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FLEXO Magazine : March 2009
INDU! Green Pain the Supply Chain WRI Dubs "Ecoflation" New Risk for Packaging . In By Amanda Sauer I n the past few years, the cost of food, energy and other raw materials has risen more dramatically than it has in decades- more than doubling in many cases. While there are many reasons for this, environmental stresses have often played a role in these price increases. The W orId Resource Institute (WRI) has created a scenario called Ecoflation that imagines how future en- vironmental trends will impact the prices of major commodities. WRI, in conjunction with global strategic management consulting firm A.T. Kearney, has recently released a study on the effects of Ecoflation on raw materials for packaging and consumer goods, titled, Rattling Supply Chains: The Effect of Environmental Trends on Input Costs for the Fast-Moving Consumer Goods Industry. Ecoflation is based on the idea that environmental issues are going to become more significant than they are today. As popula- tions and economies across the globe grow and drive new levels of consumption, the impacts of environmental issues such as pollution and climate change will intensify and further strain the quality and quantity of vital natural resources such as water, arable land, and minerals. Take forest resources, for example. Climate change will likely effect forests as precipitation patterns change, temperatures shift, tree lines move, the composition of tree species change, and risk of pests and fire incidents increase. These factors will influence wood and fiber availability and likely have financial impacts on markets for these resources, creating an ueco-inflation" to be felt by companies in the industry. The physical changes to the environment are just one side of the Ecoflation story; the public policy response to these issues will also grow in the future. Currently, many of the negative impacts (or externalities) of environmental issues are borne by society. As competition for scarce natural resources increases and some envi- ronmental issues become more present and pressing, policy mak- ers are going to react, public perception will change, and the finan- cial burden will become increasingly borne by those responsible. In the near term, packaging providers and many consumer goods companies will see higher costs as policy makers enact regulations that increase the cost of using natural resources. And, The greater impact on paper packaging prices may come from an increase in energy prices resulting from new climate change regulations, especially for mills heavily dependent on fossil fuels. - MARCH 2009 www.f I exog ra p hy.o rg FLEXO
Sustainable Winter 2009