The concept of reusable packaging is not new. Over the past century, reusability systems were in place for commodities such as milk and wine, among others. Today, as industries around the world aim to reduce their carbon emissions in response to increasingly bold climate targets, reusable packaging has once again gained significant interest.
This article is a collaborative effort by Felix Gruenewald, Jon Haag, Franziska Hornyai, Oskar Lingqvist, and Daniel Nordigården, representing views from McKinsey’s Materials Practice. Foam Polystyrene Beads
Despite this renewed interest, many trials in the pilot phase are unable to scale. One simple explanation for this is that there are several limiting factors within the current packaging value chain, mainly linked to a lack of acceptance, a lack of infrastructure, regulatory pushes for reductions in overall packaging, product safety, and cost.
This article aims to further the dialogue on packaging choice and broaden the available fact base related to reusable versus single-use packaging (see sidebar “An overview of sustainability in packaging”). With this in mind, we modeled two different potential use-case scenarios in Europe pertaining to environmental footprint and the cost impact of switching from a single-use-packaging model to a reusability model.
In recent years, we have published more than 15 articles on the topic of packaging sustainability.1 For more, see “Insights on paper, forest products & packaging,” on McKinsey.com. Across this body of work, we have sought to convey a consistent message: no single packaging type (whether plastic, glass, metal, or paper) is an absolute leader across every attribute of packaging sustainability. All types have both positive and negative features that vary in terms of sustainability, application, and region.
Critical aspects of packaging sustainability include carbon footprints, circularity (recyclability, recycled content, and reusable packaging), and environmental leakage (especially reducing ocean litter). This article focuses on reusable versus single-use packaging in relation to environmental impact, mainly expressed as carbon footprints and water consumption. We also considered costs for different stakeholders. For a broad perspective on packaging sustainability and the trade-off between different substrates and solutions, we encourage our readers to review our portfolio of publications.
The use-case scenarios, one for takeaway food and one for e-commerce packaging, were selected to compare today’s paper-based packaging with reusable plastic made with polypropylene (PP). The modeling indicates that stakeholders can further investigate the enabling conditions needed before reusable packaging outperforms single-use packaging across environmental, social, and economic factors. These conditions are not always inherent to the packaging itself.
Regulatory requirements on packaging sustainability and demand from consumers have sparked renewed interest in reusability solutions across the packaging value chain.1 “Reusable packaging: Key enablers for scaling,” McKinsey, October 28, 2022. Such solutions can help cut greenhouse-gas (GHG) emissions and packaging use by reducing the number of packages on the market. This can be achieved by increasing the reusability of those packages and raising the number of use cycles (referred to as “rotations”).
That said, there are several limiting factors to scaling reusability within the current packaging value chain, mainly linked to a lack of acceptance, lack of infrastructure, product safety, and cost.2 “Reusable packaging,” October 28, 2022. To better understand these complexities, this article examines the potential impact of reusability solutions across three dimensions:
Accounting for these three dimensions, our reusable-packaging use-case scenarios focused on incumbent alternatives in Europe, including the effects of use cycles and total product life cycles.
We made a number of assumptions when we modeled our use-case scenarios on e-commerce deliveries in Germany for nonfood e-commerce sectors and food service in Belgium.
For e-commerce in Germany, we used a potential future target of 10 percent penetration of reusability, which is aligned with Article 26 in the European Union’s recently published proposal for packaging and packaging waste.1 “Proposal for a revision of EU legislation on packaging and packaging waste,” European Commission, November 30, 2022. The model considers material cost implications, logistics, and manual work for each rotation of reusable items. However, since the model considers a return via postal facilities, additional costs for collection points are not accounted for.
That said, the use-case model for e-commerce deliveries in Germany makes the following assumptions:
For food service in Belgium, we assumed that the final retailer or restaurant selling cold or hot beverages (filling a container at the point of sale for takeaway) will target 20 percent of beverages being sold in reusable containers by 2030 (which is aligned with the European Union’s Article 26). Finally, the equivalent figure for food containers in the takeaway sector is 10 percent.
The use-case model for food service makes the following assumptions:
We analyzed two diverse use-case scenarios applying to Packaging and Packaging Waste Regulations targets3 “Proposal for a revision of EU legislation on packaging and packaging waste,” European Commission, November 30, 2022. in two different markets—e-commerce packaging in Germany and takeaway food service packaging in Belgium—assessing cost, total CO2 emissions, and water consumption (see sidebar “About the use-case models”). The chosen number of rotations was set to 20, based on the minimum number of uses needed to be close to the emissions of the single-use version.
This scenario focuses on nonfood e-commerce sectors such as fashion, electronics, and beauty products. Germany’s e-commerce market is one of the largest in Europe,4 “Germany—country commercial guide,” International Trade Administration, August 4, 2022. with approximately 2.3 billion deliveries per year.5 “Parcel shipments in online retail,” HDE Online-Monitor News, October 2021. However, the share of reusable packaging is negligible; a few examples exist, but the penetration rate is close to zero. We modeled a shift from padded-paper mailer bags and boxes to protective-plastic mailer bags or boxes using PP, which is recyclable. In the model, we set up a collection of the reusable items from collection points close to residents for redistribution to the next use cycle, excluding a washing stage. The model shows a significant increase in the amount of transportation needed because of the need to return packaging to reusable-packaging operators, third-party logistics centers, or distribution centers. In fact, for packages that achieve 20 rotations, transport will likely account for more than 75 percent of costs and more than 65 percent of CO2 emissions (Exhibit 1). Based on the e-commerce modeling, reusable packaging that exceeds 20 rotations can be competitive from an environmental perspective, and further rotations could be needed if cleaning operations create more emissions.
Accounting for the fact that infrastructure for e-commerce returns is already in place and functioning—facilitating the implementation of a reusability model in e-commerce—the cost increase of shifting to reusable packaging for e-commerce in this scenario is more than 50 percent for mailer bags and nearly 200 percent for boxes. Making every tenth parcel reusable adds around €30 million in costs for the total market in Germany. However, the volume of reusable items in the system could bring additional challenges to the logistics infrastructure.
Meanwhile, CO2 emissions could grow by 10 to 40 percent, given that handling of reusable items per rotation and transport alone are estimated to exceed emissions of single-use products. Because reusable packaging will include a standardized choice of mailer bags and boxes, overpackaging could also increase, adding additional costs and CO2 emissions because of inefficiencies in loading and transport. In addition, washing might be needed to reach a high number of rotations because water consumption and carbon emissions are likely to increase. By 2040, using zero-emissions transport (such as electric vehicles) can help reduce the CO2 footprint for collecting items and redistributing them to warehouses for further use. However, the actual CO2 footprint of transportation and distribution when using electric vehicles depends on the share of renewable sources in the electric grid, where the German electricity mix has a large environmental footprint.
Generally speaking, convenience has been the main driver for a thriving takeaway market in many countries. In Belgium alone, more than a half a billion cups and containers are sold in takeaway food businesses per year. However, a significant disadvantage is that takeaway food bought from outlets often results in consumers discarding used packaging in households, offices, public locations, and on public transportation.
This scenario assumes that consumers receive food or drinks packaged in reusable food containers or cups, either at a food service location or via home delivery. To facilitate the returning of reusable packaging, the model assumes that collection points are established. These would likely be located at restaurants and cafés as well as at or close to various common destinations for takeaway food, such as private homes and offices, enabling consumers to drop off their reusables while carrying out other errands. Finally, the model was built on the basis that system service providers (whether incumbents or new players) collect items, clean them, and redistribute them back to restaurants and cafés.
The modeling shows that a reusability solution can double the cost per use of container or cup (Exhibit 2). And emissions will likely increase more than costs—by more than 150 percent—on account of the higher share of fossil components in materials, transport, and energy use. The combined impact on Belgian takeaway businesses could raise costs by more than €10 million while adding five kilotons6 Metric tons: 1 metric ton = 2,205 pounds. of CO2 emissions and increasing water consumption by at least 20 million liters.
At the target number of 20 rotations, single-use alternatives made primarily from paper are still more cost-effective and result in lower carbon emissions, even at recycling rates of 30 percent by 2030. Thus, a system service provider of reusability solutions would need to prove a much higher number of rotations (and a low percentage of losses) to achieve economic viability (but not environmental viability based on today’s transport modes and energy mix).
For solutions in takeaway and home delivery, cleaning the packaging at the café or restaurant could reduce transport emissions and costs for containers and cups, compared with a centralized cleaning model delivered by system service providers. Notably, tableware at dine-in food service premises (not included in this scenario) would also need to change from single-use to reusable items, for which cleaning would be done at restaurants and with no additional transport required.
Beyond the direct implications of the modeled switch to reusable packaging, there are a number of wider societal impacts to consider. The major considerations for food service are the challenge to maintain a high level of food safety and the increased cost of packaging that will potentially be passed on to consumers (making it more expensive to eat) or lead to cost savings elsewhere. At the same time, consumers would need to learn new behaviors as they adjust to a different system. The implied reusability model would require customers to store, potentially rinse (leading to extra water consumption), and return items to a collection point or reverse vending machine, similar to deposit return schemes for bottles and cans.
Our two use-case scenarios indicate that reusability can add costs to the system and increase the use of fossil components in terms of materials, transport, and energy. In addition, they indicate that reusability can best be implemented where long-distance transport and washing can be avoided, where many rotations can be guaranteed, and where companies and consumers do not have to invest in parallel setups or add unnecessary complexity to the supply chain.
The following key questions can help shape decisions over whether reusable packaging is the better option in terms of environmental, societal, and economic impact.
Today, a few publications have considered anywhere from three to ten cycles in food (service) packaging to be appropriate, while B2B reusable crates are reported to be at about 24 rotations.7 “A critical view on packaging recycling and reuse in the European Circular Economy,” VTT Technical Research Centre of Finland, October 2022; “Reusable Packaging Is the Latest Eco-Friendly Trend. But Does It Actually Make a Difference?,” TIME.com, 2021. Our models show that successful system operators need to go beyond 20 rotations before emissions reductions can be achieved; for takeaway food packaging, this could be as high as 200 rotations. Therefore, using reliable and lasting materials as well as ensuring a high number of returns via incentives and harmonized communication will be necessary to make reusability an economically and environmentally efficient solution. At high rotation numbers, a significant reduction in packaging waste will also be beneficial.
In a reusability setup, packaging needs to be returned to the system after each rotation. Between use cases, the average distance can vary significantly, potentially adding more emissions costs and thereby key disadvantages compared with single-use packaging. In densely populated areas, collection, cleaning, inspection, and redistribution of reusables will be similar to last-mile deliveries, which are also reported as having significant costs and emissions. Indeed, the learning curve entails understanding how to become efficient and shift to low-carbon transport. Further, standardized packaging can lead to inefficiencies because of overpackaging. Companies would likely need to use reusable packaging within cities and avoid excess volumes to become cost and carbon efficient.
In general, paper-based packaging achieves recycling rates in Europe of approximately 70 to 85 percent, while plastic packaging reaches about 15 percent.8 Europe’s missing plastics: Taking stock of EU plastics circularity, Material Economics, 2021; Sustainable packaging: The role of materials substitution, Material Economics, 2018. By contrast, a higher share of packaging in food service is not sorted into recycling bins and typically ends up as waste. Thus, takeaway packaging needs a rapid increase in recycling rates, both for single-use and reusability models. For reusable packaging that doesn’t reach high rotations (beyond 20), an easy fit in existing recycling streams will be necessary.
In most sectors, except glass beverage bottles in countries with deposit return schemes in place, reusability brings a significant change for both businesses9 Brand owners might also require reusable packaging, which could hinder the standardization and centralization of reusability systems. and consumers. In food service, there is a need for a new format in the value chain to include reusable packaging, for which collection and reverse logistics hardly exist today. In many use cases, there is a need to invest in reusability setups10 One-time investments such as the first-time implementation of IT systems, the design of packaging solutions, the training of merchant employees, consumer education, and public communication are not considered. Further, there could be additional costs for consumers in e-commerce and food service, such as increased delivery fees, deposits, or incentives for returning the reusable items. for filling lines, warehouses, retailers, and other locations while maintaining existing packaging setups for single-use packaging in the medium term.11 “Reusable packaging,” October 28, 2022. Whether or not customers adapt their daily behaviors will affect the successful implementation of reusability solutions versus single-use packaging. The easier that reusable items can be returned, the easier a reusability circle can be maintained.
Reusability models in packaging have been flagged as a solution to minimize waste. However, our use-case scenarios reveal that there are still a number of challenges to be resolved before the benefits can be realized and scaled. Companies’ deep understanding of where to implement, when to offer, and how to execute these changes will depend on complex research and decision making. Getting this right could help create an operating model in which reusable packaging can deliver both environmentally and economically.
Felix Gruenewald an associate partner in McKinsey’s Zurich office; Jon Haag is a senior expert in the Stockholm office, where Oskar Lindqvist is a senior partner; Franziska Hornyai is a consultant in the Frankfurt office; and Daniel Nordigården is a partner in the Toronto office.
Expanded Polystyrene Bead Making Machine The authors wish to thank Emily Roeper and Tamas Vass for their contributions to this article.