How Packaging Firms Are Getting Ahead of Supply Chain Regulations 

The international paper and packaging industry has always been and remains marked by European influence. However, developments over the last few months suggest this may not continue.  

Christoph Leydolt spoke with Der Standard, one of Austria’s leading media outlets, about how packaging companies are proactively adapting to supply chain regulations to stay ahead of the curve.

The future could see countries outside the EU gain the upper hand, at least regarding company headquarters. When speaking with industry experts about upcoming challenges, they emphasize not only rising cost pressures and the need to be close to customers but also over-regulation, especially the EU Due Diligence Regulations. 

This is confirmed by Christoph Leydolt, Partner at Stanton Chase Vienna. Stanton Chase is a global company specializing in executive search and advisory services. After holding several positions in finance at various companies, Leydolt joined Stanton Chase last autumn. There he holds the position of “Global Subsector Leader, Pulp, Paper, and Packaging” due to his close connection with that industry. His insights are accordingly deep. 

“These regulations hurt the industry,” Leydolt tells “The Standard,” referring to the Due Diligence Regulations. “Being in favor of human rights and always considering environmental protection is beyond dispute. For European companies, however, this creates a substantial competitive disadvantage, especially outside the EU.” 

The Due Diligence Regulations, which came into effect last summer, oblige companies to ensure environmental and human rights standards throughout their entire supply chain. For the packaging sector, this means not just monitoring and documenting its own production processes but also those of its contractors and raw material suppliers—and not just in the EU, but everywhere. 

“If a European company wants to do business in Latin America, for example, it must also fulfill EU conditions there. A company headquartered outside the EU doesn’t have to do that. This is a problem, especially regarding China and the US,” says Leydolt. 

Closeness to Customers

The packaging industry, which by nature wants and needs to be close to the customer, is reacting in its own way. By increasingly merging and gaining size and heft in procurement, companies can counter the rising pressure of energy, material, and payroll costs while also trying to free themselves as much as possible from EU regulations. “Within a year, three giant corporations have emerged, one of them becoming Smurfit Westrock,” says Leydolt. “They all have one thing in common: their headquarters are outside the EU.” 

Innovation, speed, and adaptability are now critical success factors in the packaging industry. On supermarket shelves, packaging often influences consumer choice more than the actual product inside. Companies that fail to keep up with trends quickly lose market share. Major clients like Nestlé, with their global production networks, require exceptionally responsive service and support. This has transformed the skill set needed by employees in procurement, sales, and R&D: they must now combine industry knowledge, quick thinking, market intelligence, and collaborative skills. 

Recycling Quotas

The industry trend is moving away from plastic toward paper packaging. According to Leydolt, this poses major challenges, especially for flexible and rigid packaging producers, regarding the compostability and recyclability of materials. This, again, relates to EU regulations and prescribed recycling quotas, which are being incrementally increased. 

Accordingly, the industry places greater focus on recycling. “Many paper companies also make packaging, which they recycle to turn into paper again,” Leydolt says. “Since the EU promotes this circular economy, many have jumped on the bandwagon.” Those who produce paper from virgin fiber are at a disadvantage compared to those using recycled paper. 

Concessions

The pandemic has reduced the willingness of senior executives in the paper and packaging sector to relocate. These companies typically operate in remote locations away from urban centers, prioritizing good transportation links and minimizing labor and energy costs. During COVID, many employees left for positions with equipment manufacturers that offered remote work options, eliminating daily commutes to production facilities. In response, packaging companies have had to adopt more flexible work arrangements to remain competitive. They’re increasingly relying on international teams to manage investments and technology development. 

Read the original German article in Der Standard by Günther Strobl.