Financial Markets vs. Sustainability Markets in Packaging

Financial Markets vs. Sustainability Markets in Packaging

The intersection of financial markets and sustainability considerations has transformed the packaging industry significantly in recent years. In this article I attempt to demonstrate a comparison of how these markets interact, with specific focus on global warming impacts, carbon emissions measurement and commercial cost at the SKU level, regulatory policy mechanisms, and the critical importance of standardized measurement and reporting:

Financial Markets Perspective

• Investment Patterns: Traditional financial markets have historically valued packaging companies based on growth, margin expansion, and market share. Cost efficiency and scale were primary drivers of financial success.
• Valuation Metrics: Packaging companies are typically evaluated on EBITDA multiples, revenue growth, and return on invested capital.
• Risk Assessment: Financial markets traditionally viewed environmental regulations as cost burdens rather than opportunities.
• Carbon Risk Pricing: Increasing incorporation of carbon pricing models, with financial analysts now factoring future carbon taxes and emissions trading schemes into forecasts.
• Capital Allocation: Major investments focused on production efficiency and consolidation through mergers and acquisitions.
• Reporting Focus: Financial reporting emphasized sales growth, cost reduction, and profit margins.

Benchmark commercial uniquely cost models at the level of the SKU: financial measures including EBITDA, Commercial cost and environmental costs e.g. EPR, DRS, Plastics tax and can report Carbon (CO2e) taxes.

Sustainability Markets Perspective

• Investment Criteria: Growing emphasis on ESG (Environmental, Social, Governance) metrics, with particular focus on packaging waste reduction, recycled content, and circular economy solutions.
• Carbon Accounting: Carbon footprint (CO2e) has become a fundamental metric for packaging evaluation, with life cycle assessments tracking emissions from raw material extraction through end-of-life.
• Valuation Premiums: Companies with sustainable packaging innovations, lower carbon footprints, and strong ESG credentials often command premium valuations.
• Risk Reframing: Climate change and associated regulations are now viewed as material financial risks requiring mitigation strategies.
• Capital Flows: Significant investments in recycling infrastructure, alternative materials research, and packaging redesign to minimize carbon emissions.
• Reporting Evolution: Sustainability reporting has become mainstream with metrics tracking carbon footprint, greenhouse gas emissions across scopes 1-3, recycled content percentage, and waste diversion rates.

Benchmark captures and reports data from the bottom-up tracking emissions from raw material extraction through end-of-life.

Global Warming Integration

• Science-Based Targets: Packaging companies increasingly adopt science-based targets aligned with Paris Agreement goals to limit global warming to 1.5°C.
• Scope 3 Emissions Focus: Financial markets now examine packaging companies’ entire value chain emissions (including supplier and end-of-life emissions), recognizing these often represent 70-90% of total carbon impact.
• Climate Scenario Analysis: Financial institutions perform climate scenario modelling for packaging investments, assessing resilience to various warming trajectories.
• Material Shifts: Rising temperatures and extreme weather events are disrupting traditional packaging material supply chains, creating financial risks and opportunities.
• Adaptation Requirements: Packaging designed for climate resilience (heat-resistant, water-resistant) gaining market importance.

Benchmark only uses science based sourced data to scope 3 Emissions

CO2e Measurement Integration

• Standardized Metrics: Financial markets increasingly expect standardized greenhouse gas protocol methodologies for measuring CO2e across packaging life cycles.
• Emission Factors: Development of industry-specific emission factors for different packaging materials creates more accurate financial risk modelling.
• Embedded Carbon Pricing: Internal carbon pricing mechanisms being adopted by packaging companies to drive low-carbon innovation.
• Disclosure Requirements: Financial regulations like the EU’s Corporate Sustainability Reporting Directive and the SEC’s climate disclosure rules mandate CO2e reporting for packaging.
• Carbon Intensity Benchmarking: Competitive analysis now includes carbon intensity metrics (CO2e per unit of packaging) for comparable products.

Benchmark software calculates the CO2e per unit of packaging as well as other units of measure e.g. weight and area (imperial and metric)

Standardized Measurement and Reporting

ISO 14067 and Similar Standards

• Market Credibility: Financial markets increasingly differentiate between companies using internationally recognized standards like ISO 14067 for carbon foot printing versus those using proprietary or unverified methodologies.
• Investment Screening: Asset managers apply standardization criteria in ESG screening, favouring companies adhering to ISO 14067 or equivalent standards for product carbon foot printing.
• Data Comparability: ISO 14067 creates a common language for carbon metrics, enabling true “apples-to-apples” comparison across packaging alternatives and companies.
• Regulatory Alignment: Standards like ISO 14067 increasingly form the methodological backbone of regulatory requirements for carbon disclosure.
• Verification Pathways: Standardized methodologies create clear verification pathways that enhance data credibility and reduce greenwashing risks.
• Litigation Protection: Adherence to international standards provides legal defence against accusations of misleading environmental claims.

Benchmark is audited by SGS and verified to ISO 14067

Granular Data Requirements

• SKU-Level Precision: ISO 14067 implementation at SKU level enables precise carbon footprint declarations that financial markets can incorporate into valuation models.
• Material-Specific Data: Standards require granular material composition data that reveals true environmental impacts rather than generalized assumptions.
• Supply Chain Transparency: Methodological rigor exposes carbon hotspots throughout supply chains, enabling targeted interventions with highest financial return.
• Allocation Methodologies: Standards provide consistent approaches to allocating emissions across multi-component packaging systems.
• Temporal Relevance: Regular recalculation requirements ensure data remains current and reflective of actual operational conditions.
• System Boundary Definition: Standardized approaches to setting system boundaries prevent selective accounting that could misrepresent true carbon performance.

Benchmark’s approach of granular data accurately calculated consistently and transparently reported at the level of the SKU can then be summarised into bespoke templates and dashboards.

Market Transformation Effects

• Capital Access Premium: Companies with ISO 14067-compliant carbon data increasingly receive preferential terms for sustainability-linked loans and green bonds.
• M&A Due Diligence: Acquisition targets with standardized carbon accounting systems command premium valuations due to reduced integration and compliance risks.
• Investor Confidence: Transparent, standardized reporting enhances investor confidence, reducing risk premiums and cost of capital.
• Market Signal Clarity: Consistent application of standards like ISO 14067 creates clearer market signals about which packaging innovations truly reduce carbon footprint.
• Regulatory Compliance Efficiency: Organizations with established standards-based carbon accounting systems face lower compliance costs as regulations proliferate.
• Innovation Validation: Standards provide objective frameworks for validating carbon reduction claims of packaging innovations.

Benchmark’s consistent application of commercial cost and CO2e reporting to ISO 14067 creates clearer market signals about transparency enabling packaging innovations to truly reduce cost and carbon footprint.

Competitive Differentiation

• First-Mover Advantage: Early adopters of comprehensive standards-based carbon accounting can gain competitive advantage through data quality and management capabilities.
• Marketing Authenticity: ISO 14067-compliant carbon footprints strengthen marketing claims and minimize accusations of greenwashing.
• Supplier Selection Criteria: Leading companies increasingly require standards-based carbon data from packaging suppliers, creating market access barriers.
• Consumer Trust: Products with verified carbon footprints based on international standards build consumer trust and loyalty.
• Regulatory Anticipation: Companies with established standards-based carbon accounting systems can more quickly adapt to new regulatory requirements.
• Transparency Premium: Both consumers and investors increasingly reward transparent, standards-based environmental reporting with price and valuation premiums.

Benchmark enables business to build trust with its customers as Benchmark has no vested interest in a material or category.

Regulatory Policy Integration

Extended Producer Responsibility (EPR)

• Balance Sheet Implications: EPR creates new financial liabilities for packaging producers that must be accounted for in financial statements.
• Fee Modulation: Advanced EPR systems apply eco-modulation fees based on recyclability and carbon footprint, creating direct financial incentives at SKU level.
• Margin Impact: EPR fees, averaging 1-4% of product retail price in mature systems, significantly impact profit margins across product portfolios.
• Competitive Differentiation: Companies with packaging designed for EPR compliance gain cost advantages in markets with established schemes.
• Investment Allocation: Capital expenditure increasingly directed toward packaging redesign to minimize EPR fee exposure.
• Market Valuation: Companies operating in multiple jurisdictions face complex EPR compliance costs, with effective management increasingly reflected in stock valuations.
• Standards Integration: EPR systems increasingly incorporate ISO 14067 or equivalent methodologies for carbon footprint calculations used in fee modulation.

Deposit Return Schemes (DRS)

• Working Capital Effects: DRS systems create complex cash flow implications with deposit float management becoming a significant financial consideration.
• Infrastructure Investment: Packaging companies increasingly invest in reverse logistics capabilities to capture value in DRS markets.
• Collection Rate Impacts: High-performing DRS systems (>90% collection rates) drastically reduce littering costs and improve material recovery economics.
• Design Parameters: Package designs optimized for DRS (standard formats, durable barcodes, compatible materials) show superior financial performance in applicable markets.
• Material Value Retention: DRS-collected materials command premium prices due to higher quality, creating closed-loop economics that benefit initial material suppliers.
• Merger & Acquisition Activity: Growing trend of vertical integration as packaging producers acquire recycling assets to secure DRS material flows.
• Carbon Accounting Integration: Leading DRS systems now incorporate ISO 14067-compliant carbon data to reward packaging designs with lower carbon footprints.

Plastic Taxes

• Direct Cost Impact: Plastic taxes (e.g., UK Plastic Packaging Tax at £200/ton for packaging with <30% recycled content) create immediate SKU-level cost increases.
• Material Switching Economics: Financial analysis increasingly incorporates tax thresholds in material selection, accelerating shifts to recycled content or alternative materials.
• Price Pass-Through: Ability to pass plastic tax costs to consumers varies by product category, creating uneven margin pressure across portfolios.
• Geographic Exposure: Companies with high exposure to markets with aggressive plastic taxes face valuation discounts unless mitigation strategies are evident.
• Supply Chain Pressure: Plastic taxes create financial incentives throughout supply chains, with brands pushing requirements to packaging suppliers.
• Accounting Complexity: Multi-jurisdictional plastic tax regimes require sophisticated financial modelling and compliance systems.
• Calculation Methodology: Growing alignment between plastic tax calculations and international standards for material content verification and carbon accounting.

Material-Specific Taxes and Tariffs

• Cross-Border Complications: Tariffs on packaging materials (e.g., aluminum) create complex sourcing economics that impact both cost and carbon footprints.
• Substitution Effects: Material taxes drive rapid substitution when alternatives exist, creating market volatility for packaging material suppliers.
• Carbon Border Adjustment Mechanisms: Emerging carbon border taxes directly link CO2e performance to import costs, creating new financial variables in packaging sourcing.
• Tax Optimization Strategies: Financial teams increasingly optimize packaging specifications to capitalize on tax differentials between materials.
• Innovation Investment: Material taxes accelerate R&D investment in tax-advantaged alternatives, with financial markets rewarding successful innovation.
• Forecasting Challenges: Volatility in material tax regimes complicates financial forecasting, creating valuation uncertainty for packaging-intensive businesses.
• Standards-Based Calculation: Material taxes increasingly incorporate ISO 14067 or equivalent methodologies for determining carbon content and associated fees.

Benchmark software captures the various taxes by material and country enabling transparency and sustainable pricing to the markets.

SKU-Level Cost and Carbon Integration

For Financial Analysts

• Data Quality Assessment: Analysts now evaluate the quality of carbon data based on adherence to standards like ISO 14067, with valuation premiums for companies using verified methodologies.
• Regulatory Exposure Analysis: SKU-level standardized data enables precise modelling of exposure to EPR fees, plastic taxes, and DRS requirements across product portfolios.
• Granular Performance Analysis: SKU-level carbon metrics enable more precise valuation models and identification of climate-related financial risks across product portfolios.
• Cost-Carbon Correlation: Growing evidence of correlation between carbon efficiency and regulatory cost efficiency at SKU level provides leading indicators for financial performance.
• Portfolio Optimization: Carbon intensity data at SKU level helps identify which product lines face greatest regulatory and market risks.
• Investment Targeting: Ability to identify specific high-carbon, high-regulatory-cost SKUs allows for targeted capital allocation to improvement projects with highest ROI.
• Disclosure Quality: Companies with SKU-level carbon and compliance accounting capabilities based on international standards demonstrate superior data management, often commanding higher market multiples.

Benchmark software captures the granular cost and carbon data and reported via bespoke dashboards thereby avoiding any risks associated with loss making or Greenwashing.

For Business Leaders

• Strategic Data Investment: Growing recognition that investment in standards-based carbon accounting systems yields financial returns through improved decision-making.
• Regulatory Strategy: SKU-level regulatory compliance data enables strategic decisions about market entry, product launches, and potential market exits.
• Decision Support: SKU-level carbon and regulatory cost data provides actionable intelligence for product design, pricing, and portfolio management decisions.
• Strategic Alignment: Carbon-cost-compliance profiles at SKU level enable alignment of sustainability goals with financial performance metrics.
• Resource Allocation: Precise understanding of which SKUs drive corporate carbon footprint and regulatory exposure enables more efficient resource allocation.
• Competitive Advantage: Leaders who master carbon-cost-compliance optimization at SKU level achieve both margin improvements and sustainability credentials.
• Risk Management: Early identification of high-carbon, high-regulatory-cost SKUs allows for proactive redesign before penalties or market rejection.

Benchmark enable business leaders to make informed carbon-cost-compliance optimization at SKU level achieve both margin improvements and sustainability credentials decisions

For Packaging Producers

• Technical Capability Development: Standards implementation requires specialized expertise, creating competitive differentiation for producers who master methodologies.
• Compliance-Driven Design: SKU-level regulatory compliance data enables design decisions that optimize for EPR fees, plastic taxes, and DRS compatibility.
• Design Optimization: SKU-level carbon accounting enables design decisions that simultaneously reduce environmental impact and costs.
• Material Selection: Data-driven comparisons of cost-carbon-compliance trade-offs for different materials across specific SKUs.
• Manufacturing Efficiency: Carbon hotspot analysis at SKU level often reveals energy efficiency opportunities that reduce both emissions and costs.
• Value Proposition: Ability to provide specific carbon reduction and regulatory compliance data for each packaging solution enhances competitive positioning.
• Innovation Focus: Detailed cost-carbon-compliance metrics identify which packaging formats most urgently need innovation resources.

Benchmark software can calculate many thousands of SKU’s commercial cost and CO2e from standard templates in a matter of minutes. Enabling packaging producers to strategically focus on tender submissions.

For Brands

• Data Integrity Assurance: Standards implementation provides verification pathways that protect brands from greenwashing accusations.
• Regulatory Cost Mapping: SKU-level analysis of regulatory costs across different markets enables strategic pricing and portfolio decisions.
• Product Development: SKU-level carbon and compliance data informs product development decisions, with packaging often representing 10-40% of product carbon footprint.
• Marketing Authenticity: Specific carbon metrics for individual products enable credible sustainability claims that avoid greenwashing accusations.
• Supplier Selection: Ability to compare packaging suppliers based on cost, carbon performance, and regulatory compliance expertise for specific SKUs.
• Price Premium Justification: Data supporting lower carbon footprint at SKU level can justify premium pricing for environmentally conscious consumers.
• Regulatory Compliance: Granular data facilitates compliance with emerging product-level carbon disclosure requirements and packaging regulations.

Benchmark has a vast global repository of packaging machines, materials, consumables in production, wage and energy costs to enable realistic ‘should cost’ modelling.

For Retailers

• Supplier Qualification: Retailers increasingly require standards-based carbon data as prerequisite for shelf space allocation.
• Regulatory Risk Assessment: SKU-level regulatory compliance data enables retailers to identify products at risk of non-compliance or significant cost increases.
• Merchandising Decisions: SKU-level carbon and compliance data informs shelf placement, promotion, and assortment decisions.
• Private Label Development: Carbon-cost-compliance optimization for store brand packaging yields both margin and sustainability benefits.
• Supplier Engagement: Retailers can set specific carbon and regulatory performance requirements at SKU level for branded products.
• Consumer Communication: Shelf-edge labelling with carbon and compliance data provides competitive differentiation and meets growing consumer demand for transparency.
• Scope 3 Management: Retailers can more effectively manage their massive scope 3 emissions through data-driven SKU selection.

Benchmark have no vested interests other than to provide accurate data, our reporting and verification solutions supports retailers build trust with their customers.

For Consumers

• Trust in Carbon Claims: Standards-based carbon footprints build consumer confidence in environmental marketing claims.
• Regulatory Cost Visibility: Transparency around how packaging regulations impact product costs helps consumers understand price differences between sustainable and conventional options.
• Informed Choices: SKU-level carbon data, when visible through QR codes or packaging labels, enables carbon-conscious purchasing.
• Cost-Benefit Analysis: Understanding the relationship between product price, carbon footprint, and regulatory compliance helps consumers make value-based decisions.
• Authentic Engagement: Specific carbon and compliance metrics for individual products build trust in brand sustainability claims.
• Behavioural Incentives: Carbon labelling at SKU level can drive behaviour change through competition, comparison, and goal setting.
• Feedback Loop: Consumer preference for low-carbon, regulation-compliant products sends market signals that accelerate sustainable packaging innovation.

Benchmark authentic data results (CO2e) can be shared on pack or indeed via e.g. a QR code so the data can be interrogated further. The overall data can be held on our customer websites.

Convergence Points

• Data Quality Premium: Financial markets increasingly differentiate between companies based on the quality and verification status of their carbon data.
• Standards Adoption: Growing adoption of ISO 14067 and similar standards creates methodological consistency across markets and regulatory regimes.
• Regulatory Arbitrage: Companies optimizing packaging designs to minimize regulatory costs across multiple jurisdictions gain financial advantages.
• Green Bonds: Increasing issuance of sustainability-linked bonds tied specifically to carbon reduction targets and packaging regulatory compliance.
• ESG Integration: Financial analysts now routinely incorporate carbon footprint, regulatory risk exposure, and compliance capabilities into company valuations.
• Consumer Pressure: Both markets respond to changing consumer preferences driving demand for climate-friendly and regulation-compliant packaging solutions.
• Regulatory Influence: EPR systems, DRS, carbon taxes, plastic taxes, and materials tariffs create direct financial implications for packaging decisions.
• Technology Investment: Both markets are driving capital toward innovations in low-carbon, regulation-compliant materials and recycling technologies.
• Data Integration Platforms: Growth of software solutions that integrate financial, carbon, and regulatory compliance data at SKU level to enable holistic decision-making.

Benchmark software sits at the centre enabling informed decisions based on granular data, accurately calculated and transparently reported in bespoke templates.

The Importance of Software Interoperability

In the context of financial and sustainability markets for packaging, software interoperability—the ability of different software systems to exchange and make use of information—is critically important. This capability transforms isolated data into integrated intelligence that drives decision-making across organizations and value chains.

Strategic Importance of Software Interoperability

1. Data Integration and Workflow Efficiency
   • Eliminates manual data re-entry and transcription errors
   • Enables real-time data flow between systems
   • Creates single sources of truth for critical metrics
2. Cross-Functional Decision Making
   • Connects previously siloed departmental systems
   • Enables holistic analysis incorporating multiple variables
   • Supports decision-making that balances multiple objectives
3. Value Chain Collaboration
   • Facilitates secure data sharing across organizational boundaries
   • Standardizes communication formats between trading partners
   • Reduces friction in collaborative sustainability initiatives

Example Applications in Packaging Sustainability

SKU-Level Sustainability Management

Example 1: ERP to LCA Software Integration

• ERP system provides product specifications, material inputs, and production volumes
• LCA software calculates carbon footprints using this data plus emission factors
• Results feedback to ERP for inclusion in product master data

Business Impact: Complete carbon footprint data automatically available for all SKUs without redundant data entry

Example 2: Sourcing Platform to Sustainability Database

• Procurement software pulls supplier sustainability credentials from third-party databases
• Carbon, water, and social impact data incorporated into sourcing decisions
• Sustainability performance automatically factored into supplier scorecards

Business Impact: 30-40% faster sourcing decisions with integrated sustainability criteria

Regulatory Compliance Management

Example 3: PLM to EPR Compliance Software

• Product Lifecycle Management system pushes packaging specifications to EPR compliance tools
• EPR software calculates fees across multiple jurisdictions
• Results feed back into financial planning systems

Business Impact: Proactive visibility of regulatory costs during product development phase

Financial-Environmental Integration

Example 4: Carbon Accounting to Financial Reporting

• Carbon accounting software calculates emissions based on activity data
• Results push to financial reporting systems
• Integrated reporting shows financial and environmental performance

Business Impact: Executives see environmental metrics alongside financial KPIs in same dashboard

Example 5: ERP to Plastic Tax Calculator

• ERP system provides production volumes and material compositions
• Tax calculator determines liability across multiple jurisdictions
• Results feed into financial forecasting systems

Business Impact: Financial teams can model tax optimization strategies in real time

Supply Chain Transparency

Example 6: Blockchain to Consumer-Facing Apps

• Production data recorded on blockchain throughout supply chain
• Verified sustainability claims accessible via QR code scan
• Consumer apps pull data directly from blockchain

Business Impact: Credible, transparent product claims without centralized data control

Example 7: IoT to Sustainability Reporting

• IoT sensors monitor energy and material use in packaging production
• Data flows automatically to sustainability reporting platforms
• Real-time performance visible to management and customers

Business Impact: Immediate intervention when sustainability metrics trend negatively

Implementation Approach Considerations

1. API-First Architecture
   • Modern systems built with integration as primary design consideration
   • Well-documented APIs enable flexible connections between systems
   • Reduces dependency on single-vendor ecosystems
2. Industry Standards Adoption
   • Common data formats like EDIFACT, GS1, GDSN for product data
   • Standards like ISO 14067 for carbon foot printing methodologies
   • Enables “plug and play” integration between compliant systems
3. Middleware and Integration Platforms
   • Integration-Platform-as-a-Service (iPaaS) connects diverse systems
   • Data transformation handles differences in formats and structures
   • Centralized management of complex integration networks

Benchmark systems are built with integration as primary design consideration

Business Value Creation

The most significant value creation occurs when financial and sustainability data flows seamlessly between systems. Companies with mature software interoperability can:

• Automatically incorporate carbon metrics into financial reporting
• Model environmental impacts of business decisions in real time
• Optimize packaging designs for both cost and environmental performance simultaneously
• Provide verified sustainability data throughout the value chain
• Adapt quickly to new regulatory requirements by reconfiguring data flows

Benchmark recognise In the rapidly evolving packaging sustainability landscape, software interoperability has moved from technical convenience to strategic necessity. Organizations that master these interconnections gain competitive advantages through better decision-making, reduced compliance costs, and enhanced stakeholder trust.

The packaging industry now operates at the complex intersection of financial markets, sustainability imperatives, and regulatory compliance. Success depends on the ability to integrate carbon footprint data—measured according to rigorous international standards like ISO 14067—with both traditional financial metrics and regulatory compliance costs at the granular SKU level.

Without standardized measurement methodologies, commercial cost & carbon data lacks comparability and credibility, undermining both financial decision-making and sustainability claims.

The companies achieving superior financial performance are those that have invested in standards-based carbon accounting systems capable of delivering granular, verifiable data that drives optimization of designs, materials selection, and market positioning in anticipation of evolving regulatory landscapes.