Jean-Francois Roche: Yes. I think that’s just — so let’s just talk about the green deal, and I won’t go into the detail because it’s rather complex, but it’s something which is made out of 11 initiative, and you have a lot of [indiscernible] initiatives, law regulation directive, which will be set. But the aim of the green deal is to aim for carbon neutrality by 2050 in Europe. By the way, some of the large food and consumer goods company in Europe are already aiming for carbon neutrality on the Scope 1 and 2 emissions in 2035 or in 2040. But let’s focus on the 6 which are on the screen, one back Yes. So let’s focus on the 6 which are there. This is what will have an impact for our industry. There are 6 out of the 11. And out of the 6, we will just focus on the one, which is what we call the packaging waste regulation, okay?
That’s the one which is important for you to understand. So where are we right now on the packaging waste regulation? There — we have had several iterations about the law and what would be the implication. I think what you have to understand, there are 3 governing bodies in Europe. One is a commission. The other one is a parliament and the third one is a Council of Europe. They have all had a sort of different appreciation of what should be the packaging waste regulation, and they have entered right now into a dialogue because they want to issue one common text, which will be voted in the April, May of this year. And as the parliament is due for re-election in June. And as the actual president, [indiscernible] she has applied to be reelected, there is a lot of pressure to get that thing through.
And we won’t focus on the headwind and on the tailwinds because it’s a bit too complex. I will just ask you to focus on the green box because it’s a bit more simple. So on the consumer packaging, what would be the impact on the consumer packaging, it might have a bit of headwind impact because of reuse and the recycle, which is involving in the packaging waste regulation. when it comes to the paperboard industry, for the paperboard industry I think it will be modest tailwinds because of the inherent — I did it well, that was — benefits of fiber-based packaging compared to plastic. And as us, as a company, I think it’s a great tailwind because we are an innovation provider in packaging and in fiber packaging, and this is what the packaging waste regulation will drive.
So I am extremely confident about the tailwinds.
Mark Connelly: So the regulation for us is a tailwind. AR has dramatically expanded our innovation capabilities. But Europe is slow right now. Is that slowing down our ability to get our customers to get products in the market?
Jean-Francois Roche: No. Not at all. And we as I said before, 2023 was an expected reset because we know that the market end of ’22 was a bit over speeding, if I may say it that way. And our sales were up on the innovation by nearly 3% to 4%. This is what I said for ’23. So we are still very confident for ’24. And as well, if we look a bit long-term objective, 3 to 5 years, we know that 70% to 80% of our growth will come from innovation and that’s what give us a bit confidence. And there is one noticeable things to change that we have noticed across several multinational company. Normally, large multinational company are slow in innovation because of who they are, because of their processes, because of what made them. It’s a bit something which is — and I recall a discussion I had one upon the time with a CEO of Kellogg.
He put his mobile phone on the top of the white board because he said any breakthrough innovation would never come to my desk because of who we are. And I think the large multinational company have understand that. And there is a clear change in the way people address innovation. Top management is involved because they want to get it done. They don’t want it to be a 3, 4, 5 years process, as Maggie said, they want it quick. And that’s a major shift in the way people are addressing innovation. Just some highlights about what we have done in terms of innovation lately. So KeelClip started at the right time in mid — just at the beginning of COVID, we cannot hit a better date in Europe, and it became extremely successful. I think the capacity we have installed today in Europe, in terms of — is in the range of 300 million, 3.5 billion packs.
This is what the installed capacity we have on the machinery side, and we have seen a very strong type performance in KeelClip. It’s something which is now developing in North America. So we see great traction. It is a bit what we discussed. It was launched in Europe, I know it’s — it moves to North America. PaperSeal was developed for the retail industry in early 2020, to replace CPET trays. And we got great traction, inflation then came, then we have to rework a bit. And then we have developed a new technology, which is called PaperSeal Tray, where we have seen amazing demand in Europe, and we see as well a lot of traction on the North American market, as well and with that technology because it’s CPET tray replacement. Boardio, as Mike said, and as Maggie said, was developed for infant nutrition in Europe for a customer called Danone because it’s public knowledge.
And then it was reiterate, we developed it. And clearly, we have seen a unexpected traction on the U.S. market on Boardio, you have seen Mentos, you have seen Club Coffee. I don’t want to make any teaser, but you might see many new things soon, if I may say it that way, which is clearly because it’s a replacement to blow-molding technology. So we are getting great traction. And then we launched with Unilever, this childproof solution for the pods in Europe. And it’s — because it’s Unilever, it was a large launch in Europe, but they are expecting to launch that product worldwide, which will give us the capability as well to manufacture that product because of the network we are having a bit all across the world. And we are getting traction with other customers as well in North America.
What I want to say is that when I look at the pipeline of opportunity, we are having, sometimes as I’m wondering when I see the volume. I’m just scratching a bit my head because I have never been exposed and you have to be balanced in what you promise because the opportunities are so big that you want to be careful. But, it’s something where we are fairly confident. And what we try to do at the same time, it’s to manage the resource in an appropriate manner because when it hits the ground and when the things go, you better be ready to manage the growth of the innovation. And I just want to make the last comment on that slide because I have had that before. When we talk about petro-polymer substitution in Europe, some people think it’s a myth, I was right, because…
Mark Connelly: Myth is good.
Jean-Francois Roche: If you understand a myth, it’s different. And I just want to tell you, KeelClip was shrink replacement. PaperSeal is CPET tray replacement. Boardio is blow molding technology replacement. And what we have done with Unilever is rigid plastic replacement. So it’s just the reality of what’s happening right now and which is driving the innovation.
Mark Connelly: Jean-Francois, switching gears a little bit. Every couple of days, the Wall Street Journal has a story that says that sustainability is over. It’s too expensive. It doesn’t make any sense. Nobody wanted it in the first place. And lately, they’re pointing to the German and French protests and saying, even Europeans have figured it out, this stuff just costs too much. So have we seen our 15 minutes of fame for sustainability? Are we on to the next thing?
Jean-Francois Roche: Yes. So I — Just a small adjustment. It’s not the French, it’s a French, it’s the German, the Italian, the Spanish, the Czech and the Polish. And they are not — because it has been a bit noisy in Europe. And they are not — they are not against the regulation. They might have some questions around the pace of the regulation but not — because the understand that certain things have to be done. I think if you look at the demonstration, they are more about the fairness of the regulation because what’s happening today is that you can import goods from outside Europe, which are not under the same regulation. So they feel a bit disadvantage. So that’s the first point. So I don’t see that as something slowing down.
Then when you deal with multinational company in Europe, and I can guarantee, I live with that every day. The first thing is you have to be competitive. The second thing they ask you is what is your ASG strategy and capability. The third thing and it’s by order of important. The third thing is what are your innovation capability and how can you help us to – to match what the market is demanding. And the fourth one is the market — your capability to supply the market. Those are the key elements which are in any discussion you are having in Europe. And if you are not able to take all of them, then you — you are a bit gone. And then if you look at the top 10 food multinational company in the world, 5 of them are European based. And it’s in the DNA.
I live with that dichotomy every day between what — how much we are pushed from those companies in Europe, and I might see the difference as well from North America. And I don’t see any reason for them to slow down on that process. And I will even say what I feel, especially if the packaging waste regulation is coming into as a law, it’s my conviction. The large multinational company will push because they believe that at least the European — they want to be sure as a virtuous company. They understand that it’s part of their brand equity, and they further understand that is what customer wants.
Mark Connelly: So if I understand what you’re saying, the European CPGs are simply giving consumers what they want if they’re not backing away. We heard Maggie say that U.S. consumers want more sustainable packaging, and that’s what the U.S. CPGs and our customers are doing, and that’s what we’re working with them to provide. So it sounds like a change in U.S. administration if it were to happen, it doesn’t have a whole lot to do with what Graphic Packaging is doing today and where we’re going.
Jean-Francois Roche: Yes. You just wrap it up in a way that I would never have been able to do so — you are spot-on.
Mark Connelly: All right. Well, unfortunately, that’s all we’ve got time for. So next up, we’re going to hear from Michelle Fitzpatrick, our Chief Sustainability Officer.
Michelle Fitzpatrick: Thanks, Mark. Good morning. I can’t tell you how excited I am to be here and to be able to talk about one of my favorite subjects and be able to share with you all of the amazing things that we’re doing to transform our sustainability program and approach and the goals that we’ve got in front of us between now and 2030. So as we think about where we want to start with updating our strategy and how we best build that strategy into our business strategy and have it become part — an integral part of Vision 2030. It starts with first understanding what that global landscape looks like. What are those external sustainability trends that have the potential to create both opportunities and challenges for consumer packaging.
And as we look at that, we see 4, actually, I said 3 before, or major goals that are really where we see there’s the potential to create impact on consumer packaging. The first is population growth. Talked a lot about people want packaging. Well, we’re going to have a lot more people on this planet in the very near future. Most recent study by the United Nations that was released in November of 2023 says that there’s going to be 8.6 billion people on our planet in 2030, and that’s going to grow to 9.8 billion people by 2050. That’s a lot of people. And not only are we going to have more people, but we’re also seeing growth in socioeconomic status. So the middle class is getting bigger. And those people are moving from rural communities into cities.
And so what does that mean for packaging? Well, that means they’re going to want more goods. They’re going to need more food. They’ve got more buying power, they’re going to want more consumer goods, and those goods are going to have to travel further to get from where they’re produced to where they’re going to be consumed, and that means we need more and better packaging to safely get those products to those consumers. And as Maggie laid out and Jean-Francois has laid out our stakeholders, our customers, the brands, the regulators, they’re all taking action in response to these trends and thinking about how they’re going to adapt and we have the solution for them. Our innovative packaging is going to provide the solutions to help them embrace the opportunities in front of them and mitigate any potential challenges that they may have.
I got to have a sip of water. Okay, so our promise in how we think about sustainability. You’ve heard Mike share our purpose statement that we package life’s everyday moments for a renewable future. And what we want our promise to be is that every single one of those moments is going to be better for people and for the planet. And we’re doing this through taking action in our 3 pillars that you see up there. We’re creating better packaging by innovating our packaging and our manufacturing operations to drive out waste, improve recyclability and circularity of our packaging and really fuel a circular economy. We’re doing better for people. We’re creating safe and engaging workplaces that foster people’s growth and development, and we’re engaging our communities while we do this.
And we’re creating a better future for our planet, by taking action to mitigate climate change in our contributions and reducing our footprint as well as by being responsible in the way we source forest products so that we’re protecting valuable forest ecosystems. And as we do this, we’ve got a really good plan in place to achieve all of our goals in each of those 3 areas. And we’ve laid it out so that step by step, we’re going to make life’s everyday moments better every day. Okay. So how are we going to do that? You’ve already seen like lay out for you, our Vision 2030 plans, along with 3 impacts of better packaging, better for people and better future. And when we think about this, not only are our goals tied to delivering against those 4 global sustainability trends we talked about.
They’re also embracing and addressing some of the broader societal aspirations for us to have a more fair and just and equitable society. And they are underpinned by our commitment and our long history of operating it with integrity and with responsible business practices, and they’re reinforced by our commitment to the United Nations Global Compact to implement the 10 principles of the Compact that address human rights and protection of the environment into the way we operate and also to help do our part to advance the goals of the United Nations, like the sustainable development goals. And I hope that you can see the connections that we have to our contributions to those UN SDGs come through in how we’ve mapped our 2030 goals to where we can drive impact.
