The Talking Point: Getting ready for PPWR requirements

0:08For some companies, frankly, they are a complete catastrophe when it comes to packaging data. To be fair to them, it's usually not their fault. People ask questions that nobody has ever had to ask before, right? There was no reason to track this, so nobody tracked it. Take recyclability, suddenly you need composition at a level of detail that was never commercially or legally relevant.

0:36Hello and welcome to today's Talking Point podcast where we take a deep dive into a range of topics that are vital for the packaging industry. My name is Elisabeth Skoda, I'll be your host today. Today's topic focus will be a topic that's obviously at the forefront of everybody's mind in the packaging industry right now, particularly in Europe, which is the PPW you are and how companies can get ready for this key legislation, especially in the face of still evolving rules and regulations there. And we'll discuss what help there is available for companies out there who are struggling. And yeah, with me to do that, I have Alexander Reitz, who is head of consulting at PreZero Packaging, and he will share tips and insights and discuss pitfalls to avoid from the unique perspective of a consultancy business that was in charge of building the largest EPR system in Germany and also is a sister company to Lidl and Kaufland, major retailers in Germany, in case you're not familiar with those.

1:41So yeah, welcome, Alexander. Welcome to the podcast today. Thank you. Thank you very much for having me. To get us started, could you tell me a bit more about yourself and also about PreZero packaging and how the different arms of the business kind of complement each other. Sure, absolutely. I actually explained it already quite brilliantly. PreZero packaging is a packaging consulting arm of our business, which I guess is worth unpacking a bit because PreZero overall is the circular economy division of Schwartz Group and we are engaged in collection, sorting, recycling and energy recovery. And we are the consulting piece that is sitting inside that kind of unique ecosystem.

2:22And what people come to us with that varies a lot. Some want their packaging data in order, some want their portfolio redesign, some want their EPR costs to stop climbing. I think what ties it together is that we are advising on infrastructure and supply chains that we also actively run ourselves within Prezero or Schwartz Group. We also mentioned one of the clearest examples of the arms actually working together and which is our packaging EPR system in Germany because a few years ago didn't really exist right it was founded with a Lidl and Kaufland volume to begin with which put us at around 11 % of the market but today we're just under 23 % in lightweight packaging which makes us largest EPR system in Germany in the very competitive German market and for me the split matters more than the total right the 11 % that came with the family the other 12 we had to go out to the market and win and those are FMCG brands who could license the packaging with anybody they come to us i think mainly because we bundle compliance licensing the physical material recovery and high level of operational and strategical consulting and expertise inside the same company um and obviously like you mentioned pre-zero packaging is part of schwartz group which also contains major retailers such as littlers and Kaufland.

3:38How has this sort of set you up or what are the synergies there? How is this an advantage for you and your customers? Personally, I think synergy is usually one of those words that means two departments were told to have lunch together. So let's give you the unpolished version. PreZero packaging didn't really start out as a typical consultancy, right? We started as a central packaging competence center for Lila and Kaufland. And let's be honest, they're a very particular client to have. right? They can't fire you. They can't be sold to. And they will come back six months later with a very uncomfortable question if stuff didn't work out the way you said it would, right?

4:15And you learn quickly that way. The vehicle for most of our early work was Reset Plastic, the Schwartz Group's Joint Plastic Strategy, which was a genuine group effort, packaging teams at Lidl and Kaufland, people at group headquarters, and us. We've contributed heavily to it. And so as everyone else in that list, which is the only reason it was able to move at that scale. It goes to a 36 % reduction in the plastic usage for private label packaging and transport items compared to 2017, and an average of 26 % recycled content in private label plastic packaging. These are portfolio-wide numbers rather than showcase numbers, and that basically took years and was where we grew up as PreZero packaging.

4:57I think the advantage for an external client is simple enough. We're not bringing them anything that has not already had to survive Europe's largest retail environment first. Nobody is going to find out on their own line for the first time whether our concept hold or not. And the second part is infrastructure because the retailer and the collection and recycling operations, they all sit in the same group. We can close loops and have insights that are normally fragmented across four or five companies with no shared interest in the outcome. And that's very different with us. Two examples may be we had to build a tray-to-tray system with over 90 % RPT and food contact packaging and a yogurt cup with 30 % recycled polystyrene in it coming out of household waste collection.

5:41And everyone working in recycling will know why, especially the second one is hard, post-consumer food contact and not PET. You have to manage every link, sorting, recycling, decontamination, packaging, manufacturing, filling. So normally a project like this tends to die somewhere along the way because one link in the chain has no reason to care and here it didn't. And that's what's kind of unique about our setup. I was wondering, leading on from that, how can you, given all this, support companies, particularly retailers and private labels, manufacturers on the way to compliance? We'll dive a bit deeper into it later, but maybe a broad overview to start with.

6:21Well, the thing is, the regulation is identical for everybody, but where people are starting from is very different. A company with 40 people working in packaging and a company where packaging is half of one person's shop are held to exactly the same standard by the people that we are. So the work looks completely different depending on who's asking. At the one end, you have a lot of private label manufacturers, very good at making the product and often with no packaging function at all in the way a brand owner would recognize one. For them, the first job isn't strategy. It's basic inventory. Questions like, what packaging do we actually have?

6:58What is this in fact made of? So we usually start there with a data readiness audit, get the packaging master data into shape so that it can be reported from, which is where our platform, Prezero Spot, in cooperation with Packaging Cockpit, comes into play. And we work back from there, basically, to a roadmap and the declarations of confirmity, which are now mandatory, obviously. But at the other end of the spectrum, you have large FMCG brands with serious in-house packaging teams, right? They don't want a roadmap. They can do that just fine on their own. What they want is a second opinion from someone with no stake in the idea working, right?

7:36Their own people have usually lived with a pack for years and they are invested in it, and we are not. So we are basically a sparing partner. They bring the concept, we put it through sortability trials in our own facilities. We tell them where the concept falls over and so on. Basically, you can think of it like about the same when a CEO rings up McKinsey to have a look at the company structure. He'll sure have his own ideas, but needs them challenged, maybe tweaked, and then put into practice. so underneath both of those that's a point that i think gets underplayed um this is more about picking legal boxes in the pbwr so optimizing packaging design drives down scope three emission and protects margin against rising epr fees and plastic levels at the same time that's part of what makes sustainability make commercial sense rather than just regulatory sense and that is basically the true line for all our work i thought this would be a good time to ask you what kind of insights have you gained so far from from your work at pre-zero packaging or what have some of the learnings been well we see a lot of packaging portfolios and one pattern is remarkably consistent and i think it's worth sharing the biggest single insight is how poor data readiness still is unfortunately and i don't even mean the stragglers even the companies we consider front runners they have significant gaps in the packaging data and for some companies Frankly, they are a complete catastrophe when it comes to packaging data.

9:03To be fair to them, it's usually not their fault. PPWR asks questions that nobody has ever had to ask before. There was no reason to track this, so nobody tracked it. TAKE recyclability suddenly needs composition at a level of detail that was never commercially or legally relevant. What adhesive is on the label? Is it cold wash? Is it hot wash adhesive? The most common answer we get for this is still no idea. Sorry. or the empty space ratio. To calculate it, you need to relate the volume of the product to the volume of the packaging. That sounds trivial, right? But then you go into the IC system landscape, and then you realize there is simply no systematic connection between product data and packaging data.

9:45They sit in different places, maintained by different people, and nobody ever needed to join them up. The reaction is usually, how the heck am I supposed to connect and calculate this? or substance of concern, PFAS being the obvious one. We added what at which step across the value chain as a fundamental question running through several companies in several countries. So, which brings me to the thing that actually trips everyone up. In almost every one of these cases, the answer don't sit within the company that has to do the reporting. They sit within the value chain with the suppliers or with the supplier supplier.

10:20Legal obligation and the information are two different buildings, sometimes on two different continents. So the real realization for us is that the PPWR isn't only a packaging law, because it forces an entire new level of collaboration and data sharing along the value chain. And a lot of what people are struggling with, I think, isn't technical at all. It's that they have to go out and ask a supplier question nobody has ever had to ask them before. So in essence, it's about organization, collaboration and communication as much as it is technical packaging expertise. You've probably already answered my next question, which is that obviously the PPWR has become applicable in August.

11:04And how ready do you think companies are, in your opinion? Well, generally, poor. There's a huge spread, obviously, but some companies have been working on this seriously for three or four years. and they'll probably be fine. Others are only now beginning working out which of the obligations actually apply to them. And that's trouble, right? Taken as a whole, the industry has a very large mountain to climb and the clock is running, I think. So I think it's highly unlikely that everyone will meet all of these targets on time. And I don't think that's controversial. Most people who I talk to working on this, they know it.

11:43And they also tell you, so we'll be at the conference bar, just maybe not always on stage at the sustainable packaging summit or something. But I'd rather be honest and say it plainly than pretend otherwise because it changes how you plan. If you assume full compliance across the board by the deadline, you'll make different decisions than if you just assume what you think is actually coming, which is that for the next few years, compliance breaches and fines are going to be the norm in the industry rather than the exception, unfortunately. In that context, what are some of the particular sticking points and struggles that you have observed companies have?

12:20To me, most often it comes down to two things. One is the org chart, the other is a calendar. And with org charts, I mean silos within companies. Packaging has quietly become or evolved into a strategic function. and most organizations haven't really caught up with that. It used to be things around the product, especially in retail, right? You cared about the product and the packaging came with that. But now it's a compliance object. The structure still has not moved to the degree that reflects that. Marketing still wants a shiny box, procurement still wants the lowest unit price, and the packaging engineer gets handed the result and asked to make it work, often after the fact, which is obviously the most expensive possible moment to do that.

13:05What the PBWR actually forces that packaging, legal data and IT and procurement are aligned from day one rather than sequentially. That's an organizational change. And as we all know, organizational change can be dreadfully slow. But then even the companies that get it right run into the calendar. And that's the bigger one in practice even. Changing a packaging format physically is slow in a way that no amount of urgency fixes. right? You have to source new material, you have to adjust the filling machinery, you have to run stability and shelf-lice tests, and you cannot accelerate a shelf-lice test, right?

13:44And you also have to roll it out across the entire value chain. Now, if you set that against a regulatory timeline, almost all of the crucial details technically in the PPWR arrive through delegated acts. And once those are published, industry generally has about two years, often less, before the requirement bites. Overhauling a packaging portfolio in a two-year window is extremely ambitious, even under ideal conditions. So bottom line is that this timeline allows for absolutely no hesitation, no feet dragging, and no lollygagging, basically. And if you wait for the final comma of every delegated act before you start getting ready, you'll run out of time.

14:23I think that's almost a certainty. And that is the biggest advice that you can give is start now. And yeah, getting a bit more into the details of the PPWR and how you can support that. Obviously, in the first step, the declaration of conformity has become a requirement and there are limits set to substances of concern, including PFAS in food contact packaging. And yeah, looking at this specifically, how can you support companies that struggle with these issues? The mistake I see most often is a company holding a letter from supply and saying, we did not intentionally add PFAS, and then believing that poses a question, which sadly it doesn't.

15:06The standard is intentional addition, it's presence, and PFAS can end up in packaging without any money in the chain ever having made this decision about it and intended for it to be there. So what you actually need is a defensible way of assessing that risk rather than just a piece of paper saying that you had a long, right? The people who work out a great way, I think, to deal with this are our partners at Circular Analytics together with FA Campus Veen. There's also the same people who do the scientific backbone of our digital platform of packaging optimization, PreZeroSpot, which we run in cooperation with Packaging Cockpit, a spin-off at Circular Analytics.

15:44And they built a three-pillar risk matrix for exactly this PFAS problem and published it as a scientific paper. And when the Commission PFAS Task Force recently drafted its recommendations on technical documentation, it cited that matrix explicitly as the method blueprint, right? They said that's how we got to do it. The three pillars, put simply, are straightforward once you see them. The first is intentional use, which is supplier documentation done properly. The second is unintentional presence, where you look at realistic contamination routes, machine lubricants, recycled inputs, things that enter a material without ever appearing on a spec sheet.

16:24And the third one, I think, is what people will find most useful, because it's one that actually makes the problem smaller. You ask whether this material would plausibly need PFAS for a technical function in the first place. For a lot of packaging, the answer is obviously no, and then you can stop. For some, it's a genuine question. That's where your testing budget should go. Overall, to sum it up, I think you could call it an evidence-based probabilistic risk management strategy. What we're doing is we're building that into Prezira Spot and the packaging cockpit. Circle Analytics also offers manual screening support, and they're very good at that.

17:03But the shared end game is to obviously automate and digitalize as much of the process as we can so the administrative burden stays manageable, and you only test what you actually have to test. And yeah, looking at some other milestones within the PPWR, which is obviously rules around recyclability, the use of recycled content and waste reduction. And that is a bit further in the future and is due to become applicable in 2030 and beyond. But obviously, can't wait until then. What steps need to be taken or ideally need to have taken place already for compliance with that, also in the context of some clarity and changing legislation?

17:49Well, to me, the big fundamental question is whether we will have all the materials that are needed to fulfill the obligations that are set to the industry, right? So top of mind is really the mandatory recycled content targets. This is, for me, the most critical milestone on the horizon. and the problem underneath them is simply supply. It's very likely, according to all forecasts, that there will not be enough high-quality recyclate available to meet the quotas, most acute for contact-sensitive applications that aren't PT. And the thing is that scarcity then does what scarcity does. The market is extremely volatile for recyclates.

18:31Geopolitical tensions can push virgin plastics through the roof, and they rise sharply, which actually perversely is good news for recycled demand in the short term because price gap narrows. But at the same time, we're also seeing wave of recycled plastic imports arriving from Asia. So in the general, there's a lot of uncertainty and volatility in recycled markets. And a potential market squeeze should be on the radar of EU policymakers. There are a lot of possible interventions already on the table, chiefly the EU Circular Economy Act, but also country-specific legislation like paragraph 26 of the new German Packaging Act or Accumodulation Models in France, just to name a few.

19:14And in the discussion about how you actually build a functioning European recyclate market, you have plastic levies, credit trading systems for certified recycled content and the idea of what in Germany we call an Ansparphase, which essentially means letting companies bank recyclate the use earlier than 2030 and then counted towards the 2030 targets. So, volatile market and shifting legislation, which makes waiting feel like the prudent thing to do. I think we will need further legal support or policy support to make the recycled markets work. But you cannot also just wait, as I said earlier, right?

19:55It's the one generally fatal mistake available here is to just wait and do nothing because 2030 is less than four years away and nobody goes from zero to a portfolio wide quota overnight. Works physical, as I have said before, you have to sign out whether recycled content actually runs on your line, your product, and works with your shelf life. So you've got to do pilots, and pilots can take years before it tells you anything useful. Then you've got to scale up, and then you have to have secured the material in a market where everyone else is trying to buy the same thing at the same time. So our chief concern is recycled plastics and how the market develops there.

20:32How do you expect the developing legislation to go? Do you expect there to be any changes? Or do you think it will go ahead as planned in the context of, you know, I think there has been some companies who said, oh, can we change this? Can we change that? Can we exchange that deadline? So do you think the PPWR will stay on track with all the regulations? I hope so, because we really promote this piece of legislation and the ambition that it carries. But some ideas to actually put it in practice would certainly help, which is a boost for the reciclated market and keeping the administrative burden to a minimum.

21:12That would really help. And I think it's also be hinted at by legislation that in the delegated acts, we'll see how it can be helped. right it would be fatal if from my point of view if this would to fail as a policy measure at any point so uh certainly not hoping for that but the secondary legislation definitely has to make sense um also concerned gotta be honest a little bit about the timeline of everything and we just had the call for evidence on basically on article 7 on several detailed stipulations with that and they're now calling for evidence, which is great. They should do that. But it's already in the fall and it's supposed to be finished by the end of the year.

21:58So they're now really got to move on to publish all the delegated acts in time. So there's still hope. But I think legislators really have their work cut out for them. But I hope they'll do a great job and find good measures that work in practice. And yeah, to wrap up our conversation today, you've really shared a few tips during the podcast, but I thought it'd be nice to wrap up and have all the tips together in one group. What would be your advice to companies across the packaging value chain to best prepare for the PPWR? Well, I have three points and I already mentioned the first one, so I'll try to be quick about it.

22:42The first one is start now. Don't wait for the final delegated act. Everything physical in the industry takes longer than the window you get. So a bias toward action is the only real protection you have there. Second, already mentioned before, is also get control of the packaging master data. This is crucial. It sounds boring, but it's the one that decides everything else. You can't optimize, report, or make a claim about something that you can't see. So almost every project you run starts there, whether the client expects it or not. Alongside it, try to get the silos down. right packaging engineering procurement legal and marketing working of one cross-functional roadmap rather than just passing the problem down a line third and final one and i'm obviously not neutral here so discount accordingly i guess every company has to decide what it builds itself and what it buys the honest answer is that it depends where you're starting from if you're strong in-house packaging team obviously keep the direction setting with them they know their product better than any external party ever will.

23:43But what you can buy then is a specialist layer underneath data platform, PFAS mythology, physical sortables testing, these type of things. That work gets better and cheaper the more portfolio it runs across. If you don't have that team, and plenty of companies generally don't, be realistic about it. You're not going to build one and get it up to speed before the deadline arrives. And you want someone who does strategy as well as a specialist layer. We do both, which is why I'm saying it, but the logic holds whoever you go to. If I can leave your listeners with one thing, it's this. The PPWR looks like a legal project, but it isn't.

24:19It's a supply chain project. The information that you need sits with your suppliers. The material you need has to be secured in a market that's about to get tight. And the changes you need to take years to physically make. Companies that hand it to the legal department wait find that out around 2029 and in 2029 it's just late to find that out so start now absolutely yes i think that's probably the key takeaway from this podcast um yes thank you very much um alexander it's good to know that there's help available for companies out there to navigate the ppwr and yeah i'm sure this will be the topic of many more conversations in the months and years to come.

24:58If you'd like to hear more from Alexander, make sure that you come to our Sustainable Packaging Summit as well, which takes place in Utrecht in the Netherlands from November 10th till November 12th this year. And yeah, that just leaves me to thank you, Alexander, for being on the podcast today. Thank you for having me and bye-bye. Thanks very much. Goodbye.

25:26Thank you.

25:56Thank you.