The global packaging market is set to hit $1.53 trillion in valuation by 2028. That’s not surprising, given that our dependency on packaging is going up and to the right. As e-commerce overtakes the high street and convenience-driven consumer habits rise, so does our need for packaging.
Packaging keeps products safe and food fresh. Despite growing awareness of its environmental toll, plastic is still widely used. As a material, it’s hard to beat. Plastic is durable, light, versatile, and cost-effective in production. The flipside: only 9% is recycled – and even then – it’s hard to break down. Moreover, many plastic products contain thousands of chemicals, raising significant health concerns since they can disregulate our internal systems. We desperately need solutions, yet driving innovation within the industry remains hard. Regulations differ widely between borders, making the landscape hard to navigate. Ambiguity in labels and definitions allows greenwashing to seep into the market, slowing progress in this area.
This hasn’t stopped investors from pumping over $6 billion into the packaging market since 2015, according to our data. From biodegradable plastics to reusable containers – this article provides a glance into the world of packaging.
The Sustainable Packaging Market Investment Trends
Since 2015, the number of deals in sustainable packaging companies has steadily grown, peaking in 2023. Biodegradable and recycled packaging consistently show strong growth, with reusable packaging seeing a significant uptick post-2020, reflecting rising concerns over single-use plastics.
Biodegradable Packaging
Plant-based materials are gaining attention as plastic alternatives since they’re easier to compost. New technologies are making it possible to extract biopolymers from seaweed and fungi to create new sustainable materials. Mycelium, the root-like structure of fungus, can be cultivated into forms to substitute plastic foams for example, making it a promising substitute.
Companies like The Magical Mushroom Company, Ecovative, and Shroom Technologies are leading the charge with fungi-based packaging. Another biodegradable packaging company gaining traction is Cambridge-based startup Xampla, which recently secured €6.4 million from investors including CIECH Ventures, Amadeus Capital Partners and Horizon Ventures to reduce plastic pollution from manufacturers. Edible packaging solutions are having a moment too with companies like Apeel Sciences and Saveggy mimicking the natural cuticle layer of plants to create protective coating layers for fruits and vegetables. Still, finding packing materials that can fully substitute plastic remains a challenge, since most eco-friendly alternatives still struggle to compete with plastic in functionality and cost-effectiveness.
Reusable Packaging
Reusable packaging has made a comeback due to growing concerns over single-use plastics. Investors have traditionally steered away from reusable packing companies since they can be hard to scale. Product applications are limited, and consumer perception hinders widespread acceptance since reusable packaging is associated with a higher price tag. This could all shift though, with many countries taking legislative actions to ban single-use plastic, driving broader adoption.
With that said, product innovation alone won’t decrease our ecological footprint. Good circular-based business models and return systems are needed to close the loop. This has led to companies like Clubzero emerging encouraging consumers to reuse containers and jars when purchasing products or meals. Many of these systems operate a deposit scheme, giving a financial incentive to return the reusable containers. Vytal is one of those, a startup using scanning technology to allow users to receive deposits directly on their mobile phones when returning packaging. The reuse approach has been found to scale well within B2B settings.
Recycled Packaging
There is a common misconception that recyclable materials equals less carbon emissions. Looking closely though, the production process can often be carbon-intensive and even offsetting environmental benefits. Not all materials are equal in their recycling impact. Metals like aluminum and tin can be recycled indefinitely, unlike plastic, which can undergo the process up to seven times, significantly reducing quality in each cycle. However, recognizing that completely letting go of plastic is unavoidable, innovation is also needed to improve plastic recycling processes. Halocycle is a company improving plastic recycling through microwave processing, specifically targeting chlorine-containing plastics like PVC to create a circular lifecycle. Other solutions include Scindo and DePoly. Scindo biological enzyme system produces recycled feedstocks for plastic production, addressing the challenges of crude oil reliance. Similarly, DePoly has a proprietary chemical recycling process that converts PET plastics and polyester textiles back to their raw materials.
The Sustainable Packaging Market Remains Hard to Crack
Of course, reusing, recycling, and composting are only pieces of the puzzle. We need to reduce our overall need for packaging too. In the past decade, measures have been taken to reduce single-use plastic by eliminating components like unnecessary lids and labels from products. Another challenge is one of design. Void space within packaging, for example, contributes to waste and leads to larger transport volumes, resulting in higher carbon emissions. Although innovation is happening all across the board, finding a one-for-all solution remains hard. The lack of cohesive framework makes it difficult to create effective solutions, creating confusion for manufacturers and consumers.
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