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Sunday, June 23, 2024

The innovation imperative

Neil Farmer discusses the importance of packaging R&D even in recessionary times:

In the eyes of many observers the current state of the UK economy is not great. The country narrowly avoided going into recession in the last quarter of 2022 and is experiencing a cost-of-living crisis which is having a massive impact on every aspect of life. Wearing my economist`s hat, I would say we are unlikely to see any “green shoots of recovery” until the first half of 2024. With a general election likely later in that year we will then see economic stimulus including tax cuts, designed to kickstart the economy in the run up to the poll. It is hoped more monies will be allocated for R&D to encourage our industry to grow again.

Why the packaging industry needs financial help to innovate

Put simply, the packaging sector needs investment and financial support to help it innovate and create great new packaging designs. Our sector is grappling with the issues of poor environmental performance, including low levels of plastic recycling, a massive need to reduce waste and pollution. The industry has experienced a roller coaster ride over the last few years. The Covid-19 pandemic, the war in Ukraine and (for exporting businesses particularly) Brexit, have all caused detrimental effects to performance and profitability. The massive hikes in energy prices and raw material costs and the huge disruption to supply chains have all left the sector in a state of disarray.  I was hopeful that something was going to be done in the UK Government`s Spring Budget of 2023 to alleviate the hardship of the packaging sector. Whilst it was encouraging that the Chancellor heavily incentivised R&D in his statement of a few weeks ago, it was disappointing that sectors such as plastics, one of the largest industrial employers in the UK, were not prioritised for special attention. I strongly feel that plastics packaging has so much to offer to extend product shelf-life and offer recycle-by-design packaging. However, the industry needs investment and help to improve recycling systems, to re-establish plastics as an important material in the circular economy. The numbers for plastics circularity are woefully low at present.

Plastics industry and the Plastics Tax

Perhaps politicians do not see the plastics industry as one they wish to be too closely aligned with, in these fibre-packaging and renewable material times. It was recently revealed by a Freedom of Information (FOI) request by Duo UK, a Manchester-based packaging manufacturer, that the country`s Plastic Packaging Tax (PPT) had revenue of over £200 million. The data covered the tax`s first three quarters over April to December 2022. (Businesses are currently preparing their final quarterly return from January to March 2023). Many in the plastics industry have been calling for investment in the UK`s recycling infrastructure, the author included. It would by nice to think that much of the total revenue for the year from the tax, which after costs have been paid is estimated to be £220 million, could be channelled back into the industry, rather than just going into the coffers of the government. What happens next will be of great interest to many.

UK Research and Innovation`s Smart Sustainable Plastic Packaging Challenge

What is clear is the urgent need to move the industry out of its current downward spiral, start to innovate, create more jobs and establish the foundation for a healthy, vibrant packaging sector. The solution lies with schemes such as the following. At the end of March, the UK Research and Innovation`s (UKRI) Smart Sustainable Plastic Packaging (SSPP) Challenge revealed that £3.2 million had been earmarked for 17 projects. The SSPP, a £60 million five-year programme, is the largest and most ambitious UK government investment to date in sustainable plastics. The government deserves much credit for establishing this programme. The funding supports a range of projects from refill and reuse systems to new edible and biodegradable bio-based materials, advanced recycling technologies and plastic pollution mapping. SSPP is supporting over 70 research and innovation projects focused on consumer plastic packaging. They deal with important aspects of the packaging sector`s work for a sustainable future. I am particularly in favour of the development of plant-based biodegradable polymers to replace fossil fuel-based plastics, a sector which I have personally championed over almost 10 years. Indeed notable winners of the UKRI`s Sustainable Plastic Packaging Challenge included Xampla, a company I know well, a spin-off from the University of Cambridge. Xampla has developed plant-protein-based biomaterial that can replace synthetic materials and virgin polymers.

I also applaud the commitment of the SSPP Challenge to increase recycling and develop new sorting and recycling technologies, which I have long argued for. These are urgently needed if we are to meet demanding targets to have all packaging from either recycled sources or reusable by 2030.

Global challenges – USA initiatives

The challenges the UK are facing are mirrored elsewhere in the world. The USA, an economy eight times the size of ours in GDP terms, is grappling with the global downturn. The federal government has taken strong actions to eradicate the scourge of inflation and it appears these will be successful. More crucially it has committed to a goal of replacing 90 percent of petrochemical plastics with bioplastics over the next two decades. This reflects the urgency in the Biden administration to address global warming, food security and  health challenges. The White House plans to unveil a more detailed research and development agenda by June. The programme is not without its detractors and the ambitious goals are very much a work in progress. However, it a great example of innovation at the highest level, a policy which has the potential to change the face of the world economy as it struggles to meet climate goals, reduce pollution and food waste.

The importance of innovation for the future

We must always innovate to move forward. In my career the best businesses I have worked with have always put R&D very high on their agenda for change. The current economic woes should not detract the global industry from allocating more resources, not less, for investment in new ideas. The way forward may be uncertain at present but the opportunities provided by great R&D will make the challenges worthwhile in the longer term.  

Neil Farmer
Neil Farmer
Neil Farmer, Managing Director, Neil Farmer Associates. One of the world’s leading authorities on packaging and a fellow of the Institute of Packaging. Author of Trends in Packaging of Food, Beverages and other fast-moving Consumer Goods (FMCG), published by Elsevier.

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