to a key barrier when it comes to retailers donating surplus food to charity. The more recent US Food Recovery Act expands these protections, as well as providing funds to tackle food waste. California, Connecticut, Massachusetts, Rhode Island and Vermont have also passed State laws to keep food out of landfills.
What are companies doing?
Policy decisions send signals to companies and to consumers about what is ‘acceptable’. A regulatory focus on deforestation-free products, plastics and packaging and food waste alerts companies and consumers that these issues warrant intervention. Legislation can also help to level the playing field when it comes to certain requirements, whereby companies already leading the way have a major competitive advantage. As pressure mounts for Governments to develop environmental policies, it is more important than ever for companies to take meaningful action.
