For many companies, packaging is an expense to protect the goods being sold, but it is also an opportunity. The first interaction between a product in a shop and a consumer often starts with the packaging. It is the voice of the product, with a split second to share the product’s story and show off the quality and brand. A survey by the Paper and Packaging Board in the USA suggests that 7 out of 10 consumers agree that packaging design can influence their purchasing decision1.
No, Smurfit Kappa is not the name of the Smurf fraternity house, they are in fact a packaging company with an ambition of providing sustainable paper-based packaging possibilities to combat the plastic waste problem. In the UK, 2.3 million tonnes of plastic packaging were disposed of in 2017, and less than half was recycled. Our Ethical Investment Plans include Smurfit Kappa, which is held in the Pictet Global Environment Opportunities Fund and the Liontrust Sustainable Future European Growth Fund.
The finance stuff 📈
Company value: £6.02bn
Share price: £25.24
2019 Profits: £424.8m
What does Smurfit Kappa do? 🤷
Smurfit Kappa is a world leader in paper-based packaging. It designs and delivers cost effective packaging solutions for its customers by preventing waste of packaged products, optimising material usage, and reducing transport trips through appropriate packaging design. Smurfit Kappa employs roughly 46,000 people across 35 different countries in Europe and the Americas.
Founded in 1934 as a box-maker in Dublin, Smurfit Kappa made its way to the top as one of the UK’s largest packaging companies. In 2005, the company, then known as Jefferson Smurfit Group (JSG), successfully merged with Kappa Packaging to form what we know today as Smurfit Kappa. It then participated in an initial public offering (IPO) in 2007 – an IPO is when shares of the company are offered on a public stock exchange for the first time as a way of raising new money. As a result, Smurfit Kappa became a member of the FTSE 100, where the largest 100 companies on the London Stock Exchange are listed, and the company is still present on the FTSE 100 to this day.
What positive impact is Smurfit Kappa having? 🌱
Like many of the companies featured in our Ethical Plans, Smurfit Kappa’s approach to sustainability and positive change spreads across all of the pillars commonly referred as ESG practices (Environmental, Social and Governance). The company aims to tackle the issues of plastic usage and waste to landfills through the use of 100% renewable and recyclable paper-based packaging. It is also advocating responsible forestry, water quality and scarcity as well as pollution both on land and in the oceans. With the aim of fighting climate change, Smurfit Kappa is tackling its CO2 emissions by improving energy efficiency, as well as moving from fossil fuels to bio-based energy wherever possible. In 2019, Smurfit Kappa provided its customers with tools to help them determine their carbon footprint – they were used on average 11,000 times a day!
Responsible forestry requires managing supplies of sustainable, renewable fibre, while protecting biodiversity and ecosystems, as well as creating employment in rural areas. Smurfit Kappa is committed to recycling its wood fibres – and in total, these can be recycled up to eight times. Using both recycled and new fibres in production can help deliver fit-for-purpose packaging with the best overall environmental footprint for each package.
All Smurfit Kappa manufacturing sites are Chain of Custody (CoC) certified, and over 99% of their fibres are sourced through Chain of Custody certified supply chains. The CoC certification is regulated by the Forest Stewardship Council (FSC). Having this certification ensures that FSC materials and products are checked at every stage of processing, so customers purchasing products sold with FSC claims can be confident that they have been sourced responsibly.
Looking towards the Social and Governance practices, in 2019 Smurfit Kappa introduced a new Group Ethics Management process which includes an up to date Code of Business Conduct policy and a third party tool for whistle-blower and good-faith reporting, called ‘Speak Up’ services. Smurfit Kappa is also committed to offering all employees at every level the chance to broaden their skills and offer fair opportunity for career progression and pay irrespective of gender.
Smurfit Kappa invested over £3m in social projects in the areas in which they operate through ‘The Smurfit Kappa Foundation’. These projects include support for disadvantaged children in the areas of healthcare, nutrition, and education. The Foundation has set a goal to end poverty in the communities and countries in which it operates, with the aim of helping the local community become self-sustainable. Its annual World Cleanup Day event, where over 8,000 of their employees joined forces to clear designated areas, accumulated in over 20,000 hours volunteered and 10,000 bags and boxes of litter being collected.
What Smurfit Kappa has to say 📣
“We consider climate change, resource efficiency (particularly regarding litter) and people issues such as human rights, safety and well-being, training and development, and diversity and inclusiveness as major global issues, and we are well placed to be part of the solution to these long-term sustainability challenges.
We have realised significant reductions in our carbon footprint since 2005, and over 50% of our energy consumed is from renewable sources. Our product is a vital element in society’s supply chains, improves our customers’ environmental footprints and fully supports the circular economy by being renewable, recyclable and biodegradable.
Our ambition to generate superior returns for all stakeholders focuses us on becoming a truly sustainable and circular company. Within that ambition, generating superior returns for our investors is paramount to enable us to invest in our people, the environment around us, the communities in which we are privileged to operate and in the long-term sustainable growth of the business itself.”
2019 Sustainability Report
What Pictet think… 🤓
Plastic-based waste is a major concern globally, with an estimated 12.7 million tonnes of plastic polluting our oceans each year. The effects are dramatic, with bigger plastic parts choking sea turtles and birds or clogging the stomachs of animals mistaking plastic for food. Micro-plastic is finding its way back via the global food chain onto our plates.
We invest in Smurfit-Kappa to address these issues. The company produces paper-based packaging products that are a necessity to avoid plastic-based waste and helps reducing transportation cost by appropriate package design. A large proportion of the company’s products are based on recycled paper. In addition, Smurfit Kappa owns and operates 100,000 hectares of forests globally.
To wrap up 🎁
With sustainability running through its veins, Smurfit Kappa has been a part of the largest share index in the UK since its Initial Public Offering and that is some achievement. The company’s core product line tackles the problem of plastic packaging waste in landfills, which can take up to 1,000 years to decompose compared to paper which if it wasn’t recycled, can take only 2 to 6 weeks. It is important to remember that it’s not just about what companies contribute environmentally that classifies them as sustainable or ethical. Having key policies in place that ensures all employees are treated fairly is just as important. These are all things Smurfit Kappa values as a company and it makes us proud to have them in our Ethical Investment Plans.
Please remember the value of your investments can go down as well as up, and you could get back less than invested.