Beruflich Dokumente
Kultur Dokumente
Paper prepared for the Fifth Annual Conference of the European Association of
Environmental and Resource Economists - Dublin, 22-24 June 1994
The research work that made this essay possible was carried under the scientific
supervision of Sebastiano Brusco. Data input was shared among myself, Federica
Tagliazucchi, Giuseppe Di Lena and Donata Maccelli. The econometric estimation
rested entirely on Raffaele Miniaci's broad shoulders; German interviews were
carried out by Sabine Geissler. I am deeply indebted to Jim Skea for discussion,
to Paolo Bertossi for encouragement and helpful comments, and to David Ulph for
asking the right questions. I also wish to thank all industry experts and
companies' spokespersons who accepted to help me along the way. I wish to mention
John Beckett and Ruth Steinholtz at Cadbury Beverages Europe, Alberto Bruna at
Henkel, Dieter Bürkle and Jean-Jacques Couchoud at Elf Atochem, Giulio Cainelli
and Fabrizia Forni at ERVET, Professor Vittorio Capecchi at University of Bologna,
Milena Cucconi at Farcon, Robert Dangerfield and Brian Waygood at British Steel
Tinplate, Elie Eliasco at Pechiney, Carlo Guidetti at Tetra Pak, Adriano Landi at
Barilla, Jennifer Lovell at Shell Chemicals, Carlo Montalbetti at COMIECO,
Marcello Pieroni and Dr Iascone at Istituto Italiano dell'Imballaggio, Frau
Rafalski at Tengelmann, Len Randall at Marks&Spencer, Dr Rudi at VIAG, Françoise
Schell at Prisunic, Francesco Sutti at Saffapack, Roberto Tagliaferri at IMA R&D,
Peter White at Procter&Gamble, and above all the exceedingly patient Paolo
Simonazzi at IMA. Correspondence to: Alberto Cottica, Nomisma-Eco&Eco, Strada
Maggiore 29, 40125 >Bologna, Italy Tel. (+39) 051 64 83 309 - Fax (+39) 051 225
352 - E-Mail eco&eco@cineca.it
2 1. 1. Introduction
2.
3.
THE
INNOVATION
IN
The data The model Results Interpreting results: technology and demand effects on
the innovative process Interpreting results: the role of firm size and position
within the filiére Interpreting results: packaging innovation as a superproduct
quest Interpreting results: private optimality of environmental innovation
Interpreting results: the role of regulation Conclusions
REFERENCES
4 1. Introduction
The majority of European large grocery goods companies have now environmental
policy statements on packaging. Reading through them, one has the impression that
packaging is undergoing a process of change, aimed at the reduction of its
environmental impact. The word "sustainability" is used in almost all of these
statements. But is this impression correct? Does the European packaging industry
innovate to reduce the environmental impact of packaging? How does it do it? Is
the process generating "green" innovations any different from that generating
innovations otherwise oriented? Which sort of stimuli set "green" innovative
processes in motion? How do innovating activities respond to environmental
regulation? These questions share a microeconomic focus. This paper reports the
results of an empirical investigation into the microeconomics of environmental
innovation in the European packaging industry. It does so by a rather unusual
research methodology, consisting of a two-stage investigation of the innovation
generating process in the packaging industry, and of the role played by
environmental concerns in it. The first stage consists in round of talks with
industry experts and firms' spokespersons in Germany, the UK, France and Italy,
that highlighted innovation strategies and generated hypothesis regarding the
microeconomics of environmental innovation, i.e. what explains the choice of a
particular firm of steering its technical progress on what Giovanni Dosi would
call an environmentally friendly technological trajectory. The second stage
consists in the setting up of a database of innovative packings on which these
hypothesis were tested. Chapter 1 provides background information on the European
packaging filiére and data sources; Chapter 2 reports on the innovation strategies
adopted by different groups of players within the filiére and spells out a set of
microeconomic hypothesis; Chapter 3 presents an econometric model to test them.
1.
2.
2. the packaging technology sectors (3-7) are more concentrated elsewhere than in
Italy, but still rather dispersed 3. the finished packings and components sector
is very dispersed.
1HH
is computed under the assumption that the market share per employee is a constant
within sectors. This assumption is at least dubious, and is sure not to hold for
sectors 1 (whose concentration is underestimated) and 2 (whose concentration is
overestimated) because of the vertical integration problems highlighted in their
definitions.
7
8
It is important to keep in mind that most firms in the filiére are multiproduct.
We have, however, assigned each of them to only one sector on the basis of the
number of products belonging to each sector manufactured. The flow chart in Figure
1., therefore, should not be taken too literally. Among the four countries,
France, Italy and the UK publish yearly Packaging Directories, which keep track of
most, if not all, firms involved in the filiére. The Italian packaging filiére
(users are not included in the definition of filiére) consists of about 2,200
firms; the British one of about 2,600 firms; the French one, of about 3,000 firms.
These figures are liable to be underestimated, since very small firms, or firms to
whom the production of packaging is marginal, may just not bother to make an entry
into the Directories. In fact, a different estimate [III, 1992] Quotes a figure of
about 3,500 firms for Italy. It is much more difficult to estimate the filiére
turnover in the presence of vertical disintegration. An IFEC estimate based on
calculations done by the European Institutes of Packaging reports the production
of packs to be worth around 76 bln ECU in 1992 [Morino, 1992]. The four countries
account for over three fourths of this figure. The IFEC estimate does not take
into account our sector 4, which normally sells directly to packaging users.
According to a COPAMA estimate, it is worth about a further 6 bln ECU in 1990
[Reis, 1992]. The entire filiére production should therefore amount to around 82
bln ECU, as shown in Table 1. TABLE 1. PRODUCTION OF PACKS AND PACKAGING AND
PACKING MACHINES IN EUROPE.
Packs - 1992 Machines - 1990 Germany France Italy UK Rest of Europe Europe Billion
ECU. 11/3/1994 Sources: IFEC, 16,73 14,45 12,93 12,17 19,77 76,03 Copama. Exchange
2,59 0,50 1,64 0,30 0,89 5,92 rate of
8%
20% Metals
29%
39%
3.
One of the key issues here is the relationship between environmental regulation
and technical progress. As a vast body of literature documents, it is by no means
easy to measure the latter. However, industrial economists have tried to do it by
asking a panel of experts to build lists of innovations, to each of which a string
of variables could be attached. The result is a database of innovations which
lends itself to statistical treatment. This has provided important insight in the
economics of innovation [Townsend et. al. 1981, Scherer 1982]. This work draws on
that tradition. In order to monitor technical progress in the packaging industry,
a database of packaging innovations in Europe in the last 15 years was set up.
Innovative packings competition in the four countries are used as data sources.
Interviews with industry experts and firms' representatives have shown European
competition to be fairly representative of the industry's innovative activity. All
of these countries hold competitions, organized by the national packaging
institutes, for innovative packaging solutions. In addition to these five
competitions (there are two in the UK), there is a fourth one held, at a European
level, by the European Packaging Federation. It is worth it to recall the main
characteristics of each of these data sources. ITALY: OSCAR DELL'IMBALLAGGIO -
Oscar dell'Imballaggio is the oldest of the European packaging competitions: the
first edition was held in 1956 (meaning that the entries were accepted in 1956 and
the prizes were awarded in 1957) and knew almost
11 no discontinuities to the present day. It is organized yearly by Istituto
Italiano per l'Imballaggio. Entry is restricted to Italian firms (that is, to
Italian innovators, whereas users do not have to be Italian). Data have been
obtained from 1981 on. FRANCE: IFEC PRIZE - The Institute Francais pour
l'Emballage et le Conditionnement organizes a yearly competition similar to Oscar
dell'imballaggio, and nearly as old as its Italian counterpart. Its outstanding
features are the large number of prizes awarded each year (40-50) and the good
quality of IFEC's files, from which data can be obtained directly. Data have been
obtained since 1978, with a few discontinuities. UNITED KINGDOM: STARPACK.
Organized yearly by the Institute of Packaging, Starpack is modelled on Oscar
dell'Imballaggio. One major difference is that there are three ranks of awards:
Gold, Silver and Bronze Stars. We have adopted the policy of entering all
innovations, regardless of their rank. Data have been obtained since 1978, with a
few discontinuities. UNITED KINGDOM: INNOVATORS OF THE YEAR. The Institute of
Packaging has been running this competition since 1989. It is structured in a way
roughly similar to Oscar dell'imballaggio, with three differences. The first one
is that there is only one winner for each of the "categories" (initially three,
now five); the second one is that the entry is open to foreign firms as well; the
third one is that, since 1990, a "Packaging and the environment" category was
created. Data regarding all four editions have been gathered. GERMANY:
VERPACKUNGSWETTBEWERB. The RKW organizes a competition structured in a way similar
to the Oscar - IFEC model. It issues a large number of awards per edition (usually
about 40), but it is held only every three years. Data are available for all
editions since 1978. EUROPE: EUROSTAR - Eurostar was established by the European
Packaging Federation only one year after the launch of Oscar dell'Imballaggio, and
explicitly linked to the national competitions: the winners of the former enter
automatically the latter. To avoid double counting, innovations from Germany,
France, the UK and Italy countries have been excluded from the data set. Data are
unusually hard to obtain, and have been gathered for a limited number of editions;
this is due to the fact that the EPF only exists on paper: national associations
take turns in organizing Eurostar. There seems to be an ample consensus that such
competitions are representative of the innovative activities going on in the
packaging filiére. They are important enough for firms to enter, but not important
enough for them to try to bias their outcome. Individual freelance designers, and
even industrial design students, have been known to make winning entries. Also,
since rules typically require that packs be already traded on the mass market
before they can enter (except for the prototypes, which is were individual
designers come in), clever-but-economically-unviable ideas are screened out. The
witnesses the research group has talked to maintain it is reasonably safe to treat
award-winning packs as a proxy of innovation on packaging (but not, for example,
in recycling techniques). 4. A database of innovations in the European packaging
filiére: available information
Each of the about 1,400 innovations awarded with one of these prizes was coded
into a string of data. Available information concerns:
12 * * The year of entry The name of the innovator and of the user of the
innovation, and their countries of location (for innovators, the latter is usually
bounded by regulations internal to each competition: for example, a company has to
be Italian to enter Oscar dell'Imballaggio. Multinationals get round the problem
by entering competitions with their local subsidiaries. When there is no user,
innovations are treated as prototypes. The sector (in the sense given above) to
which the innovator belongs within the filiére. The coding is as in section 1. The
sector in which the pack is to be used, coded with the relevant EUROSTAT three-
digits code The number of employees of both innovators and users. Firms were
grouped in eight classes: up to 10 employees, from 11 to 25, from 26 to 50, from
51 to 100, from 101 to 250, from 251 to 500, from 501 to 1,000 and over 1,000. The
function served by the pack. This may be presentation, transport or both. The
reasons, given by the jury, for the awarding of the prize. They are quite easily
grouped into nine categories.
Use of new materials Packing previously unpacked products Cost reduction
Distributor friendliness User friendliness Product protection Aesthetics Low
environmental impact Others
* * *
* *
The jury can, and often does, give more than one reason for finding the
prizewinning pack innovative. In these cases, all of them were reported, and an
effort was made to extrapolate the main one. VIII. The number and kind of the
materials used to manufacture the pack (labels and inks not included). The
possibilities are wood, aluminium, steel and other metals, paper and cardboard,
polyethylene (henceforth PE), PET, PVC, polystyrene, other plastics and composites
(e.g. tetrapak). IX. The total number of recorded innovations presented by the
same industrial group entering this particular innovation. The choice of looking
at groups, rather than single firms, is due to the centralization of some R&D
facilities and to the frequent innovative spillovers between firms within the same
group.
13
2.
5.
THE
Interview format
The reduction of the environmental impact of packaging can happen by means of very
different technical innovation strategies. This section illustrates them,
highlighting their similarities and differences; its purpose is to generate a
range of hypotheses about the microeconomics of environmental innovation, to be
tested for through the use of econometric techniques. It consists of anecdotal
evidence, gathered by a series of discussions held with industry experts and
companies spokespersons in the four countries, which were carried out mostly in
the period January-March 1994. These talks were aimed at finding evidence on the
state-of-the-art of environmental innovation in packaging rather than sketching a
picture of the general trend; therefore, we concentrated on companies known for
being particularly sensitive to environmental concerns. Most of them are members
on environment-oriented trade associations, such as ERRA or INCEPT. Respondents
were asked to confirm or challenge, supporting their response with examples, the
following two statements, generated by earlier statistical treatment of the data
on Italian innovations alone: 1. environmental innovation, like packaging
innovation in general, is largely done by manufacturers of finished packings and
components. These, however, work in very close connection with their customers,
who identify problems and priorities; it is almost as if packings manufacturers
were acting as R&D facilities for packaging fillers. environmental concerns and
regulatory recycling targets for packaging are not inducing any significant shift
from materials that are difficult to recycle (plastics, composites) to materials
that are easily recyclable (glass, metals, paper).
2.
Source reduction can take place in either of two ways. One is the elimination of
what industry experts are beginning to call overpacking, layers of packaging
which, while adding to the service content of the pack, are not strictly necessary
to its delivering a satisfactory performance. Overpacking is, of course, a totally
subjective concept. One example of elimination of overpacking comes from the
experience of the Italian food producer Barilla. Its successful minicakes, a
relatively expensive and high-margin range of products (Dolcetti), used to be
conditioned one by one in small rigid paper baskets, which could be stacked inside
a plastic sack. The paper baskets system ensures a better protection of the
product, and it makes it easier to extract one minicake from the pack.
Nevertheless, they were eliminated: now minicakes are simply conditioned into the
sack. Barilla integrates the R&D on packaging into an 11-strong research unit, and
designed the innovation itself. About 12% of the research unit's time is devoted
to the reduction of the environmental impact of packaging. Of the four under
investigation, Germany is probably the country where overpacking is most
counterproductive in marketing terms. What's more, the implementation of the Dual
System has imposed an additional cost on all packs earlier than elsewhere. The
result of this is a richer array of innovations in the sense of overpacking
abatement. It is worth it to report four examples from different industries. *
Bottles of wine from Asbach & Co. Weinbrennerei are no longer wrapped in
transparent polypropylene foil, which gives the bottle a more glossy appearance.
This saves about 40 tons of foil a year. The cosmetics producer Croldino Schneider
manufactures a hand-washing cream which comes in plastic tubes. The tube used to
come into a cardboard box for presentation and space-fractionating purposes, which
has now been removed. About two tons of cardboard a year have been saved. Schöller
Lebensmittel & Co. produces ice cream on an industrial basis. Ice cream is
conditioned in polystyrene thermal boxes, which used then to be packaged in
cardboard boxes for presentation purposes. The cardboard boxes have now gone, and
the presentation function is taken care of by paper labels stuck directly on the
polystyrene box. Hans Warholtz Konserven's sardines are conditioned into tinplate
steel cans; they too used to come in presentation cardboard boxes. Now the
information about the product is printed on the tin, and the cardboard box has
been removed.
Another path to source reduction is what goes under the name of lightweighting. It
consists in redesigning the pack so that it delivers the same performance with
less material. From a merely technical point of view, lightweighting is more
interesting than elimination of overpacking, because it involves "real" re-
engineering of the pack, and therefore a comparison of R&D costs and expected
benefits. The raw materials side of lightweighting is called downgauging; this
means producing a grade of a polymer which will yield good properties even when
extruded to a very thin layer. This innovation strategy is, of course, a no-regret
one; a lighter pack costs less money than a heavier one, regardless of what it
does to the environment (in fact, if the environmental problems caused by
packaging were thought to be waste generation only, it could successfully be
contended that lightweighting does not do much good to the environment, because it
does not necessarily reduce the volume of packaging waste). This encouraged
lightweighting even before the environment became a core issue in the political
agenda of European governments. Figure 4 depicts the decrease in body weight of a
representative 0.44 l steel beverage can. It is immediate to see that the 30%
reduction in weight did not come in a single wave, but by means of several
incremental innovations dating back to 1979. Environmental awareness of consumers
has sped up the process; the introduction in various forms, of packaging levies
throughout Europe are expected to speed it up further. FIGURE 4 - WEIGHT OF A 0.44
L STEEL BEVERAGE CAN OVER TIME
An example of lightweighting from the soft drinks industry comes from the Japanese
firm Hosokawa, that sells drinks and diet integrators for athletes. These drinks
come in flexible packs: a "specialized supplier" sort of relationship between the
Japanese user and two Italian societies, Guala Pack (a packaging manufacturer) and
Safta (a conditioning technology producer), has led to the development of
CheerPack, a flexible container for liquid whose main feature is that of being
confortable to carry (it adapts its shape) and easily reclosable. These are useful
features to athletes, who take a sip at a time while, for example, taking part in
a bicycle race. CheerPack weighs about 65% less than earlier soft drinks flexible
packs. It won an Oscar dell'imballaggio in 1990. Detergent producers have taken
this concept one step further, and lightweighted their product as well as their
packs. Procter&Gamble is probably the single company that pursues lightweighting
most vigorously; it is worth recalling the Ariel Ultra story. Ariel is a laundry
detergent. In 1989, P&G introduced Ariel Ultra, the first compact detergent in
Europe. The formulation had been changed; the detergent could now be a effective
with a smaller amount of powder, which was placed directly inside the washing-
machine drum. As a result of this, Ultra, like all compacts, uses less packaging
per load washed than non-compacts. P&G calculates that, on Ariel Ultra alone, more
than 12,500 tons of packaging material have been saved throughout Europe. The move
was quickly imitated by competitors, and compact detergents enjoy now a share
ranging from 20 to 60%, depending on the country. It is estimated that the overall
savings on packaging materials in Europe since the introduction of compacts amount
to 800,000 tonnes approximately. Notice that this involved no packaging innovation
at all. The second step in the lightweighting of Ariel was the introduction, in
1992, of a refill, which comes in a minimal package similar to a sugar bag. Once
home, the consumer pours the detergent in the carton (which lasts 4-5 refills on
average) and disposes of the refill bag. This saves a further 50% of packaging
material with respect to the compact carton. Again, only fine tuning of the pack
was needed, so innovative activities were limited to a minimum; again, the move
was quickly imitated by all major European detergents producer. With a stronger
innovative effort, Henkel produced a lightweight pack for liquid detergents,
essentially a flexible pack with a cardboard reinforcement to hold it standing.
The refill philosophy is being enthusiastically adopted by detergent
manufacturers. Refills of liquid detergents, however, posed a technical problem,
that of finding an ultra-light packaging solution that was also waterproof. P&G's
Dash 3 Ultra is an example. In this case, the answer was found in laminate stand-
up pouches (the stand-
17 up feature is necessary to optimize exploitation of shelf space in
supermarkets), a 20year-old French invention that had hitherto found very limited
application. The expertize for manufacturing pouches from laminate was held by a
French converter called Soplaril, a subsidiary of the plastic giant Elf Atochem.
P&G asked Soplaril to develop the pouch; Soplaril, then, worked together with Elf
Atochem for the fine tuning of the laminate, almost a textbook example of
specialized supplier relationship. Soplaril is now enjoying a rapid growth due to
the rediscovery of the stand-up pouch on environmental grounds. The savings of
packaging material are, in this case, even more significant: a pouch weighs 70%
less than a plastic bottle. 8. Strategies for reducing the environmental impact of
packaging: reusing
In principle, containers can be used several times, thus lowering the amount of
packaging waste produced per unit of product packaged. In fact, quite a lot of
transport packaging (pallets) and some primary packaging (typically, beverage
bottles) are recovered for re-use on a regular basis. Switching to re-usable
containers, however, can be very difficult, because it involves setting up a
product-specific recovery system. Prize-winning innovations of re-usable
containers in the database are all transport packs but one. Despite such
difficulties, re-use of primary packaging is being contemplated by the beverage
industry. Plastic manufacturers, and notably ICI, are undertaking highly
structured and very expensive R&D projects about what goes under the name of
"flavouring" to make plastic bottles re-usable. The technical problem with this is
twofold. Firstly, bottles are washed with very hot water before re-use, and most
plastics will melt or degrade. Secondly, since both plastics and flavours of soft
drinks are oil-based, beverage and bottle interact chemically, and the latter
retains the taste of the former. In fact, contact with some plastics can alter
substantially the taste of some beverages; to prevent these problems, the beverage
industry works with a flavourmaterial compatibility matrix. Glass bottles, on the
other hand, are perfectly reusable because of a relatively high melting point and
chemical inertness. A first success was obtained by Continental PET, who produced
a re-usable PET bottle for Coca-Cola: however, it won't work with less strong-
tasting drinks, like water. 9. Strategies for reducing the environmental impact of
packaging: using recycled material
Of particular interest are those innovations that imply a change in the raw
materials from which the packing is made. This is the only innovation strategy
that is not aimed to any one waste management option; it is generally, but not
always, directed to increasing the recyclability of the pack. "Recyclability" is,
in the packaging industry, a fairly abstract concept; which has nothing to do with
the existence of collection, sorting and recycling systems. For example, single
material plastic packs are marketed as easily recyclable; what that means is that,
if recycling facilities and a separate collection system for that particular
plastic existed, the pack could all go into the same polypropylene or PET bin. The
reason why we are interested in looking at this particular kind of innovation is
that packaging regulation, especially in Germany, is now rearranging the set of
incentives to use some raw materials rather than other. The principle is to
collect a sort of levy on packs, that is then used to pay collection, sorting and
recycling costs. Table 5 reports the set of prices that packaging users selling
their products in Germany have to pay to participate in the Duales System. TABLE 5
- DSD TARIFFS PER KILO OF RAW MATERIAL
Material Glass Paper and cardboard Tin Aluminium Plastics Cardboard composites
Other composites Natural materials Source: DSD, March 1994
It must be noted, however, that the levies are expressed by weight, which
mitigates the disadvantage for low-weight plastics.
3The
move out of PVC has reached innovation as well. A Hausman test comparing
innovative packs invented before 1992 with those invented in 1992 show that the
latter use significantly less PVC.
20 similar to the standard PVC ones, and started feeding it polypropylene. Some of
the problems they met with could be solved by modifying the machine; for example,
it turned out that pre-heating polypropylene before thermally shaping it improved
greatly the performance of the machine. Other problems were solved by means of
fine-tuning the grade of the polymer. The process was a trial-and-error one, where
both fine mechanics and fine chemistry technologies were used to get round
obstacles, and fed into each other. The results of the process were a new blister-
making machine that could work with polypropylene and a new grade of propylene to
feed to it. In order to increase the recyclability of blisters, German companies
are now working on the allpropylene blister, which is already employed by some
manufacturers. It is a kind of blister which replaced the aluminium foil with an
easy-to-tear polypropylene foil. Another example of recyclability-improving
material shift is EcoTop, a steel can top developed by British Steel Tinplate.
Cans are made of two parts: bodies, which undergo a blow-moulding process, and
tops. At the moment, about a half of the bodies are made of steel, the other half
of aluminium; on the contrary, tops are all aluminium made because of technical
difficulties in producing steel tops with a satisfactory performance. EcoTop has
no ring to pull, but two "buttons" to push down and fond inside the can, one to
pour the drink, the other for air to flow in as the drink is pulled. It doesn't
perform as smoothly as traditional tops, but it can be marketed as very
environmentally friendly because of the lower energy intensity of steel with
respect to aluminium and because of the very easy recyclability of all-steel cans,
made possible by the new top. Steel can be pulled out of the waste stream by
magnetic extraction and sent back to the furnace for re-melting. British Steel
feels the environment is now the single most important ground for competition to
producers of raw materials for packaging. 11. Strategies for reducing the
environmental impact of packaging: developing recycling technologies
Some materials, like plastics and composites, are difficult to recycle; of others,
recyclability, while already good, can still be improved. In order to reduce the
environmental impact of packaging, then, some firms work on the development of
better, cheaper recyling technologies. It is mostly raw material manufacturers,
who have the necessary expertise and feel the green movement's pressure more than
firms elsewhere in the filiére, engaging themselves in such efforts. Recycling has
become a very important public relation issue for highly visible multinational
companies, who fund pilot schemes and produce literature. Especially active in
this field are plastics producers: APME, the association of plastic manufacturers
in Europe, lists 109 plastic recycling schemes going on. Nevertheless, technical
progress in this direction has not so far been impressive. Shell claims to be
doing quite a lot of R&D on what goes under the name of "feedstock recycling". The
idea is to work waste plastics into an oily feedstream suitable for cofeeding to
existing petrochemical or refinery processes, such as gasification, distillation
or hydrogenation into more refined processes. This option features a higher public
acceptability than waste-to-energy (the additional plants would be seen as part of
existing refineries), and a better energy balance, as hydrocarbon molecules are
not destroyed. Moreover, feedstock equipment will be easy to integrate into
existing refineries or petrochemical plants, thereby minimizing the capital cost
of the operation and exploiting economies of scale in full. However, such plants
are large and very far from each other; this implies such schemes would have high
transportation costs. Fully developed feedstock recycling technology is not yet
available. Elf Atochem is heavily involved in Valorplast, the French plastic
recycling consortium. They follow a line of research to improve plastics sorting
technologies; Valorplast will soon be starting a sorting plant which employs an
Italian X-ray scanning technology to
21 separate PVC from PET, and tests are being run on a different line which
separates PE as well. British Steel Tinplate declared that steel producers are
constantly working for the improvement of their recycling technologies. To them,
it is not a public relation issue; scrap steel is a strategic resource for the
industry, since all grades of steel employ a relatively high proportion of scrap
and some, like stainless steel, are made of 99% recycled material. A tin-
separating treatment to recycle the layer of tin that covers scrap tinplate steel
was also developed. Tetra Pak is engaged in several R&D projects to recycle
cardboard composites. It is trying to develop technologies that recycle waste
composite into items such as pallet spacers, thermal insulating material and even
shoe sole reinforcements, as well as investigating repulping techniques. However,
it is dubious that these products can find a market in the short term. Finally,
Marks and Spencer funded the development of a technology for the recycling of PVC.
It is not being used, because the company finds it is too expensive. 12. A set of
hypothesis on the microeconomics of environmental innovation in packaging
The interviews show that the packaging filiére is simultaneously pursuing several
strategies in order to reduce the environmental impact of packaging. Often,
different strategies are pursued within the same company, as Table 6 shows. TABLE
6
STRATEGIES
Strategy Companies
EXAMPLES
OF
ENVIRONMENTAL
INNOVATION
Tengelmann, Barilla, German companies Henkel, P&G, Tetra Pak, Barilla, M&S,
Cadbury, British Steel Coca Cola, ICI P&G, Henkel IMA, Barilla, M&S, Henkel,
British Steel, P&G, Cadbury, Tengelmann Tetra Pak, Shell, British Steel, Elf
Atochem
3.
13.
THE
INNOVATION
IN
The data
As pointed out in chapter 1, the research team collected 1407 packaging innovation
awarded with prizes in the countries being con sidered or at the European level.
Annexe 1 contains the main descriptive statistics; this section contains a brief
outline of the characteristics of this population of innovative packs. About 100-
120 prizes were awarded each year, from 1978 to 1993 (relative to entries dated
from 1977 to 1992). The number of prizewinning packs making environmental claim
has been constantly on the rise, from 1-2 in the late 70s to around 15 in the late
80s, reaching a maximum of 30 in 1992. Medium-sized and large firms are the
largest contributors to innovations.Within the filiére, almost all innovators
belong to the finished packings and component industry. The second most innovative
sector is the raw materials one which, however, has produced no environmental
innovations. Among the industries using innovative packs, the most important ones
are obviously the grocery goods ones; the food industry is the single largest
contributor, followed by the detergent and the beverage industry. The detergent
industry is the single largest contributor to environmental innovation. The
materials most frequently used are plastics (PE being the most popular one), paper
and cardboard, steel, glass and aluminium, in this order. The materials pattern of
environmental innovation is roughly the same as that of non-environmental
innovation. 14. The model
1 + ex 1 + e x 3 + e x 4 + e x
where prob(1) stands for the probability that CHOICE=1 and 1 for the set of
coefficients attached to the vector x of explanatory variables when CHOICE=1.
CHOICE=2 is chosen as the base alternative.
26 Regressors are divided into four groups. The first one, from ITALY to UK refers
obviously to the country of the innovator; the second one, FOOD to SERVICES,
refers to the industries using innovative packs; the third one, from ALUMINIUM to
PVC + OTHER PL. to the materials used; the fourth one, composed of PRESENTATION
and BOTH, to the function performed. All these variables are dummies; NMATERIALS,
the number of materials used, INNUMBER, the total number of innovation done by the
innovative firm (at the group level), and TIME (a variable set to 1 in year 1978,
2 in 1979 and so on) are continuous variables. Table 8 summarizes the meaning of
setting all dummies of the same groups, to zero, i.e. which countries, industries,
materials and function are incorporated within the constant term. TABLE 8 -
COMPOSITION OF THE CONSTANT TERM IN COUNTRY Country of the innovative firm
Industry in which the pack is used All but D, F, UK, I, NL Agriculture, clothes
and textile, petrochemical, pharmaceutical, hardware, mechanics, automobiles,
miscellaneous Paper and cardboard, wood Transport
Materials Functions
This section is devoted to the presentation of the multiple choice model section
13 has recognized the need for. Estimates for parameters and tests are simply
presented; any attempt of interpretation is left to the following sections. In
fact, this section can be skipped altogether by readers who do not find
econometrics exciting. Table 9 summarizes the values of the parameter computed
under the specification of the model we call COUNTRY, for reasons that will soon
become clear. Regressors regarding firm size and position within the filiére are
dropped; this allows the model to run on 1337 observations, thus recovering the
possibility of adding regressors regarding the country of the innovator.
Coefficients that are significant at the 90% significance level are marked by an
asterisk; coefficients that are significant at the 95% significance level by two
asterisks. This notation will be held on to throughout the rest of the paper.
27
Two separate sets of tests were run on the parameters characterizing COUNTRY. The
first one concerns the joint significance of all parameters for each value of
CHOICE. In particular, four F-tests were run on the null hypothesis that
i
i = 2,3,4,5
= 3 = 4 = 5 =
2
1 1 1 1
The second set of tests concern the joint significance of groups of parameters
across all different values of CHOICE. The null hypothesis is that, for each group
j of parameters
1 j
2 j
3 j
4 j
5 j
=0
Table 11 summarizes the results. TABLE 11 - COUNTRY: TESTING FOR ZERO VALUE OF
GROUPS OF PARAMETERS ACROSS VALUES OF CHOICE Country Industry in which the pack is
used Materials Functions NMATERIALS INNUMBER TIME KO** KO** KO ** KO ** KO ** OK
KO**
2.
The results do not seem to provide strong support for a consumer-driven theory of
environmental innovation in packaging. A glance at table 9 shows that the
coefficient on PRESENTATION packaging is indeed positive, but not statistically
significant, whereas the coefficient on the dummy representing packings that serve
both a presentation and a transport purpose (BOTH) is negative (recall that the
base is transport packaging). The parallel we tried to draw with aesthetic
improvements is rejected by the data; when CHOICE=4 the coefficients on
PRESENTATION and BOTH are positive, high and significant at the 99% significance
level. Grocery good industries do not seem to be specializing in environmental
innovation either. Coefficients on FOOD, BEVERAGES and DETERGENTS are positive as
expected, but the one on DAIRY is unexpectedly negative. None is significant at
the 90% (nor, indeed, at the 80%) level . Again, aesthetic innovation behaves
differently; all coefficients on grocery goods industries are positive, and all
but DAIRY are significant at the 95% level. Coefficients on other industries are
negative. This regularity seems to point to an important role played by pack
design in determining the purchase decision in supermarkets; obviously the pack's
environmental friendliness is not as effective in this respect. If demand-pull
factors do not seem to influence environmental innovation any differently than
production cost reduction innovation, it is worth it to test for technology-push
effects. In the innovation database, the raw materials variables can be
interpreted as innovation opportunity variables; comparing their coefficients when
CHOICE=1 should give an idea of the extent to which some materials specialize in
green innovation more than others. With respect to the constant term, which
incorporates paper, cardboard and wood, the coefficient estimates on GLASS, PE and
PET are positive; those on ALUMINIUM,
30 other METALS, PS, COMPOSITES and PVC+OTHER PLastics are negative. None is
statistically significant at the 90% level, although the coefficient on PET, a
plastic that has a reputation for being environmentally friendly, is significant
at the 85% level. The conclusion is that the environmental innovation
opportunities offered by packaging materials do not seem to be radically different
from their production cost reduction opportunity. These results do not, by
themselves, allow the researcher to label environmental innovation in packaging as
demand-pull, nor as technology-push. In fact, the whole database only allows to
draw comparisons between innovations along different trajectories, whereas
innovation economics has concentrated mostly on the problem of whether to
innovate. Data do, however, yield some insight into the matter. Nonstatistical
evidence for the demand-pull nature of at least some environmental innovation is
quite robust, and nowhere contradicted by data. Nonsignificance of coefficient
estimates on industry variables certainly does not, by itself, deny it. The
detergent industry is an example of an industry where firms anticipate
environmental regulation in order to compete for market share. The fact that the
coefficient estimate on DETERGENTS is not highly significant in the model should
not come as a surprise: in a market where price elasticity of demand is high,
innovation that abates production costs also provides innovative firms with a
weapon for market share competition. What the model does, then, is simply
comparing two different trajectories along which firms face the same sort of
incentives. The nonsignificance of the coefficient estimate on PRESENTATION cannot
deny that some environmental innovation is demand-pull either; what it does say is
that there is at least some environmental innovation, that done on transport
packaging, that isn't demand-pull. This, together with the significance of the
coefficient estimate on TEMPO, can be interpreted as an indirect proof of the
existence of a regulation effect. On the other hand, it must be kept in mind that
most environmental innovation, as most packaging innovation in general, is done on
presentation packaging; transport packaging (the "certainly not demand-pull"
component) only accounts for 12% of total green innovation. 17. Interpreting
results: the role of firm size and position within the filiére
Regressors are now divided into five groups. The first one, from FOOD to SERVICES,
refers to the industries using innovative packs; the second one, from ALUMINIUM to
PVC + OTHER PL. to the materials used; the third one, composed of PRESENTATION and
BOTH, to the function performed; the fourth one, composed of EMP 100-250 and EMP >
250, to the number of employees; the fifth one, from PACKS to USER, refer to the
position of the innovator within the filiére, as defined in chapter 1. As with
COUNTRY, all these variables are dummies; NMATERIALS, the number of materials
used, and INNUMBER, the number of innovation done by the same firm (at the group
level) as the innovative firm, are continuous variables.
32 Table 13 summarizes the meaning of setting all dummies of the same groups to
zero, i.e. which industries, materials, function, firm size and position within
the filiére are incorporated within the constant term.
TABLE 13 - COMPOSITION OF THE CONSTANT TERM IN SIZE Industry in which the pack is
used Agriculture, clothes and textile, petrochemical, pharmaceutical, hardware,
mechanics, automobiles, miscellaneous Paper and cardboard, wood Transport 1-100
Raw materials, services
Two separate sets of tests were run on the parameters characterizing SIZE. The
first one concerns the joint significance of all parameters for each value of
CHOICE. In particular, four F-tests were run on the null hypothesis that
i
i = 2,3,4,5
= 2 = 3 = 4 =
5
1 1 1 1
OK KO** OK KO*
2 j
3 j
4 j
5 j
=0
Table 15 summarizes the results. TABLE 15 - SIZE: TESTING FOR ZERO VALUE OF GROUPS
OF PARAMETERS ACROSS VALUES OF CHOICE Industry in which the pack is used Materials
Functions Number of employees Position within the filiére NMATERIALS INNUMBER TIME
OK KO * KO ** OK OK KO ** OK OK
A glance at table 12 shows that none of the coefficient estimates on firm size
(EMP 100-250 for firms with 100 to 250 employees and EMP > 250 for firms with more
than 250 employees) or position within the filiére (PACKS for sector 2, MACHINES
for sectors 4 and 5, USER for packaging users) is significant. Table 15 confirms
that this is true across all values of CHOICE, and not only for environmental
innovation. These results, combined with the nonquantitative evidence presented
above, allow to draw quite strong a conclusion; the packaging filiére tackles and
solves all innovation problems in the same way. The specialized supplier approach
to innovation, as explained in chapter 2, is to build long-term alliances of
packaging users and packaging manufacturers, where the latter solve technical
problems chosen by the former. Interviews suggest that, as environmental concerns
became more important, the very same user-supplier teams that had successfully
innovated along other technological trajectories applied their expertise to the
new problem. Data are fully compatible with the existence of a specialized
supplier relationship: well above 50% of both environmental and non-environmental
innovation is done by firms with less than 500 employees; about 15% by firms with
less than 100. Figure 5 reports the distribution by class of employees of the
innovator referred to environmental and non-environmental innovations.
34
FIGURE
50,00 45,00 40,00 35,00 30,00 25,00 20,00 15,00 10,00 5,00 0,00 1-25 26-100 101-
500 > 500 ENV NON-ENV
A reasonable interpretation for the coefficient estimates and figure 5 is that the
economies of scale in innovative activities are very similar in environmental
innovation and non-environmental innovations, and that they are not so strong as
to prevent small firms to do some innovation. 18. Interpreting results: packaging
innovation as a superproduct quest
The results discussed so far suggest that the profiles of the typical
environmental and non-environmental innovators coincide. Variables representing
the industry using innovations, materials used, innovator size, innovator position
within the packaging filiére do not seem to make any significant contribution to
explaining the innovator's decision to do an environmental innovation rather than
an innovation of another kind. The issue of whether R&D competition in the
packaging filiére resembles more a quest for specialization or one for a
superproduct, however, has not been addressed. Tables 16 and 17 present a list of
the most innovative firms, respectively in nonenvironmental and in environmental
innovation. They show that some leading firms in innovation in general also lead
in environmental innovation.
35
Env 3 0 2 0 3 1 2 3 0 0 4 0 0 0
Non-Env 47 45 33 26 18 18 17 12 12 12 11 10 10 10
Env 4 4 3 3 3 2 2 2 2 2 2 2 2 2
Non-Env 11 0 47 18 12 33 17 5 5 3 3 2 0 0
The environment has become an important issue for packaging, which contributes
greatly to the generation of domestic waste. The appearance of a share of
consumers willing to buy low-environmental impact goods on the one hand, and high
political visibility on the other hand are the two main sources of incentives to
industry to innovate their packaging along an environmentally friendly
technological trajectory. Despite the enlightened wing of industry's claims that
"pollution prevention pays", the latter source of incentives seems to have been
more important than the former, except perhaps in Germany. Environmental
innovation happens by applying to the reduction of the environmental impact of
packaging the same across-filiére innovative teams that have done (and still do)
non-environmental innovation in the past. By virtue of a large population of
innovative firms, of a relative easiness of imitation, and of an extremely
flexible technological paradigm, a relatively large number of environmental
innovations were launched on the European market in the period considered.
However, despite some successes, there is a feeling, widespread among politicians
and environmentalists, that these problems are not being tackled aggressively
enough. Industry experts remark that there is no commonly accepted way to assess
the overall environmental impact of packaging, and that there is not even
consensus on the most environmentally friendly packaging waste options. This
contributes greatly to divert the innovative effort from environmental innovation,
except for "no-regret" innovation strategies like lightweighting. It is not by
chance that our models find a close resemblance between innovation on production
cost reduction and environmental innovation. Environmental policy can play a key
role as, in Rosenberg's words, a focusing device; it can give (and it often has)
the industry's technological expertise a direction. Some firms, for example, are
already modelling their packaging policy on the "ladder" of waste management
option adopted by the EU Packaging Directive draft, before the Directive is even
approved. The debate on the environmental policy on packaging in Europe,
especially when it comes to levying collection and reprocessing fees, has often
been in terms of static allocative efficiency; one wonders whether the "signalling
impact" of environmental regulation on the directions of technical problems
shouldn't be considered more carefully. The "new wave" of environmental policy
making in Europe, leading to the setting up of consortia for recycling packaging
waste, is too recent to have influenced the data prersented above. However,
applying the same research methodology used here to innovative packings presented
after these consortia started to operate will enable researchers to evaluate the
impact of this kind of environmental policy on innovative activities.
38