The SAP Solution Transforming How Businesses Navigate Plastic Regulations

Regulations regarding plastic waste are expanding at a dizzying pace. The United Kingdom established plastic taxes in 2022, followed by Spain in 2023. The United States is intensifying its regulatory efforts, with more than 100 extended producer responsibility (EPR) laws implemented to date.

Meanwhile, in its quest to make all packaging reusable or recyclable by 2030, the United Nations is preparing to launch a plastic treaty in 2024. At the same time, businesses themselves are furthering their commitment to sustainable practices through voluntary agreements, such as those proposed by the Ellen MacArthur Foundation and the United Nations Environment Program (UNEP).

Consumers are taking up the issue as well. According to UNEP, 91% of consumers express concern over plastic waste. A study by Trivium Packaging and Boston Consulting Group indicates that 73% are willing to spend more for eco-friendly packaging.

Compliance with these new regulations can be a challenging and expensive task for businesses of all sizes. Many smaller to mid-range organizations lack in-house expertise on these issues, often resulting in either rudimentary monitoring or expensive outsourcing. Larger companies may find the immense scale of the task daunting and default to costly shortcuts.

“With the complexity that they face and the sheer volume of business they have across multiple products and multiple countries, many organizations tend to be conservative to avoid fines,” explains Darren West, product expert for Circular Economy Solutions at SAP. “As a result, they will more or less approximate what taxes they need to pay, and overestimate to add in some contingency.”

Driving Up Accuracy, Driving Down Costs

For consumer goods giant Henkel, the quest for an effective solution to its plastic waste challenge began in its tax department. Triggered by the advent of plastic taxes across the UK and EU, Henkel’s tax experts embarked on a project aimed at addressing compliance from a fiscal perspective.

On the IT side, the team was immediately faced with some significant hurdles. First, to comply with new regulations and avoid penalties, it needed a system that could monitor, measure, and report its products’ plastic data. Amidst a limited market of solutions, finding the right tool for its needs was no easy task – one made more difficult due to the newness of the regulations. And it needed to aggregate and organize the essential master data for accurate reporting without excessively complicating or inflating the cost of its IT infrastructure.

SAP Responsible Design and Production was born out of a desire for a more dynamic approach to plastic waste. The solution can supply teams with a streamlined, granular data management system to help facilitate the monitoring, measuring, and reporting related to the environmental impact of production and packaging.

Today, the SAP Responsible Design and Production solution assists operations such as Henkel’s in navigating the labyrinth of product and packaging composition. Handling the details of primary, secondary, and tertiary packaging, as well as transport packaging throughout the supply chain, requires a meticulous approach. The solution offers a digital model of the larger packaging and product landscape, helping facilitate a thorough and accurate impact analysis.

To encapsulate the complexity of the packaging process, the solution can capture precise data on material flows and circularity attributes. It can also assist teams in recording the weights, volumes, and shipment information as well as important details regarding recycled content, import/export information, and the various packaging components. This precision is crucial for calculating plastic taxes as well as EPR fees, which demand exceptional accuracy and knowledge of detailed material flows within a country and across borders.

In the future, SAP plans to extend the solution to help track and monitor the recyclability, reusability, and embedded CO2 of various materials. Such data is essential for organizations seeking to comprehend their scope 3 emissions across their entire packaging portfolio and to make their packaging more sustainable.

The solution helps provide results that businesses can stand behind, saving time and money and decreasing complexity – particularly when it comes to new markets. If an enterprise is based in one country, such as Belgium or the Netherlands, and is looking to expand, say, to France and Italy – which each have their own distinct systems and rules to govern packaging – the complexity of data management increases. With SAP Responsible Design and Production, material, packaging, and transportation data can be tailored for new market expansions without repeating the same processes.

But the real beauty lies in the solution’s ability to adapt once the data is integrated. It can seamlessly adjust to different market requirements, working to enable straightforward report generation for tax and EPR compliance at the click of a button.

“What we’re talking about here is simplicity,” says West.

Redesigning a More Sustainable Future

Data and insights are just the start. The real challenge is translating this information into action.

Beyond supporting businesses in fulfilling operational obligations such as paying plastic taxes and accurately calculating EPR fees, the solution can enable informed strategic decisions. By offering insights into the impact of material choices and compositions, it helps empower businesses to embrace sustainable and responsible packaging solutions and business models.

After working with SAP Responsible Design and Production, Henkel was able to meet its fundamental obligations more efficiently, gaining better insight into its data. These new capabilities have delivered far more than short-term efficiencies. They’ve spotlighted Henkel’s ongoing efforts to reduce its environmental footprint, adding a new dimension to its green leadership in the industry.

“One of the greatest things about this solution is what it does for an organization like Henkel,” says Stephen Jamieson, global head of Circular Economy Solutions at SAP. “Namely, allowing it to evidence the good work it is already doing very effectively.”

Henkel’s initiative with SAP Responsible Design and Production dovetails well with a related Henkel initiative to strengthen supplier communication, collect more data, and enrich its sustainability database.

These efforts equip Henkel’s teams to pinpoint the products with the highest plastic tax load. These insights could soon guide strategic product redesign, potentially leading to significant cost savings. Moreover, by laying a solid foundation in regions such as Spain and the UK, Henkel is preparing itself to adapt to regulatory changes across markets.

The Road Ahead

As the global economy begins to look towards a more circular model, SAP Responsible Design and Production is innovating in stride. Recognizing that businesses interact with diverse material types, the solution will expand in the future to accommodate elements such as food, land use, textiles, batteries, waste electronics, and more – all cornerstones of the circular economy – measuring key factors such as virgin materials, recycled content, embedded CO2, and renewable content.

At its core, SAP Responsible Design and Production aims to assist organizations in actualizing their circular economy vision – eliminating waste, promoting material circulation, and rejuvenating natural systems. The solution is engineered to integrate smoothly with essential business processes and systems, empowering businesses to implement their sustainability strategies with more precision and efficacy. Whether it’s incorporating cost calculations into invoice procedures or integrating with other solutions to create a more holistic approach to sustainable practices overall, SAP Responsible Design and Production can assist teams in transforming their business operations.

“At Henkel, we are committed to leadership in plastics reduction and offering greener options for our customers,” says Dr. Nora Mundschenk, corporate director, Finance Tax and Trade Group, Henkel AG & Co. KGaA. “SAP Responsible Design and Production and SAP Services and Support are going to help us do that.”

For more information on how SAP helps companies record, report, and act on their sustainability goals, visit www.sap.com/sustainability.