7 Source Reduction Strategies to Help You Prepare for SB 54

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whole thing, because it’s big, we’re really focusing on source reduction strategies and reporting essentials. I got a little sneak peek of the presentation from today as we were prepping, and it’s amazing and chock full of information. So it’s going to be a really good one.

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So before we get into it, I definitely want to thank our sponsors, WPA, the World Pet Association, has sponsored our whole series of webinars this year, so thank you so much. Your support is needed and appreciated. And today’s specific webinar is brought to you by Sagebrook Advisors. We’re really happy to have them as members

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And they have some great content for you today.

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If you are new to the Pet Sustainability Coalition, hello, welcome. My name is Allison. I’m the Director of Sustainability and Innovation here at PSC, and every day I’m really stoked and motivated by our mission. We’re working towards a future where every choice for pets supports a thriving planet.

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And we do that primarily through education, innovation, and collaboration.

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Here are just some of our members. You can see we’re working across the world and across the supply chain. And you can really think of us as the pulpet industry’s partner for sustainable progress.

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A few things we’re really excited about. It is currently July, which means that we are in plastic recovery July. This is a collaborative effort where the industry and our members are pooling resources to collect as much nature-bound plastic as we can. We partner with Repurpose Global for that initiative, and we’re really proud of what we’re able to do as a collective

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We are also gearing up, as I’m sure many of you are, for Super Zoo. The Pet Sustainability Coalition is at booth number 3532, so come see us. We have a networking happy hour at House of Blues on August 12th, and then we also have a very cool retail-ready connections lounge on the show floor on that Thursday. So just a few things to add to your calendar if you’re going to be with us in Las Vegas there

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And then we’re also very excited for this November. We are bringing Impact Unleashed back to Boulder, Colorado. So get your tickets now. They are on sale. And we’d love to see you there.

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We also have just some Zoom housekeeping things to go over, because we are in a digital world right now. There’s a few buttons on the bottom of your screen that I want to call your attention to. The first one is the chat. You’re welcome to say hello to fellow attendees, drop a random thought, introduce yourself. The chat is quite casual and you can use it however you’d like. You can also see our marketing manager, Alexandra Flynn

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I don’t know why I said your full name, Alex Flynn is going to drop some important links in the chat as well too. The next button is the react button. Because we can’t see your faces, we can’t tell what you think of what we’re saying. So if you would like to send a heart or a laugh, I see some reactions happening now

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Those are appreciated. And finally, and maybe most importantly, is our Q&A. I am going to be facilitating an audience Q&A at the end. So if you have a question that you would like to ask our speakers today, please drop it there.

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Okay, and before I pass it off to the deep experts on this topic, I wanted to just give us some context in case you’re here for the first time and you’re like, what is SB 54? What is Source Reduction? What is EPR? I’m going to cover some of those absolute basics

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Right now. So the first thing to know is that source reduction is just a part of SB 54, and it’s an important one because it is basically pushing the pressure to improve packaging upstream. So SB 54 is California’s Epr law

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And basically, Epr laws just shift the responsibility of recycling and packaging waste from municipalities to the producers selling those into the market.

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Source reduction is a concept that just means that you’re cutting down on the packaging waste before it becomes waste. So it’s meaning less material through design, material reuse, refill. We’re going to talk a lot more about that later. And compliance and reporting are a huge part of this law, and our speakers today are going to get a lot more into that, but it is an important part

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A quick housekeeping thing, the last housekeeping thing from me is, I know that there are a lot of questions out there about EPR laws in general. You are welcome to send those into the Q&A today, but we’re gonna prioritize the ones about source reduction, because that’s what we’re focusing on today.

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Okay, without further ado, I’m very excited to introduce our speakers today. First off, Mira Paramisiv. Oh my gosh, I’ve struggled with that. I’m sorry. She’s the founder of Sagebrook Advisors and has a super strong background in finance, compliance

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And really helping companies work through these complex issues. She’s really focused on translating EPR requirements into practical next steps, which we can all use.

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She’s also invited her colleague and industry expert, Prateek Lal, to join this conversation, because he brings a really cool experience. He’s really into packaging development, sustainability with the ADEPT group

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So Mira, I will invite you to join me on screen and start sharing.

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Thank you, Alison. Good morning, everybody, and thank you for that great, great introduction. Let me go ahead and share my screen

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Does that work? Perfect.

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Okay, so good morning, everybody, and thanks, Alison. Before we begin, I’d like to give a quick shout out to PSC. If you are not already a member, I encourage you to check them out. PSC does an outstanding job educating the industry and bringing together different stakeholders for their collaborative efforts

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And we are really proud to support their work and their efforts.

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So with that said, let’s get started.

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So, as Allison mentioned, source reduction is by far one of the more complex aspects of SB 54. And SB 54 is already a complex piece of legislation

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So if you are still wrapping your head around it, or perhaps still in the denial stage, don’t worry, you are not alone.

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Our goal at the end of this session is for you to walk away with a clear understanding of source reduction and some practical considerations to keep in mind as you develop your source reduction plan.

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Before we go any further, I want to share a quick legal disclaimer. Today’s webinar is intended to be an educational session only. Sagebrook Advisors is not a legal firm, and this is not intended to be legal advice.

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Okay, so here’s what we have lined up for you today. We will walk through some foundational concepts before addressing the topic that’s probably top of mind for many of you, and that’s the individual Source Reduction Plan.

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We will cover the five source reduction pathways, how source reduction is measured, and share a simple framework to help you prioritize your next steps.

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I will then shift gears, and Prateek will join the conversation and share some of the opportunities and challenges that he’s seeing today in the market with regards to source reduction.

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And finally, we will wrap up by opening the floor for your questions. So please keep those coming. As Allison said, we will be prioritizing those related to Source Reduction today. So if you don’t get to all your questions, we will reach out to you afterwards.

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Okay, so hopefully that all sounds good to everybody on the call.

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So let’s start with the big picture.

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SB 54 establishes three enforceable targets which are laid out on this timeline starting with 2027, going through to 2032.

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And by the way, we are referring to the 1st of January. So it’s the start of each of these years.

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So the first target is source reduction. This is where producers must reduce the amount of single-use plastic packaging and food service wear that they supply into the state of California, measured against what they did back in 202

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You will see some interim targets along the way, culminating in that 25% target at the start of 2032.

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The second target relates to recycling rates.

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And here the focus shifts to improving recycling outcomes. So think of this in terms of investments in recycling facilities, improvements to end markets in order to increase the amount of plastic that successfully recovered

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and recycled

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Third target is a little different, and it pops up in the last year here

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It stipulates that all packaging, not just plastic, must be recyclable or compostable by 2032.

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And sorry, and unlike the first two targets, this is an individual target, meaning that if you are doing business in California and you are an obligated producer, you could find yourself facing some significant challenges

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If your packaging does not meet this requirement. And as a quick side note here, without getting too much into the deep weeds. SB 54 uses SB 343, the truth in labeling standards to determine what can

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Classed as recyclable

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And it aligns with AB 1201 in terms of the requirements to be labeled compostable.

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But here’s the important

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thing here that I want you to remember is that these three goals working tandem and are part of that broader SB 54 strategy to reduce the amount of plastic waste in California.

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And having that context will help you make better sense of some of the details around source reduction.

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So, what does Source Reduction mean for your business?

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There are three points that I want you to really keep in mind and take away. The first is that the 25% reduction target that I mentioned, that is a collective goal, not an individual producer target.

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And some producers can and should be able to exceed that target, while others may find Source Reduction more challenging

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The second point you need to bear in mind is that progress is measured against what you did back in 2023. So that is your baseline, and there is no allowance, unfortunately, for sales growth

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The last point I wanted to take away is that source reduction cannot come at the expense of recyclability, meaning that you cannot move from a material that’s recyclable today to something that’s less or not recyclable tomorrow. That simply does not count

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So the challenge with any collective target is that there’s always potential for free riders, right? In this case, those companies that benefit from the reductions and the efforts achieved by others without making meaningful changes themselves.

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So that’s why the program includes financial incentives and penalties, which are referred to as malices, which are designed to give producers a strong economic incentive to contribute towards that statewide goal. And we will cover that later

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So let’s turn our attention now to the individual Source Reduction Plan itself

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This is the report that details how you, as an individual producer, will contribute towards SB 54’s Source Reduction goals.

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Some of you are probably wondering if you need to even submit one. And the short answer, if you are an obligated producer under SB 54 is yes, it is a statutory requirement.

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Now, CAA, or Circular Action Alliance has released a template, and if you submit at the annual Source Reduction report in May, this will look familiar to you.

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The key differences are that the ISAP plan covers the target years in the future

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It’s one… it’s a one-time submission.

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That’s due really at the end of this month, on the 1st of August. And as far as we know right now, it can’t be revised once it’s filed. So this one needs to be right the first time.

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I also do want to call out that the ISR plan is intended to be enforceable. We are waiting to see what that enforcement mechanism looks like. So we’re waiting for the ISR agreements from CA to better understand that mechanism

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But for now, I would strongly encourage you to approach your plan with a healthy dose of realism.

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So that’s kind of the what and the why behind the ISAR plan. Now let’s pivot to and look at the how.

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So these are the five pathways that SB 55 gives you to achieve that for a source reduction outcome.

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So we have reuse, refill

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elimination

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shifting materials, rightsizing, which covers a few scenarios, and increasing PCR content.

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Now, the statute does not prescribe the form or resin type of plastic to reduce. It calls for an overall reduction in plastic weight and number of components.

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From a financial perspective, though, you want to kind of keep in mind that elimination shifting materials and rightsizing share the same incentive structure

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While we use and refill attracts an additional bonus and PCR, which is considered an alternative pathway, has its own bonus mechanism.

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So we just stay high level on the next few slides because we will be diving into some more detail with Prateek later in this session.

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So the first pathway is reuse refill. And quite honestly, we could probably dedicate an entire session to this pathway. But here’s what you kind of need to know.

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To qualify as refill reuse, your packaging must be designed very intentionally and marketed for reuse

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It’s got to be durable for multiple uses and you need to make sure that it’s supported by convenient collection and refill infrastructure to make sure that multiple users actually happen.

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There are two qualifying models outlined in the guidelines, and by guidelines, I’m referring to CA’s guidelines. And depending on who is, if you like, doing the refilling. So the model calls out

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that it could be either the producer or the consumer. You want to bear in mind that the financial incentive, at least at the moment, is tied to the producer managed model

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I mean, I think it’s clear to everyone on the call that this pathway is going to be by far the most transformational pathway and it is receiving a lot of attention in part because SB 54 expects no less than 10% of that headline 25% reduction

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to come from reuse, refill, and elimination.

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I had a client say to me that their packaging was so well designed and durable that their customers were often repurposing it to store other things. And that’s great, but in the consumer-managed model, that doesn’t really count as reuse, refill

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The packaging must be reused for the same product.

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But in the producer managed model, producers are permitted to use the packaging for another purpose in the supply chain. So that’s a little bit of detail that you want to bear in mind there.

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Our second pathway is elimination. And this is actually a great place for most companies to start because there are often a lot of opportunities for quick wins here where you can remove unnecessary excess packaging with little to no impact on product performance or customer experience really

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If you think about unnecessary inserts or protective films, overpackaging, redundant components, of course, some opportunities can be implemented quickly, while others

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like, if you require new tooling on balls will naturally take longer.

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Now, if you end up replacing that plastic component with a plastic, non-plastic material, that should be classified under the shifting materials pathway.

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Now, the shifting materials is exactly what it sounds like. So replacing plastic packaging with covered non-plastic materials.

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But in order for this to count again, you do want to make sure that you’re moving to a non-plastic covered material that is still deemed recyclable or compostable. So you can’t move into something that’s less recyclable and or not compostable.

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Our next pathway is what CAA refers to as rightsizing, etc. And this is kind of a catch-all for several related but technically distinct tactics

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Think of it as kind of how do I deliver the same customer value with less packaging by optimizing my packaging design

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So SB 54 identifies 4 viable approaches here. There’s concentration, right sizing lightweighting and shifting to bulk formats

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Now, this may sound like simple packaging changes, but this is not a box checking exercise. For many companies, this is going to be among the most challenging changes to make and will require significant investment in time

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redesign effort, cross-functional collaboration. But it can also represent some really meaningful changes

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Our final pathway is PCR. Now, PCR is different from the other four Source Reduction Pathways because it replaces virgin plastic, but it doesn’t reduce the amount of plastic entering the California market.

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So that’s why SB 54 caps PCR’s contribution to source reduction at 8% of the statewide goal each year

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But we know that a strong, stable PCR market strengthens the economics of the recycling industry, which in turn drives SB 54’s other core objective, which is to increase

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recycling rates overall.

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So, what does that mean for producers?

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For now, CAA wants you to maximize their PCR use, and there is a bonus linked to every pound of APR-certified PCR used above your 2023 baseline.

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But one thing you want to watch here is that if that state wide PCR exceeds that 8% ceiling, CAA may reevaluate the bonus level

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But I would say that that’s a future consideration, and it really doesn’t change the immediate opportunity… opportunities for most producers.

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So, let’s pivot now and talk about how we actually measure source reduction.

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This is an area that is causing a little bit of confusion when people are building out their ISR plans. So I do want to break this down for you.

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So, everything starts with your 2023 California Baseline report. So that’s the packaging you supplied into the California market back in 2023.

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We then compare that to your packaging in a future year. So I’ve used 2026 in this example. So your 2026 supply reflects your new packaging design, right? Multiplied by the number of units you supplied that year

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And the difference between those two numbers is your net source reduction. That’s the overall reduction in plastic entering the California market.

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But that does raise an interesting question

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How much of that reduction came from better packaging, and how much simply came from you supplying more of fewer units into the market?

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But to answer that question, we need to know your business as usual scenario.

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In other words, what would your plastic footprint have been in 2026 if you had used your original 2023 packaging

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So this is what I call the baseline, adjusted baseline supply

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And once we have that benchmark, we can separate two things out. So we can then isolate the impact of plastic supply due to changes in sales

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And the impact of

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packaging improvements

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And if you’re familiar with CAA’s guidelines, this is what sits behind the formulas A, B and C and collectively they’re referred to as Source Reduction Activity.

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So again, hopefully this helps when you are building out your ISR plan and you’re trying to figure out how you calculate your net source reduction and your source reduction activity

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So let’s kind of bring this to life with a simple example. Let’s say in 2023, our baseline plastic packaging footprint was say 850 pounds. And in 2026, in my example, let’s say our projected supply

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was going to be £360 pounds

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So our net source reduction

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is £490 pounds

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But we also expect to sell fewer products in 2026, 7,200 compared to 8,500

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So once we calculate our adjusted supply, we can then isolate how much of that 490 actually came from sales reductions which should be assigned to the elimination pathway and the remainder is what you would then break down into the actual sort of the

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a design related pathways, or the reuse refill pathway.

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So

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We’ve now covered some of the key concepts you need to know to build your ISAR plan. So the next question really is, where should you focus on first?

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And

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What strategies do you want to quantify and include in your ISAR plan? Keeping in mind that, as I said before, the ISR plan is intended to be enforceable.

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So I find it helpful to think about it using a simple prioritization framework. And in this example, each company is going to be different, but in kind of the way I think about it.

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I look at the level of effort, so how difficult is this initiative to implement? And you will want to think about this in terms of design work required, supply chain implications, tooling, supply engagement, testing, that’s kind of there’s a whole host of criteria you will be assessing this against.

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And on the other axis, you will be looking at return on investment. So not just financial return, but also think about it in terms of compliance value and strategic benefits.

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So as I mentioned, every organization is unique and will assist these variables slightly differently. But the important thing is to try and evaluate all your opportunities using a consistent methodology like this model

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Now, all these contrains are fairly self-explanatory, but I want to draw your attention to the lower right box called the Compliance Last Resort.

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To understand the implications here, I want to remind you that source reduction is one of three enforceable goals under SB 54, right? And one of the other goals is that all packaging must be recyclable or compostable by 2032.

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So to take that one step further

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CAA’s draft program plan, which they released in mid-June, introduces a comprehensive material strategy that groups all covered material into three categories

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On the left, you see the maintain and strengthen Compliance Group. So these are materials that are… that already have a great recycling and composting profile in California. So the strategy is to maintain investment and expand their use.

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In the middle are the phasing materials. So these guys have known challenges today, but CIA believes that they have a reasonable pathway to compliance if the right infrastructure and system improvements are made

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And they are signaling a willingness to make those investments.

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But on the right side of phase out materials, and these face the greatest barriers to compliance and CA expects that they will need to be phased out in order to be compliant with SB 54

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goals. I saw 18 material categories on this list, including several flexible packaging formats that are designed to be phased out

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So the key takeaway here is this. When you are prioritizing your strategies, you want to ask yourself, is this material likely to be recyclable or compostable by 2032? So this is, again.

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something that you really, really want to be referencing as you are making those choices.

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The other lever that I want you to pay attention when you’re building out your ROI is the financial incentive mechanism that’s linked to source reduction.

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So I think many of you are familiar with Epr fees. You know that, for an example, plastics with poor recycling potential attracts much higher fees than, say, paper and fiber, right? This is a separate incentive and malice program

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to that EPR fees program, right? So, this program starts with packaging placed on the market in 2027 that you will then report in 2028, and CAA expects to settle this in 2029 onwards. So that’s kind of the timeline you’re planning towards.

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The core bonuses are Tier 1, Tier 2 bonuses, and these apply equally to all methods of source reduction.

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The middle one here is the PCR bonus, and this is the per pound bonus for certified PCR that I mentioned above before.

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And the last one here is called the reuse direct investment strategy bonus. And this bonus is paid for single use plastic avoided through reuse refill systems.

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And currently, they apply to B2B transport, B2B refill, and the B2B pre-fill models

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The program is designed to be revenue neutral, so bonuses paid out will be funded through malice payments. But here’s what you really want to note, is that CAA has suggested that rates could reach 500 to 7

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dollars per ton to achieve SB 54’s objectives. And that’s a critical unknown at this point.

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As a producer, you want to make sure that you are not simply left paying those malice fees in a few years time.

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Again, another reason to very seriously explore and consider source reduction opportunities within your organization.

00:28:53.000 –> 00:29:02.000

And finally, before I wrap up this part of this webinar, I’d like to leave you with a final thought and hopefully a few ideas to take back to your team.

00:29:02.000 –> 00:29:16.000

I think the best source reduction initiatives are going to be those that balance compliance with financial return and long-term business value, because ultimately it has to make sense for your business.

00:29:16.000 –> 00:29:22.000

I will not speak to every single point on this slide. You can take this back as a checklist for your team

00:29:22.000 –> 00:29:33.000

But as you prioritize your source reduction opportunities, don’t solely focus on EPR fees and incentives, but really consider the full business case

00:29:33.000 –> 00:29:41.000

From one-time implementation costs and recurring savings to customer perception. ESG reporting, future product development

00:29:41.000 –> 00:29:57.000

And maintaining data governance around, like, data quality, being able to report this information in the future. So there’s a whole host of considerations that you want to start to think about as you’re building out a source reduction for your company

00:29:57.000 –> 00:30:13.000

So, with that, I would like to invite Prateek to join the session. I’m going to start stop sharing here for a moment so that we can maybe pivot to and talk about

00:30:13.000 –> 00:30:20.000

Some of the opportunities he’s seeing out in the in the market. Hi, Prateek.

00:30:20.000 –> 00:30:23.000

Hello. Thanks for having me. It’s nice to be here.

00:30:23.000 –> 00:30:36.000

Of course, thank you, Prateek. I know Alison gave a quick introduction to you and ADAPT Group. If there’s anything else that you want to add on before I jump into a couple of questions that I really want to pick your mind on.

00:30:36.000 –> 00:30:49.000

Yeah, you know, maybe just to set the stage and to give everybody a little bit of context and comfort that we are familiar with what we’re talking about.

00:30:49.000 –> 00:30:54.000

You know, what I would say is we’re a company that’s

00:30:54.000 –> 00:31:11.000

been involved in packaging engineering and package and sustainability now for over 18 years. We serviced over 300 of the Fortune 500 companies, delivered over $100 million of savings

00:31:11.000 –> 00:31:28.000

And we’re very intimately and deeply involved in source reduction, both from starting with understanding the data, creating the plans to actually executing the plans and doing so in a way that

00:31:28.000 –> 00:31:43.000

Offsets the incremental costs that source reduction will have for an organization. So I’m very happy to be here and happy to answer any questions and add some insight.

00:31:43.000 –> 00:32:02.000

Thanks, Prateek. So just to get the conversation going. As you said, you work with a wide range of consumer products companies and some companies in the pet industry. What are you seeing as some of the biggest opportunities right now when it comes to source reduction with clients and where

00:32:02.000 –> 00:32:11.000

You’re able to reduce plastic with really compromising on product performance or even custom experience

00:32:11.000 –> 00:32:17.000

Yeah, that’s a really good question. Can you hear me all right?

00:32:17.000 –> 00:32:18.000

I can, yes.

00:32:18.000 –> 00:32:25.000

So that’s a really good question, and you know I would answer it by saying

00:32:25.000 –> 00:32:29.000

There is a real need to be incredibly practical

00:32:29.000 –> 00:32:37.000

And how you go about doing this, like practical and strategic. And so what I mean by that is

00:32:37.000 –> 00:32:51.000

At source Reduction generally, there is a significant impact of source reduction, and that impact is on the with the financial with the increased cost

00:32:51.000 –> 00:33:08.000

the operational complexity and the operational impact, right, in terms of filling lines and things like that. And so, when you look at what to act on, the lowest hanging fruit is the packaging that is furthest away

00:33:08.000 –> 00:33:23.000

from the product. So if you think about this as concentric layers, right? So starting with the inside with things that touch the product, and then working your way outwards, the places that where it’s most practical to start with has the least

00:33:23.000 –> 00:33:35.000

impact is to start with the packaging that’s furthest removed right? So distribution packaging, things like stretch wrap and optimizing those

00:33:35.000 –> 00:33:53.000

And then slowly working your way towards the levels of packaging that touch the product and interact with the consumer. Because as you get closer to that, the business impacts of those grow exponentially.

00:33:53.000 –> 00:34:02.000

Can you, share with us perhaps any kind of real success stories before I kind of flip that question and start

00:34:02.000 –> 00:34:05.000

talking about some of the challenges that we’re seeing

00:34:05.000 –> 00:34:13.000

All right, I’m going to pop on really quick. Pratee, could you turn your video on and off again? We can hear you just fine, but your video is frozen.

00:34:13.000 –> 00:34:23.000

Yeah, Allison, I just noticed that and I went to turn it on and off, and it’s telling me that Zoom is glitching.

00:34:23.000 –> 00:34:24.000

Love that.

00:34:24.000 –> 00:34:33.000

And so I was thinking maybe best to not mess with it.

00:34:33.000 –> 00:34:35.000

Yeah.

00:34:35.000 –> 00:34:36.000

All right.

00:34:36.000 –> 00:34:37.000

Let’s continue, but your voice is good enough for now. Okay, continue on with the success stories. Thank you

00:34:37.000 –> 00:34:47.000

Okay, so in terms of success stories, like I was saying, you know, let me start with sharing some examples from that

00:34:47.000 –> 00:34:59.000

line of thinking, right? So let me start with tertiary packaging, and then working to secondary and primary. So from a tertiary packaging perspective, we have optimized quite a lot of

00:34:59.000 –> 00:35:14.000

Source are done for a lot of source reduction, starting with stretch rat and whip containers and and distribution packaging, right? So the packaging that the consumer never really sees. It’s really about getting the product through the supply chain

00:35:14.000 –> 00:35:31.000

And through the retailing network. So things like I was explaining, taking multi-layer stretch film, making it monolayer, reducing the amount, sometimes even having the option to change that to a fiber stretch film and so forth

00:35:31.000 –> 00:35:46.000

The next is looking at the secondary packaging. And then is looking at primary. You know, when we look at primary, we’ve done quite a lot of work in reducing the amount of plastic used for rigid

00:35:46.000 –> 00:36:00.000

Changing multi-layer films to single material, monolayer mono material, which we just mean it’s one material as opposed to multiple layers of different films laminated together.

00:36:00.000 –> 00:36:07.000

Which is complex, and then we’ve actually done also quite a bit of work in switching from

00:36:07.000 –> 00:36:12.000

From films to fiber

00:36:12.000 –> 00:36:28.000

So, flow wrap. And what that means is, you know, if you think of, like, a bars, or pet snacks, a lot of them come in plastic pouches. So switching that from a plastic pouch to a paper pouch

00:36:28.000 –> 00:36:38.000

Tend to be some examples of the successes that we see on shelf that we’ve already worked on.

00:36:38.000 –> 00:36:53.000

Thanks, Prithik. That’s super helpful. So let’s flip that around. What are you seeing as some of the real challenges that producers are encountering as they’re stepping into source reduction?

00:36:53.000 –> 00:37:08.000

That’s a really good question. And I wonder if your point, if what your experience is similar. I think the first one and the most basic is just the information, the data, right? And the lack thereof

00:37:08.000 –> 00:37:13.000

So it is it seems quite

00:37:13.000 –> 00:37:28.000

Standard, quite normal, that companies do not have a accurate and complete data set. So they have data sets that have varying degrees of accuracy and gaps.

00:37:28.000 –> 00:37:36.000

And so that is the first challenge, because without knowing what you’re using, you can’t change it.

00:37:36.000 –> 00:37:42.000

From there, the second thing that I would say is

00:37:42.000 –> 00:37:47.000

You know, having the bandwidth and the expertise.

00:37:47.000 –> 00:37:58.000

to actually come up with a source reduction plan that you can implement, and doing so without introducing or minimizing the additional cost

00:37:58.000 –> 00:38:13.000

And the operation operating complexity. So I’ll use a really easy example. You know, if you think of a multi-layer bulk food pet food bag. Those are quite complicated to

00:38:13.000 –> 00:38:22.000

change into a ecomodulated format, because those multiple layers each serve a purpose.

00:38:22.000 –> 00:38:39.000

the equipment that it’s filled and sealed on is being depreciated, it’s been bought, you know, changing that is a very costly endeavor. And so it has a direct impact on the cost of the packaging. It also has an impact on the shelf presence, the consumer experience

00:38:39.000 –> 00:38:48.000

And so all of those kinds of things, and those tend to be some of the challenges in pursuing source reduction.

00:38:48.000 –> 00:38:59.000

I totally agree with you on particularly the data front. That’s something that a lot of people are grappling with. Absolutely. One of the other challenges that I’ve seen is that

00:38:59.000 –> 00:39:12.000

the Source Reduction is kind of relegated to one small team in the organization, like the compliance team or the sustainability team, if you have one. But this is really not the breadth and depth of SB 54 is

00:39:12.000 –> 00:39:14.000

pretty

00:39:14.000 –> 00:39:29.000

Pretty steep. I would say this has to be a tier one project for most companies if you are doing business in California, and if you want to bring along your C-suite from the very beginning, you want to make this

00:39:29.000 –> 00:39:44.000

collaborative cross-functional project from from day one really, or starting now, if you haven’t already done so that that’s been a real challenge that that folks have grappled with, because all the changes, even changes you mentioned, Prateek

00:39:44.000 –> 00:39:53.000

pretty substantial, they are costly, and it needs everybody’s buy-in to really truly appreciate the impact

00:39:53.000 –> 00:40:01.000

I couldn’t agree with you more, you know, and just to share some numbers. The cost of recycled plastic

00:40:01.000 –> 00:40:11.000

Is at a very significant premium, you know, 20 to 30% of, it’s a premium over virgin plastic. And so when you look at that

00:40:11.000 –> 00:40:31.000

and you want to add recycled content into the plastics, you should expect that the cost of that component is going to go up by that 20 to 30

00:40:31.000 –> 00:40:32.000

Yeah

00:40:32.000 –> 00:40:40.000

On top of that, there is some real supply constraints, right? So it’s not easy to get clean reset PCR. And that then changes the shelf presence. You know, if you go from a very clear bottle to one that is kind of

00:40:40.000 –> 00:40:57.000

Blackened to some extent. You know, there’s a very different consumer expect consumer perception around if that is about that bottle, right? And so I think there’s a lot of implications like you’re saying

00:40:57.000 –> 00:41:06.000

And so what this really does take is a very thoughtful approach. I think the other thing that you said is also quite pertinent, which is

00:41:06.000 –> 00:41:15.000

You know, at this current time, the guidance is that the plan that you submit will be the plan that you’re committing to.

00:41:15.000 –> 00:41:23.000

And and so it is important to get that right, because once you’ve committed to it, then you actually need to be able to deliver against it as well.

00:41:23.000 –> 00:41:24.000

Yeah.

00:41:24.000 –> 00:41:25.000

Absolutely.

00:41:25.000 –> 00:41:29.000

What has been your experience so far?

00:41:29.000 –> 00:41:40.000

In terms of challenges, again, as I mentioned, the data issue is a big one. Gathering that information, validating that information, particularly for companies that have

00:41:40.000 –> 00:41:57.000

Wide huge assortment of SKUs, right? So then it’s about grouping your SKUs into product families, looking at commonalities, and really being efficient about obtaining that information. How do you set that up? How do you

00:41:57.000 –> 00:42:15.000

kind of keep in mind all the different components of source reduction, whether it’s making sure that you are keeping in mind that 100% recyclability, compostability rule that we’re kick in in 2032 or end of 2031,

00:42:15.000 –> 00:42:22.000

It’s all these different components and wrapping it together to build your Source Reduction Plan. I think it’s

00:42:22.000 –> 00:42:28.000

It’s complex, and I do see people sort of grappling with that at the moment.

00:42:28.000 –> 00:42:38.000

Yeah, I would agree with that. I think that putting the challenge of the day is to compile a

00:42:38.000 –> 00:42:44.000

Source Reduction Plan that the organization

00:42:44.000 –> 00:42:46.000

can commit to.

00:42:46.000 –> 00:42:47.000

Yeah.

00:42:47.000 –> 00:42:49.000

Agreed

00:42:49.000 –> 00:42:57.000

I think given where we are on time, Alison, I wonder if you might be able to cue some questions for us

00:42:57.000 –> 00:43:14.000

Sure. I guess first, before we get there, I do want to reflect on just some of my favorite things that I’ve learned so far. We talked about that PCR strengthens the overall industry. So even though there are these caps and whatnot, it’s a super important part of the puzzle

00:43:14.000 –> 00:43:15.000

Yep.

00:43:15.000 –> 00:43:26.000

Mira, I love your net source reduction concept and visualization of that, that you have this adjusted baseline that essentially normalizes for your sales changes and your packaging improvements.

00:43:26.000 –> 00:43:41.000

Prateek, I loved you just stating plainly that the lowest hanging fruit is the packaging that’s furthest away from the product, super actionable. And then, yeah, you’ve both talked a lot about just, like, the planning and the business integration, and how that’s super important.

00:43:41.000 –> 00:43:56.000

So let’s get into some of the questions that we have so far. One of the first ones was, what’s a swap for shrink wrap? You answered this out loud. You mentioned fiber, monomaterial, so feel free to build on that. But I wanted to throw in, too

00:43:56.000 –> 00:44:12.000

When you’re making these swaps, are they always better for the environment, or are there places where the swap might be good for compliance with this law, but maybe has environmental consequences?

00:44:12.000 –> 00:44:30.000

So two questions there. The first one is what is a alternative? And so I would say two things. One, when you talk about shrink rapids, there’s a real opportunity to optimize how much you’re using, right? Think of a pallet that is being wrapped

00:44:30.000 –> 00:44:33.000

Based on the

00:44:33.000 –> 00:44:37.000

subjective opinion of the

00:44:37.000 –> 00:44:52.000

The line technician, right? So he feels like, hey, I’ll just wrap my pallets 12 times. So he wraps them 12 times. But really, what’s necessary to get it through the supply chain might only be two wraps, right?

00:44:52.000 –> 00:45:14.000

And so there is one of optimizing how much you’re using. The second is optimizing the material and the grade of it. You know, all shrink wrap is not the same. There’s, in fact, many different types of shrink wrap and many different grades. And so, being able to optimize and determine their appropriate material and the grade of

00:45:14.000 –> 00:45:21.000

will go a long way. And then the last is, you know, being able to, if you have the opportunity, based on your particular

00:45:21.000 –> 00:45:34.000

Product requirements and supply chain, you know, being able to switch to from something that is a polymer base to something that’s fiber based could be a big advantage.

00:45:34.000 –> 00:45:39.000

You know, so those might be some of the areas to look into.

00:45:39.000 –> 00:45:51.000

You know, we do quite a bit of work in that in that space. And I think the second one around sustainability, you know, is it just to meet this requirement or is it actually more sustainable?

00:45:51.000 –> 00:45:57.000

You know, there is many different

00:45:57.000 –> 00:46:11.000

scales of measuring sustainability, and I don’t believe that there is a standard way of doing that, you know? LCAs tend to be the one that people default to, but

00:46:11.000 –> 00:46:27.000

Every LCA is not the same either. And so I think that it’s really important to have a view on what the goal is. And if the goal is compliance first, financial exposure second

00:46:27.000 –> 00:46:43.000

And then meeting your overarching corporate sustainability goals, then having a clear priority of those 3 or other criteria will go a long way in building a plan that your organization will continue to support going forward

00:46:43.000 –> 00:46:46.000

On average

00:46:46.000 –> 00:46:50.000

Compliance will have an incremental cost.

00:46:50.000 –> 00:46:59.000

Right? And so a lot of the work that we do is on how do you actually build a compliance plan that offsets

00:46:59.000 –> 00:47:14.000

Some of these costs, right? So, for example, if I’m gonna add PCR in, can I put in some additives that strengthen the plastic? Can I reduce the amount of plastic? Am I being able to offset the cost of the added… the incremental PCR exposure

00:47:14.000 –> 00:47:24.000

By reducing the overall amount of plastic, maybe by changing the grid, by switching out from using 10 grams of plastic to adding one gram of an additive

00:47:24.000 –> 00:47:31.000

And really managing that or controlling the cost increases

00:47:31.000 –> 00:47:35.000

Okay. Mira, did you have something to add or should we move on to the next question?

00:47:35.000 –> 00:47:51.000

No, that I agree with what Pratik is saying. I also want to perhaps touch on some of the other ESG reporting frameworks that, you know, may apply to some participants. So

00:47:51.000 –> 00:48:04.000

That might help answer some of your questions around is this swap actually helping? Is it truly sustainable or not? So that would be another framework to kind of reference back to.

00:48:04.000 –> 00:48:29.000

Sure. I think one of the questions that we’ve gotten is kind of reiterating that, saying that while it may improve from regulatory compliance, does it actually improve environmental performance or recyclability? And I think we’ve mostly answered that, but I just want to name that that recyclability layer is another, it’s like a third element. So it’s like we have compliance, we have overall environmental performance, and then also recyclability is like a third thing

00:48:29.000 –> 00:48:30.000

Yeah.

00:48:30.000 –> 00:48:35.000

So, sustainability is really a juggling act.

00:48:35.000 –> 00:48:51.000

I agree, and what makes it slightly more complicated is that it’s evolving right now. So a material might be in one class, but it might shift up or down two years down the road. So you are having to make some choices today

00:48:51.000 –> 00:49:11.000

With that unknown risk there, which certainly doesn’t make it simple, but you do have experts that you can reach out to when you’re making some of these determinations. But yes, that again, this space is evolving, and it just adds another layer of complexity.

00:49:11.000 –> 00:49:34.000

Yep. Speaking of complexity, let’s go to the next question from someone in the audience. It says, I struggle to understand how you can reduce the amount of packaging for food. You need a certain amount of plastic from a quality controls perspective to prevent air permeating the products

00:49:34.000 –> 00:49:35.000

Yeah.

00:49:35.000 –> 00:49:42.000

Same issue with changing from plastic to paper. It can’t prevent bacteria. How do we overcome this? I feel like that’s kind of a million dollar question, just like, how can we have it all? But I’m really curious to hear your answer.

00:49:42.000 –> 00:50:00.000

I want to say, I want to go back to the statute, right? So that 25% source reduction target is a collective goal. There is obviously recognition that not every producer is going to be able to reach that 25% target by any means, and some can do more, some can do less. It’s a collective goal

00:50:00.000 –> 00:50:11.000

But what Prateek pointed out earlier was super helpful, like, start with kind of the packaging that doesn’t touch the product, doesn’t touch the consumer, and work

00:50:11.000 –> 00:50:15.000

look at them in terms of layers.

00:50:15.000 –> 00:50:21.000

You could possibly still have some wins there. Pratik, do you have anything else to add

00:50:21.000 –> 00:50:26.000

You know, I cut out when Alice and you were just asking the question, will you repeat that one time?

00:50:26.000 –> 00:50:38.000

Yeah, the question is basically like, how can we have it all? How can we prevent bacteria from getting in packaging and food? How can we prevent oxygen from getting in while also reducing the amount of packaging?

00:50:38.000 –> 00:50:39.000

Yeah.

00:50:39.000 –> 00:50:55.000

So, this is an actually very thoughtful question. Really, really thoughtful question, because this is something that, for everybody that’s starting to put together their source reduction plan, this should be front of, like, front and front of mind, right? Is

00:50:55.000 –> 00:51:09.000

What are the actual impacts? So the couple of impacts that you’ve mentioned are around product quality, right? So by removing an oxygen layer, what will it do for my shelf life? It might take your shelf life from eight months down to two weeks.

00:51:09.000 –> 00:51:23.000

Because the pet food will get oxidized. How do you prevent microgrows? How do you do all of these things that really have to deal with the efficacy

00:51:23.000 –> 00:51:38.000

the of the product. Then there is what actually happens to shelf presence. Imagine changing a package and consumers decide that it’s no longer attractive enough. And at that moment of truth they decide to not buy it.

00:51:38.000 –> 00:51:48.000

That is a catastrophic result, you know, because not selling product is not an option.

00:51:48.000 –> 00:52:00.000

Then the next one, you know, is really around the financials of this. So if you change to more sustainable packaging and it erodes your margin

00:52:00.000 –> 00:52:07.000

That’s in this current environment, companies have a very, very low tolerance for that

00:52:07.000 –> 00:52:15.000

And so the way we deal with this is we actually have a software platform that allows us to model

00:52:15.000 –> 00:52:19.000

and analyze the changes

00:52:19.000 –> 00:52:34.000

with that in all of these modalities. Right? So we get to see what are the product risks? What are the financial risks? Also, we get to be able to quantify the amount of CapEx

00:52:34.000 –> 00:52:56.000

and affects and the time that these changes will actually take. So let’s stick with that example of you want to either lightweight or rigid, like a jar with a cap, or switch from a multi-layer to a monolayer. These changes don’t happen just by deciding that they happen, you know? Somebody has to actually… you have to spend engineering hours to do the development

00:52:56.000 –> 00:53:11.000

The Lion trials testing likely by change parts or new equipment. So there is a pretty significant impact there. And so because you have to not analyze, not just analyze one thing, but analyze pretty much your whole portfolio

00:53:11.000 –> 00:53:15.000

Item by item, packaging family by family

00:53:15.000 –> 00:53:19.000

It’s incredibly complicated to do this either

00:53:19.000 –> 00:53:34.000

in your head or on Excel. And so we use an AI-enabled platform that our customers for our customers to do this, and the output of that is the source reduction plan, as well as a roadmap

00:53:34.000 –> 00:53:37.000

That you can then manage to

00:53:37.000 –> 00:53:42.000

Because once you submit that plan, then for the next 3 years

00:53:42.000 –> 00:53:47.000

Your organization is committing to actually doing all of these packaging projects, you know.

00:53:47.000 –> 00:53:50.000

Yeah, yeah.

00:53:50.000 –> 00:54:17.000

I am looking at the time, and I don’t think we’re going to get to all the audience questions. So we’re happy to follow up if you submit them with your name on it. I do want to get one more in. Are there currently any other states that have already enacted source reduction? Basically, that we can model off of? And I’ll add on, like, not just states in the Us. But other places in the world that maybe have have done this before we’re tackling it now.

00:54:17.000 –> 00:54:30.000

So California is super unique, but lots of places are watching California, let’s put it that way. So to my knowledge, this is a unique California requirement at the moment.

00:54:30.000 –> 00:54:31.000

Okay.

00:54:31.000 –> 00:54:37.000

And might I just add a little bit to that to share that

00:54:37.000 –> 00:54:49.000

Man, like, if you take this topic of source reduction and you were to expand its definition a little bit to changes that are being mandated by regulation

00:54:49.000 –> 00:54:50.000

Yeah

00:54:50.000 –> 00:55:05.000

Now you do see that there are many, there are other states that have different requirements. There are states that have a requirement for adding more recycled content by certain days. There are states that now have requirements for materials of concern

00:55:05.000 –> 00:55:15.000

So things you cannot use in your packaging. Then there is labeling and artwork changes, right? And so when you take all of these things

00:55:15.000 –> 00:55:35.000

The real the thing to take away from this question is, it is not one dimensional right? You have to build out a packaging ecomodulation roadmap, a packaging changes roadmap that not this meets one requirement, but meets all of the regulatory requirements

00:55:35.000 –> 00:55:51.000

And then also is aligned with your innovation roadmap and your productivity roadmap, because you cannot touch one package 3 different ways and expect that to still meet all the requirements, right? You have to synthesize all these down

00:55:51.000 –> 00:55:53.000

into one

00:55:53.000 –> 00:55:58.000

roadmap, and then go and deploy that

00:55:58.000 –> 00:56:20.000

And so, you know, I think that question is a very pertinent one, because as we’re moving from planning to execution, this is the reality, and this is why you actually was the root cause for us to build out a platform, a software platform that allows us to manage this

00:56:20.000 –> 00:56:21.000

Yeah.

00:56:21.000 –> 00:56:33.000

Because all of these are constantly changing and adapting. And so when you change one thing, you can affect three other things, and it’s really important to have line of sight to, oh, if I change this, then these other things change, now I have to remodulate my portfolio.

00:56:33.000 –> 00:56:35.000

Yep.

00:56:35.000 –> 00:56:55.000

Okay, we’re getting a lot of reactions and positive feedback from our audience in the chat about this concept. So thank you so much. Before we wrap up, I just wanted to give you both the opportunity to leave the audience with your closing thoughts and maybe just a few sentences. Pratik, do you want to go first?

00:56:55.000 –> 00:56:59.000

Yeah, thank you. What I would say is, you know

00:56:59.000 –> 00:57:14.000

For every company that we’re working with, every company is looking at this and going, oh crap, you know, this is a difficult requirement to meet. And what I’d like to share with everybody is you’re not unique

00:57:14.000 –> 00:57:31.000

Right? You’re not by yourself. This is a common challenge for a lot of different companies. And within the pet industry, it’s even more heightened given the amount of flexibles that are being used. And so the key thing I would

00:57:31.000 –> 00:57:47.000

would share with everybody is you have resources available to you. The sooner you tap into the resources you have available, whether it’s a packaging, engineering and compliance company like ours, or it’s hiring a consultant

00:57:47.000 –> 00:57:58.000

Or, you know, working with your suppliers, sooner you start and the better an ecosystem you build, the easier this is going to be for you.

00:57:58.000 –> 00:58:01.000

Cheers to that. Mira

00:58:01.000 –> 00:58:06.000

Yeah, I would echo that thought. As I mentioned before.

00:58:06.000 –> 00:58:15.000

companies really need to see this as a tier one priority to get right. This is going to be

00:58:15.000 –> 00:58:28.000

not an insurmountable challenge for companies, and I encourage folks to reach out to the resources that they can tap into now. Don’t wait until

00:58:28.000 –> 00:58:46.000

It’s too late. Reach out now. There are folks who can help guide you and share some expertise. This is relatively new for everybody, and there’s always opportunity to share learnings and use benchmarks and to learn from each other

00:58:46.000 –> 00:58:48.000

Great.

00:58:48.000 –> 00:58:49.000

Sure.

00:58:49.000 –> 00:59:08.000

Alison, might I suggest one more thing? I’m very open just to share, I’m very open to helping folks and answering questions. What I would suggest is if you want to look me up on LinkedIn, please do and then LinkedIn and feel free to ask the questions that you have. And me and my team will

00:59:08.000 –> 00:59:11.000

Help you through those as they come up.

00:59:11.000 –> 00:59:29.000

Okay, thank you. That’s kind of my closing thoughts is I’m getting a real sense of we’re in it together. Obviously, Brands are involved, but retailers are involved. There’s like this one concept of source reduction touches so many different things and everyone is figuring it out. And if we do that together, I think we’ll do it better

00:59:29.000 –> 00:59:32.000

Yeah

00:59:32.000 –> 00:59:33.000

Okay.

00:59:33.000 –> 00:59:43.000

have better outcomes for everybody. So, thank you so much to Mira and Prateek for being here and sharing your wisdom, and thank you for our audience for listening and participating. I’m just really grateful for everyone’s time.

00:59:43.000 –> 00:59:44.000

Thank you.

00:59:44.000 –> 00:59:45.000

Thank you. Nice.

00:59:45.000 –> 00:59:47.000

Thanks, everyone.

00:59:47.000 –> 00:59:48.000

Bye.

00:59:48.000 –> 00:59:53.000

Bye