Case study- Sustainability Marketing

Date: January 1, 2019 B5884

S A R A L. B E C K M A N S T E F A N I E R O B I N S O N S E R E N P E N D L E T O N - KN O L L

Rewarding Consumers for Recycling Packaging: Kimberly-Clark Seeks Shared Value

Senior Lecturer Sara L. Beckman prepared this case study with Associate Director of the Laboratory for Manufacturing and Sustainability (LMAS) Stefanie Robinson, Berkeley-Haas Center for Responsible Business Program Director Seren Pendleton-Knoll, and with assistance from Case Writer Elizabeth Whalen, as the basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation.

Copyright © 2017-2019 by The Regents of the University of California. All rights reserved. No part of this publication may be reproduced, stored, or transmitted in any form or by any means without the permission of the Berkeley Haas Case Series

We are a company manufacturing primarily disposable products.

If we’re not working to help solve waste issues, we’re not working on the right things.

—DANI E L LOCKE, SUST AI NA BI L I T Y ST RAT E GY AND BUSI NE SS DE VE L OPM E NT AN AL YST, K I M BE RL Y-CL ARK

As 2015 drew to a close, Kimberly-Clark Corporation celebrated its recent sustainability achievements; by December 2015, for example, Kimberly-Clark had diverted 95.6 percent of its manufacturing waste from landfill,1 against a goal set in 2010. At the same time, Kimberly-Clark was looking forward to introducing its sustainability goals for 2022, the year that will also mark the company’s 150th anniversary in business. The company’s 2022 sustainability goals extend the zero-waste mindset to all Kimberly-Clark solid wastes, not just those produced directly by its manufacturing operations. Specifically, the company set the goal of cumulatively diverting 150,000 metric tons of post-consumer product and packaging waste from landfills between 2016 and 2022.2

1 Kimberly-Clark 2015 Sustainability Report, “Sustainability for a Better Life” 2 Kimberly-Clark 2015 Sustainability Report, “Sustainability for a Better Life”

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KIMBERLY-CLARK FLEXIBLE FILM PACKAGING 2

Charged with helping Kimberly-Clark achieve the packaging component of that goal are two members of the sustainability team: John Opsteen, Secondary Materials Program Leader, and Daniel Locke, Sustainability Strategy and Business Development Analyst.

“We’d never set this type of externally facing target that has to do with the products and packaging after consumption,” said Opsteen. “The goal was set based on a pipeline of ideas that we believe can get us into the ballpark. We’re working to identify opportunities that create value for the entire supply chain. It’s really an evolution from the linear mindset where you take, make, and then dispose of things. We’re working to create a more circular business model that allows us to recapture materials for reuse.”

Of particular interest to Opsteen and Locke are packages made of flexible plastic film, which are wrapped around a large share of Kimberly-Clark’s products, including diapers, paper towels, toilet paper, and feminine hygiene products, as well as similar products made by other companies. These packages, which are made of material similar to that in plastic shopping bags, serve several purposes. They keep the products clean during transport and on store shelves; they help market the products, and they contain the Universal Product Code (UPC) that is scanned at the store register.

Flexible plastic film is currently the best packaging material available to Kimberly-Clark. “From a greenhouse gas perspective, the film is superior. It’s the lightest, most hygienic material we can consume. Everything about it, except for its disposal, is better than the alternatives,” Opsteen explained. The company can also package a large amount of product for a relatively low cost, in part because a single package, which weighs about two grams, can be made with very little plastic resin.

However, public perception of plastic shopping bags appears to be turning negative, with some communities banning these bags. These perceptions may eventually apply to flexible film packaging, which is one driver of Kimberly-Clark’s interest in diverting the films from landfills. “It’s very important to Kimberly-Clark that we continue to use flexible film,” Opsteen said. Other key motivators for the focus on flexible film packaging are its prevalence in packaging of all kinds and the fact that very little of it is recycled.3

According to draft estimates from the Closed Loop Fund, a social impact fund, approximately 3.2 billion pounds of flexible plastic film are disposed of by households each year in the U.S. That amount includes both film packaging and plastic shopping bags. Approximately 300 million pounds of film enter municipal recycling facilities (MRFs) each year, but only about ten million pounds of that film is recycled because most MRFs are not equipped to process it. The remaining 290 million pounds are landfilled.

The fact that flexible plastic film can be returned to stores for recycling presents a key opportunity; approximately 18,000 acceptance locations now exist in the U.S.4 Stores sell the collected film to plastics recycling companies that recycle it into film, rigid plastics, and other products. Stores also sell film to other companies, including Virginia-based Trex, which combines recycled film with recycled wood to produce composite lumber used in decking and fencing.5 The Closed Loop fund estimates indicate that about 136 million pounds of flexible

3 Other teams within Kimberly-Clark are working on other ways to reach the post-consumer waste-diversion goal. 4 2013 National Postconsumer Plastic Bag & Film Recycling Report, prepared by Moore Recycling Associates Inc. for the American Chemistry Council, February 2015.

5 Trex website: http://www.trex.com/why-trex/eco-friendly-decking/

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plastic film is recycled each year, 126 million pounds through store drop-off and ten million through MRFs, for a total recycling rate of less than four percent.6

To encourage consumers to return these films, thereby keeping them out of landfills, Opsteen and Locke are considering developing a consumer rewards program that would increase film recycling and allow Kimberly-Clark to track both the total amount of film returned and individual consumer behavior. Tracking would, in turn, help the sustainability group accurately describe goal progress to company brand leaders and the company to publicly communicate its performance.

“At the end of the day, we’re trying to divert materials from landfills to give them a second life,” clarified Locke. “That’s more important than tracking, but we hope to accomplish both together.”

Opsteen believes that the recovery value of the film itself is too low to fund rewards substantial enough to encourage consumers to return films to a store. However, he also believes continued use of the films is an important issue for other entities in the plastic-film value chain. This is where Opsteen and Locke see opportunity: perhaps these other entities, particularly retailers, also see enough business value in maintaining use of the films, and in the consumer data a rewards program would collect, that they would be willing to help fund such a program.

Regardless of the form the program takes and how it’s funded, it needs to create a significant and measurable increase in post-consumer recovery rates for Kimberly-Clark to consider it a success.

“We don’t want to go through this process of creating a platform and then have consumers not participate in it. We’ve really got to think long and hard about what’s going to motivate and drive a consumer to participate,” Locke said. “Then, we need to work together with key stakeholders in the value chain to make the program as successful as possible.”

Enabling Recycling through the How2Recycle Program

The flexible film Kimberly-Clark uses to package many of its consumer products is sometimes called single-layer polyethylene film (SLPF)7 because it does not contain layers of other materials, such as metal foil found in some drink pouches, or adhesives.

The SLPFs act as a contaminant in most U.S. municipal recycling programs because the programs are single-stream; that is, paper, cardboard, rigid plastic containers, and glass and plastic bottles are collected in one bin rather than separated into different bins. The processes and equipment now common at single-stream MRFs are not designed to handle the lightweight SLPFs, which can wrap around sorting equipment, reduce efficiency for other recyclables, and add costs.8 Those SLPFs that come in contact with other recycled materials in single-stream bins and at single-stream MRFs may stick to other materials, particularly if wet or affected by static electricity. Or, they may collect nearby dirt or residues from other materials and become extremely difficult to separate, causing contamination.

6 Calculated based on 126 million pounds out of a total of 3.2 billion pounds. 7 This term is used to ensure clarity and simplicity in this case study. It is not necessarily a term used throughout the plastics industry.

8 2013 National Postconsumer Plastic Bag & Film Recycling Report, prepared by Moore Recycling Associates Inc. for the American Chemistry Council, February 2015.

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“The quality and the cleanliness of the film after passing through a single-stream process immediately present challenges to its reuse and recyclability,” said Opsteen. “Even if single- stream MRFs did modify their assets to not treat the film as a contaminant, and they were actually able to pull it through the system, the film would have to be cleaned.” Indeed, film collected through curbside programs has historically had far less scrap value than bags and films collected at retail stores, which are largely free of contaminants.9

As a result, most single-stream MRFs do not accept SLPFs, leaving consumers with two options: throw the films away or deposit them in collection bins at retail locations. These bins, often located near the store’s entrance, are also designed to accept plastic shopping bags.

To make consumers aware of the store drop-off option, Kimberly-Clark has partnered with How2Recycle, an initiative of the Sustainable Packaging Coalition (SPC),10 which is led by environmental nonprofit GreenBlue. How2Recycle has developed standardized labels that its brand members may put on packaging. The labels show consumers 1) how to prepare a package for recycling, 2) whether and how the package can be recycled, 3) the recyclable material, and 4) to which part of the package the label applies. For example, for SLPFs, the top part of the label says “Recycle if Clean & Dry.” The next part of the label, which includes the international recycling symbol of three arrows in a triangle, says “Store Drop-Off” for SLPFs. (For widely recyclable packaging, the symbol includes no additional text.) The third part of the label on SLPFs reads “Plastic,” and the fourth part says “Wrap.”11 Running down the right side of the rectangular label is “how2recycle.info,” to encourage consumers to visit the How2Recycle website. (See Exhibit 1 for examples of How2Recycle labels.) The website also includes a store locating function to allow consumers to easily identify nearby retail locations that accept SLPFs.

How2Recycle developed its labels to reduce confusion among consumers about what is and is not recyclable because this tends to vary from community to community. It also developed the labels to follow the Federal Trade Commission (FTC) Green Guides, which help marketers “avoid making environmental marketing claims that are unfair or deceptive” under the FTC Act.12 If, for example, the How2Recycle label indicates the packaging is widely recyclable, at least 60 percent of Americans can recycle it through curbside or drop-off recycling programs.

Plastic films with the “Store Drop-off” label must meet recyclability criteria. Some Kimberly- Clark products, such as wet wipes, require moisture-barrier characteristics in the plastic film that currently render the packages non-recyclable.13 Therefore, the How2Recycle label on packages like these should contain a line through the recycling symbol directing consumers to throw away the package.

Kimberly-Clark pays an annual licensing fee to How2Recycle to use the labels. How2Recycle members may choose to place the labels on all or just a portion of their product packaging. Kimberly-Clark currently puts the label on most of its products, approximately 900 of them, and

9 2013 National Postconsumer Plastic Bag & Film Recycling Report, prepared by Moore Recycling Associates Inc. for the American Chemistry Council, February 2015.

10 The coalition consists of member companies throughout the packaging supply chain, including waste management companies. Not all members of the coalition participate in the How2Recycle program.

11 Some packages, such as a paper box wrapped in plastic, contain multiple components; these packages will have a How2Recycle label with information for each component.

12 https://www.ftc.gov/sites/default/files/attachments/press-releases/ftc-issues-revised-green-guides/greenguides.pdf 13 If Kimberly-Clark developed a new film with the necessary moisture-barrier properties that is recyclable, that would fall under the third prong of the product and packaging post-consumer waste-reduction goal, which is explained in the “Kimberly-Clark’s Packaging Sustainability Goal” section.

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the majority of its retail-facing products are wrapped in plastic film.

Prior to establishing its partnership with How2Recycle in 2014, Kimberly-Clark had an agreement with another recycling labeling and collection program. That program tracked return rates because it required consumers to mail in the packaging. Kimberly-Clark chose to switch to How2Recycle because the previous program’s annual price was high relative to the participation rate. “Our return on investment was low even though there were a lot of touch points for the previous program. There was a lot of social media buzz, et cetera, but we weren’t getting the number of packages back that we were hoping,” elaborated Kathleen Gauger, a member of Kimberly-Clark’s North American consumer packaging team who oversees the company’s relationship with How2Recycle.

Through the previous program, consumers got a credit of approximately two cents for each Kimberly-Clark package returned that would go to a charity of their choice. Kimberly-Clark paid for those credits, but “the scope and efficacy of the program needed improvements. Due to this, Kimberly-Clark decided to search for alternative programs with a more holistic approach,” said Becky Walter, a research and engineering leader and sustainability champion at Kimberly-Clark.

Another issue with the previous program was that the labels did not apply to materials the program did not accept. The How2Recycle labels can go on a wide range of products. “It reaches all the material types used in packaging, and it is based against industry and nationwide studies to say what different collection agencies can take or not. It helps consumers know what can go in this stream and what should not go in this stream,” Gauger said. “And it even has the logo to say not to recycle certain materials because they are not compatible.”

Raising Consumer Awareness

Since February 2012, consumers visiting how2recycle.info have had the option to take a survey about the label, their recycling behavior, and their perceptions of brands using the How2Recycle label. Between the survey’s launch and January 31, 2016, 1,900 responses to the survey have been recorded.14 Seventy-two percent of respondents indicated they found out about How2Recycle by seeing the label on a package. Half of the total respondents said they had changed their behavior based on the label or website, and of these, 46 percent said the change was dropping off a plastic bag or film at a store for recycling. Between early 2014 and early 2016, 320 total respondents indicated they have started recycling plastic bags and films as a result of the How2Recycle label.

Of those survey respondents who saw the label on a product, 77 percent said they had a more positive impression of the brand making the product as a result; 18 percent said their impression of the brand remained the same. Between July 2015 and January 2016, the number of respondents indicating they had seen the label on a Kimberly-Clark product increased 70 percent. How2Recycle generally attributes these increases to a brand adding the How2Recycle label to more of its products or to an increase in the volume of the brand’s How2Recycle-labeled products in the marketplace. (See Exhibit 2 for more data on responses to the survey, including the number of respondents for each question.)

To Kelly Cramer, senior manager at the SPC and leader of the How2Recycle program, the survey results indicate the large potential to increase recycling by educating consumers. “People don’t

14 How2Recycle Consumer Survey Report, March 2016.

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realize that they can recycle the films at the store, but they are realizing that more and more because of the How2Recycle label,” she said. Anecdotally, Cramer has also found that people are pleasantly surprised to discover, through the label, that they can recycle plastic film packaging along with plastic bags. “The label itself is such a powerful education tool,” she added. “It is the main piece when it comes to education, and it does a lot. We’re packing a lot of information about packaging recyclability into a simple and elegant label design.”

Still, she believes that other entities in the packaging supply chain have a role to play in education. “I think that retailers could make their signage clearer about what they accept, and I think that signage could be more uniform,” she explained. “Sometimes people are confused if it just says it accepts plastic bags. Sometimes, they want confirmation that it’s definitely OK to put a toilet paper wrap or similar plastic wrap in the bin.” At other times, consumers are unsure what to do if a bin appears full; Cramer thinks it would be helpful to have a sticker on the bin that says consumers can indeed pack in additional films.

“One critical way that brands can increase the impact of the How2Recycle label is by putting it in a prominent place on a package, which I see Kimberly-Clark doing,” Cramer said. “On Cottonelle, for example, the How2Recycle label is on the back of the package next to all the other consumer information that one would read.” She also notes that Kimberly-Clark uses How2Recycle labels that exceed minimum size requirements and prints them using a process that makes the text sharp and easy to read.

“There are also a lot of opportunities online, through social media and digital media storytelling, to let people know this is something you can do,” she continued. “If I were in the position of a brand company, I would scream about the store drop-off label from the rooftops because I didn’t even know plastic film packaging was recyclable until I worked at GreenBlue.”

Going from Education to Behavior Change

Cramer recently learned about a three-step behavior-change model developed by B.J. Fogg: 1) get specific about the behavior you want, 2) make it easy and remove obstacles to the target behavior, and 3) trigger the behavior.15

“We think the How2Recycle label fits into all three of those pieces,” Cramer said. “We want people to recycle, so we tell them exactly how. We make it really easy for people to look at the label and know what to do, and since no behavior happens without a trigger, I think it really helps consumers to have that label on package to remind them to recycle.”

To date, Kimberly-Clark has not added promotional information to its product packaging specifically telling consumers that the How2Recycle label has been added to the package. “That would compete with other messages on pack, such as the different features of the product,” Gauger said.

The company also has not run advertising campaigns specifically telling consumers that the How2Recycle label is on its products. “Packaging is not the primary reason consumers buy our products,” added Walter. Therefore, she doubts the company would feature information about packaging sustainability in its advertising campaigns. But, Kimberly-Clark might use other channels, such as its website or its annual sustainability report, which featured the program in

15 The Fogg Method, http://www.foggmethod.com/

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2016,16 to publicize the How2Recycle program.

Kimberly-Clark is one of many well-known brands participating in the How2Recycle program; others include Walmart, Wegmans,17 Coca-Cola, Kellogg’s, Clorox, and Verizon. According to Opsteen, many of the participating companies that use SLPFs are exploring how to support SLPF recycling, and retailers in particular are educating consumers about SLPF recycling. To his knowledge, however, Kimberly-Clark is the only How2Recycle participant seeking to incentivize consumer behavior change with respect to SLPFs.

The Market for Recycled Plastic Film

After SLPFs are deposited into store collection bins, the retailer bales them and sells them to a commercial recycler or to a company like Trex, the composite lumber maker. Many retailers also bale and sell other waste, including stretch film wrapped around pallets of goods and corrugated paperboard, so a collection process and return infrastructure already exist for post-consumer films. Some retailers separate stretch film from dropped-off bags and packages; some do not.

Buyers of SLPFs include Novolex, a company headquartered in Hartsville, South Carolina that produces a variety of packaging products, including paper and plastic bags. Novolex has two plastic-film recycling facilities of its own and contracts with other recycling facilities around the U.S.

Novolex’s owned facilities are currently operating at maximum capacity and unable to accept additional film input, according to Phil Rozenski, Senior Director of Sustainability for Novolex. In addition, each facility processes a different input stream of film. One processes primarily post- consumer shopping bags returned to grocery stores. The other processes plastic films individually wrapped around apparel items, such as sweaters, that are shipped from overseas factories to shopping malls. Store workers remove these films before displaying the apparel on racks and shelves.18 The contamination in each stream differs: for shopping bags, the primary contaminant is receipts; for apparel wraps, it is labels and the adhesives that attach the labels to the bags. Removing these contaminants requires different processes, and matching the input stream to the facility’s contaminant-removal process increases efficiency.

Total capacity in the U.S. is slowly growing. According to Rozenski, one or two new facilities that process plastic films come on line each year. Support for film recycling is also coming from other sources. For example, the Closed Loop Foundation19 recently partnered with SC Johnson, maker of Ziploc bags, to award $300,000 in grant money to two recycling companies for film- related projects.20 However, Rozenski says new firms face risks related to the nature of plastics recycling, which differs from aluminum, paper, and glass recycling.

When energy consumption rises in response to low oil prices, plastic production rises and prices fall. The current low oil prices are increasing the amount of virgin plastics available, and recycled plastics never sell for more than virgin plastics do.

16 http://www.kimberly-clark.com/sustainability/Pages/Reports/WasteandRecyclingReport.aspx#Innovating 17 Wegmans is a grocery chain serving the Mid-Atlantic and New England regions. 18 Consumers do not receive these films with in-store purchases but may receive them through online or catalog orders. 19 The Closed Loop Foundation is the nonprofit arm of the Closed Loop Fund. 20 Environmental Leader, http://www.environmentalleader.com/2016/09/22/closed-loop-foundation-awards-300k-to- plastic-film-recyclers/#ixzz4Lf5UpfVf

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“There’s a risk when you invest in recycling,” Rozenski said. “Prices were up two years ago, and it was a great time to be in plastics recycling. It has swings like no other product.”

Demand for films containing at least some recycled content is growing. In fact, Novolex added the second of its two owned facilities to respond to this demand. It also continues to expand its relationships with other recycling facilities. A key driver of this demand is the desire to reduce costs. For example, buyers of Novolex’s plastic shopping bags include grocery stores, which also collect used bags and SLPF packaging. “We’ll recycle it and use that lower-cost material in their bags and share that benefit with them,” Rozenski said. Because the stores collecting the material are also buying the bags Novolex makes from that material, transaction costs are lower than they would be if virgin plastic were used or if a third party, such as another manufacturer, were involved. “We’ve found a way to save that cost for everybody.”

Kimberly-Clark’s Packaging Sustainability Goal

Founded in Wisconsin in 1872, Kimberly-Clark is now headquartered in Dallas, Texas; it operates in 36 countries and employs approximately 43,000 people worldwide.21 Its products, which include Kleenex facial tissue, Huggies diapers and wipes, Scott paper towels, Cottonelle toilet paper, and Kotex feminine care products, are sold in more than 175 countries.22

The company’s 2022 sustainability goals cover five pillars, one of which is waste and recycling.23 It is under this pillar that the goal of diverting 150,000 metric tons of product and packaging waste from landfills falls. To achieve the goal, Kimberly-Clark is taking a three-pronged approach. The first is developing a post-consumer waste recovery program, which could include the proposed consumer rewards program. The second focuses on re-designing products to reduce their material content while maintaining their performance. One example is Scott Tube-Free toilet paper, which eliminates the cardboard tube at the center of the roll. The third prong is designing for recyclability, which focuses on finding ways to increase the recyclability of products and packaging.

Savings and diversions from any of these programs may count towards the 150,000 metric ton goal. For example, Kimberly-Clark is counting the weight of the toilet paper tubes it is not putting into the market, through sales of its Scott Tube-Free product, towards the goal.

When it comes to calculating the contribution of post-consumer waste recovery to the goal, enabling the recovery of Kimberly-Clark product packaging is just one component. That is, the company packages as many of its products as it can in films eligible for store drop-off recycling but counts towards its diversion goal only those that are actually recycled. At present, the company estimates how many of its eligible packaging films are returned based on the Closed Loop Fund estimates of the total amount of films returned. Current estimates indicate approximately 3.9 percent24 of recyclable packaging films are returned to stores for recycling, so Kimberly-Clark would count 3.9 percent of the weight of its recyclable film packaging towards the goal. To the extent that the estimated percentage changes, Kimberly-Clark would adjust the amount counting towards its goal.

21 Kimberly-Clark company profile: http://www.kimberly-clark.com/newsroom/media_resources/companyprofile.aspx 22 Kimberly-Clark 2016 Fact Sheet, http://www.cms.kimberly-clark.com/umbracoimages/UmbracoFileMedia/2016 KMB Fact Sheet_umbracoFile.pdf

23 The other four pillars are social impact, forests and fiber, energy and climate, and supply chain. 24 Calculation based on 126 million pounds recycled through store drop-off out of a total of 3.2 billion pounds.

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If Kimberly-Clark develops a program that collects specific data on return rates of Kimberly- Clark films, that data would replace these estimates in the company’s goal-progress calculations. If data from the program, or from another innovation that Kimberly-Clark introduces, shows increased consumer return of films, packages from other companies’ products could also count towards the goal.

“Ideally, if we can mobilize the right group of stakeholders, build in some incentives, and properly seed this in the right retailers—let’s say we get a ten percent lift in return and we can see that through data—we can say how many tons of film we’ve diverted from the landfills,” explained Opsteen.

Long-Term Packaging and Recycling Alternatives

Kimberly-Clark is unlikely to replace the SLPFs it now uses with a different form of packaging. The company has made substantial investments in packaging equipment and other assets. These investments, in combination with the appealing characteristics of the films themselves, reinforce Kimberly-Clark’s continued use of SLPFs.

However, the material the films are made of may eventually change to include more bio-based plastics. “That, to me, would be game changing,” said Brent Thompson, a member of the Kimberly-Clark corporate research and engineering team. These materials are currently too expensive to be cost-effective for Kimberly-Clark’s operations, and low oil prices are increasing the cost gap. If and when those conditions change, Thompson expects the marketplace will begin to shift away from non-renewable, petroleum-based plastics to bio-based plastics.

Today, Kimberly-Clark uses some recycled plastic in its film packaging, the source for which is recycled rigid containers, such as milk jugs, not recycled film. These containers are more widely available than recycled films are, and they are denser. As a result, the number of recycled rigid containers required to make a given number of new film packages is much lower than the number of returned film packages would be.

Rigid containers are also typically made with similar materials, regardless of the supplier. Milk jugs, for example, are made essentially the same way from the same resin by most suppliers, but the contents of film packaging varies from supplier to supplier. The consistency of input materials is crucial to meeting Kimberly-Clark’s packaging specifications. Inconsistent inputs can adversely affect the performance of the final packaging product in unknown ways, and determining those impacts for every variation of input can become an exhausting, cost-prohibitive process.

However, resins made from recycled films are more chemically similar to new films than resins made from rigid containers are, so recycled film resin can be processed into new film at a lower cost. As a result, Thompson would prefer recycled film to rigid containers as an input, but consistency remains a problem. “From a cost standpoint, if there was a consistent market, we would be willing to pay more for consistent film made from recycled material [than inconsistent film],” he explained. “And as a result, we could use it at a higher percentage because it’s consistent and therefore its properties are predictable. If it’s inconsistent, you can’t put in a larger amount of recycled polymer due to the increased risk to the final packaging performance.”

Opsteen and Locke see the How2Recycle label and the proposed consumer rewards program as helping address this issue because the two programs are intended to increase the availability of a consistent recycled film and reduce the cost of resins made from that material. The label is also

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designed to help reduce contamination, both by requiring packages to meet recyclability standards and by educating consumers about what may and may not be placed in store drop-off bins.

Another long-term change could come at the MRFs. “The way I look at this issue, we need to go down parallel paths,” said Bridget Croke, head of external affairs for the Closed Loop Fund, which invests in the physical infrastructure component of programs designed to increase recycling.25 The first path is maximizing the use of the existing film-recycling system of store return. The second is innovating collection and processing to expand the types of materials that people can recycle through municipal programs. “[Accepting films] is an engineering barrier, and I think it’s a huge perception barrier for MRFs, which I think is probably going to be even the bigger issue if we solve the engineering challenge,” Croke said. “But technically, it’s possible; it’s feasible but would require a lot of work. If we can build the end market and drive value in the material type, it’s money to be made for these guys, and if they can make money on it, there’s an engineering solution to be had.”

Whether MRF collection of SLPFs occurs or not, it will almost certainly not happen in time to support Kimberly-Clark’s 2022 goal, and the transition could be expensive. “There was a lot of money put into single-stream recycling here in the U.S.,” said Locke. Changing that model would require similarly large investments, so collecting flexible films in a store-drop off program “is probably the quickest and most economical way to go at this point,” he added.

What Drives Consumers to Recycle

Locke, Opsteen, and their colleagues across multiple divisions at Kimberly-Clark view the How2Recycle labels as the first step to changing consumers’ habits. The Kimberly-Clark team segments consumers into categories with respect to their willingness to recycle. Although some people recycle because doing so is part of their self-perception and value system, this group is the minority. Most people will change their behavior only in response to financial incentives. The Kimberly-Clark team cites data from states in which consumers pay a deposit on beverage containers as strong evidence for the idea that rewards can increase recycling. For example, according to the Container Recycling Institute (CRI), a nonprofit that advocates for deposit legislation, beverage container recycling rates in states with these laws are approximately 60 percent; in states without these laws, rates are about 24 percent.26 The team also sees the Box Tops for Education program as evidence that consumers are willing to return packaging in exchange for a financial reward. Through this program, parents clip out a label from products they purchase and send those labels to their child’s school.27 The school turns in the labels and receives a check based on the number returned.28

A consumer rewards program for SLPF recycling would encourage consumers to see the packaging itself as having value, just as container-deposit and the Box Tops for Education programs do, while simultaneously helping divert the films from landfills.

Today, consumers do drop off plastic shopping bags at stores, an act that typically comes with no financial reward. According to a study Novolex conducted, between 60 and 75 percent of bags are reused for other purposes, such as lining trashcans. About 15 percent of bags are recycled.

25 For example, the fund provides low-interest loans to finance MRF equipment and collection bins. 26 Container Recycling Institute: http://www.container-recycling.org/index.php/issues/bottle-bills 27 Some Kimberly-Clark products are eligible for this program. 28 Box Tops for Education: http://www.boxtops4education.com/about

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“We’re getting back almost 50 percent of the bags remaining after reuse,” Rozenski observed. “A 50 percent recycling rate, there’s only one thing that beats that: aluminum cans at 60 percent. It’s actually one of the most recycled items already.”

The SLPFs wrapped around Kimberly-Clark products do not have obvious reuse options, though, and Rozenski sees the How2Recycle label as a key way to increase consumer awareness of recycling these films. “Recycling wise, we’ve done a terrible job as a society with plastics,” he said. “We put a logo and number on there and that told you what it is, and people had to go online and look that up, find out what it is, and then look up how you handle it. Nobody cares what it is. They want to know what to do with it. That’s where How2Recycle is cutting out two or three of those steps and educating consumers.”

The Role of Rewards

Before joining the Closed Loop Fund, Croke worked at New York-based Recyclebank, a company that works with communities, waste management companies, and businesses to incentivize green actions, including recycling.29 In communities with Recyclebank programs, citizens can earn points for recycling, which they can redeem for rewards like magazine subscriptions and discounts at restaurants. Municipalities save money on landfilling, which is used to fund the rewards. Overall, the program increases recycling rates, in some cases more than doubling them, but Croke cautions against assuming these changes resulted solely from the introduction of rewards.

“Often we went in with several things at the same time, so there was not a single variable,” she elaborated. For example, the rewards program was often introduced as part of the community’s switch to single-stream recycling and the distribution of large recycling carts, design shifts that made recycling easier. “And we know from other programs that recycling rates go way up when people have to do less work.”

Rewards also need to be commensurate with the level of action the consumer has to take. Croke acknowledges that awareness is a challenge when it comes to recycling SLPFs, but she also believes asking consumers to take multiple steps to recycle them is a substantial barrier. People must remember to separate their bags and film wraps, put them in their cars, take them to a store, and correctly identify which films can and cannot go into the store drop-off bin.

“It will take some testing to understand how much of a motivation someone needs to make a higher barrier action like a store return. I don’t know the answer to that, but we do know that economic messages definitely play a role. They impact people’s behavior,” Croke said.

Still, there is risk with introducing a rewards program; questions Croke raised include: What will the cost of the program be and how will that change over time? What is the consumer actually getting? What will happen if the incentive goes away at some point? What is the communication to the customer in that instance? If the program were discontinued, would that negatively affect recycling in the long term?

Furthermore, some consumers in states with beverage container deposits are not swayed by the redemption value and may choose to recycle their bottles or cans in the curbside bin because doing so is convenient. Or, they may choose to throw away the containers. “People who are

29 Recyclebank corporate info: https://www.recyclebank.com/corporate-info/

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busy, people with a certain level of affluence, there are a lot of people who will just say, ‘I will lose the five or ten cents,’” Croke said. In her work with Recyclebank, she found that some people actively redeemed points and some simply let them accumulate. Company surveys indicated that the program’s perceived value was sufficient to influence some consumers’ behavior, even if they did not exchange their points for rewards.

Non-Reward Drivers of Recycling

Other factors can spur recycling, including awareness, which can go beyond simply knowing something is recyclable and how to recycle it. For example, seeing one’s friends or co-workers recycling, or discovering the severely negative consequences of failing to act sustainably can each spur action, suggested Ben Jarrett, who leads sustainability marketing in North America for the Kimberly-Clark Professional division. “My earliest memory of being sustainable was cutting up the six-pack rings from Tab to protect the turtles.” He recalled watching cartoons on Saturday morning and seeing advertisements promoting these kinds of environmentally preferred actions. “Those kinds of campaigns have power,” he said.

The Kimberly-Clark Professional division’s customers include office buildings, health care facilities, schools, hotels, and sports stadiums. Although the packaging for these products is largely corrugate, not plastic film, waste can quickly become an issue with customers. For example, customers may choose to switch from certain products due to zero-waste or landfill- diversion goals. “Nine times out of ten, when that happens, it’s because someone in the organization went out behind their building and saw the volume of trash generated,” Jarrett explained. “We don’t see those every day, but I think that awareness would accelerate behavior change. Still, to get widespread behavior change, there needs to be a monetary incentive.”

In 2015, retailer Walmart began piloting the use of the How2Recycle label on its private branded products to understand how adding the label would affect production. Through that pilot, Walmart found a substantial lack of awareness among its suppliers of what constitutes recyclable packaging. In response, the retailer has taken several steps to encourage suppliers to learn about and use the How2Recycle label. In some cases, that process has shown suppliers their packaging is not recyclable and needs to be changed in order to be considered recyclable. Walmart is now planning to expand use of the label. “Before we go forward with further promotion or advertising about it, and I don’t mean advertising in the traditional sense but just communicating about it, we want to actually make sure it works and you can see it on our products,” said Ashley Hall, a senior manager on Walmart’s corporate sustainability team.

Access and convenience also encourage recycling. For example, not all recycled SLPFs enter the recycling stream through store drop-off. Trex collects plastic film through drives at schools and universities and in communities.30 Kimberly-Clark’s Neenah, Wisconsin, campus, where about 3,000 employees work, recently held a How2Recycle drive to collect SLPFs. “We received about one thousand pounds within a month,” said Thompson, who works at the Neenah campus. “People are more than willing to bring things to avoid throwing them in the landfill. If you tell them you’ll take their plastic bags and use them for another application, they will bring them to you if they’re aware of the program.”

However, Thompson is skeptical that participation at the Kimberly-Clark facility represents general knowledge about and interest in returning films for recycling. “I don’t think the general

30 Trex Recycling Programs: http://www.trex.com/recycling/recycling-programs/

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consumer really worries or bothers about it at all. I say that because I’ve gone to numerous recycling facilities, and I generally see plastic packages in the incoming loads. And they tell you right on the recycle bins, no bags, no films,” Thompson observed. He believes people continue to put the films in the recycling bins because they don’t want them to end up in landfills or because they simply are not aware of the issues the bags cause local municipalities. “However, along the landfill boundaries are thousands of plastic shopping bags clinging to fences or trees because they blow in the wind. The How2Recycle program has done a great job classifying materials through its labels, but I still think people look at a bag and aren’t sure what to do with it.”

Other Plastic Film Recycling Programs

Some communities are addressing the issue of plastic film waste, either to increase revenues, reduce costs, or both. For example, Stanford University—which has dual-stream recycling collection in which rigid plastics, glass, and metal are separated from mixed paper—created a collection program for plastic bags and films.31 Since 2002, the films have been collected in dedicated bins distributed throughout campus at locations where films are common, such as the bookstore. Just as trashcans are, the bins are lined with a plastic bag. Once full, the bag is closed and collected along with the mixed paper recycling. When the collection trucks deposit their loads at the recycling facility, most of the bags float through the air, due to their very light weight, to the top of the pile of mixed paper. Throughout this process, the films remain clean and dry. Once enough films accumulate, they are baled and sold. In 2012, the university collected more than 8,000 pounds of plastic bags and films.

The city of Phoenix, Arizona, began a partnership in 200732 with local retailers to encourage store drop-off of plastic shopping bags.33 The city owns its own MRF and wanted to reduce contamination, primarily plastic bags, that cost the MRF approximately $1 million annually in downtime. The partnership launched an education campaign that included messages printed on plastic bags, advertisements inserted into municipal utility bills, and promotional campaigns at school and neighborhood events. Most participating retailers voluntarily placed recycling containers in prominent places in their stores. The city distributed reusable bags and committed to measuring the change in disposable plastic bags received at its MRF. Retailers committed to monitoring the volume of bags deposited at select locations.

Three months after implementation, the MRF measured a 20 percent decrease in plastic bags received; this decrease remained three months later. On an annual basis, six grocery store chains reported collecting a total of 1,300 tons of bags, increased revenues from selling the collected material, and decreased bag-purchasing expense resulting from increased use of reusable bags.34

The Flexible Film Recycling Group (FFRG), a self-funded team from the American Chemistry Council, is bringing together governments, communities, retailers, and other stakeholders to address film recycling across the United States through their Wrap Recycling Action Program (WRAP), a national public education and outreach initiative. WRAP’s goal is to double flexible film recycling to 2 billion pounds by 2020. It is designed to empower motivated stakeholders to contribute to a common goal: to make plastic film packaging a commonly recycled material with a strong and ever-growing recycling rate

31 Plasticfilmrecycling.org success stories: http://www.plasticfilmrecycling.org/successstory/stanford.html 32 Arizona Food Marketing Alliance’s Bag Central Station: http://www.afmaaz.org/BagCentralStation/index.html 33 Plasticfilmrecycling.org success stories: http://www.plasticfilmrecycling.org/successstory/bagcentralstation.html 34 Plasticfilmrecycling.org success stories: http://www.plasticfilmrecycling.org/successstory/bagcentralstation.html

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Their pilot public outreach campaign launched in Milwaukee in 2013. The campaign used film recycling information signage, placed on front-of-store collection bins at retail partner locations, along with outreach by the city to educate consumers about what plastic film could be recycled and how to recycle it. In 2014 this campaign resulted in a 25% increase in collection of film beyond bags.

The learnings from Milwaukee shaped their 2015 WRAP campaign in Vancouver, WA, which was a partnership with Safeway/Albertsons, the city and county, and other stakeholders. The campaign took a multi-pronged approach to achieve two goals: decrease the amount of plastic film going into the local recycling facility and increase collection of plastic film for recycling at retail stores. To reach the first goal, the county waste authority put tags on curbside carts at homes to educate residents on the proper recycling of plastic film through retail drop-offs. To reach the second goal, the city offered residents a gift card to view an educational video on the plastic film recycling, and Safeway leveraged their established plastic bag collection program to amplify the city’s public outreach effort. Safeway utilized WRAP communications tools, including bins at the front of their stores with signage to show consumers what plastic film could be recycled and how. This direct communication and consistent messaging resulted in a 125% increase in film beyond bag material collected, and a 75% reduction in plastic bag waste being sent to the county’s recycling facility from a targeted area.

WRAP has subsequently launched in North Carolina and Connecticut. WRAP has been effective in increasing film recovery by providing motivated recyclers with the proper information on how to recycle flexible film packaging. Post-campaign surveys from the Vancouver WRAP effort reported that 82% of consumers value stores with plastic film recycling programs, and the stores have not experienced any issues with contamination. Through these campaigns WRAP has developed educational tools and best practices that can be found at: Plasticfilmrecycling.org.

Developing and Implementing a Rewards Program

Because retailers can generate revenues by collecting and selling plastic films, they will play a key role in any successful consumer rewards program. However, Opsteen is concerned about contamination. In store drop-off recycling, contamination occurs when consumers put non- recyclable films or other materials into the store drop-off bins; this dilutes the value of films to retailers. Reports commissioned by the American Chemistry Council to estimate plastic-film recycling rates indicate that store drop-off films are mostly free of contaminants.35 Still, incentivizing recycling could change that. People voluntarily returning films now are potentially more likely to be aware of what is and is not recyclable than people new to store drop-off recycling. Opsteen also points to the same issue as Thompson—that many people already put plastic films into single-stream recycling bins due to lack of understanding of what is and is not recyclable.

“The worst case scenario would be if we encourage people to bring something back, but the system can’t retain the material value because of cross-contamination or because the material’s prepared in a way that’s not cost-effective for the retailer,” Opsteen said.

35 2013 National Postconsumer Plastic Bag & Film Recycling Report, prepared by Moore Recycling Associates Inc. for the American Chemistry Council, February 2015.

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Contamination can also pose other problems. Contamination could add costs or inefficiencies to store operations or, in some cases, create a hazardous waste issue for employees.

If a consumer rewards program were introduced, Hall would like to see contamination data from store drop-off programs at other retailers. To her, store drop-off recycling is less about creating competitive advantage and more about doing the best thing for the customer and the environment. So, she believes other retailers with that data would be willing to share it.

To reduce contamination, Opsteen thinks stores could replace the bins with a kiosk that includes a scanner to read product UPC barcodes. As the consumer scans each film, the kiosk would indicate whether or not it is acceptable, thereby ensuring only recyclable films are deposited. The kiosk would need to be both simple enough that it works quickly yet sophisticated enough that it prevents contamination.

Getting consumers to use these kiosks would likely require a rewards program. “I don’t think consumers would scan packages out of the goodness of their heart,” Walter said. “If there are good incentives, they might do it, but I don’t think you could ever expect consumers to do that kind of work and not get something for it.”

Creating New Value through Store Drop-off Recycling

The form the rewards take could vary, and might include coupons for Kimberly-Clark products or entries into drawings for gift cards. “We don’t have to quantify it yet,” Locke explained. “We can leave it open and ask, ‘What is it going to take to get the consumer to think, this is worth me taking it back to the store and recycling it?’”

However, paying for those rewards and anti-contamination measures like kiosks will likely require collaboration across the existing film-recycling system to identify new sources of value. The material value of each film package is low, and the retailer and the recycler capture that value, not Kimberly-Clark.36

Opsteen has generated several ideas for potential value sources. The return kiosk could be paired with functionality added to the retailer’s loyalty program. Through the enhanced loyalty app, consumers could see photos of the products they purchased and the specific value to them of recycling the packaging. In response, consumers might both increase their recycling and their purchases of products with recyclable packaging. Some retailers could also find new value in store drop-off recycling. For a brick-and-mortar retailer, for example, recycling incentives can encourage people who primarily shop online to visit the store.

Another potential source of value is data on consumer behavior. “The more data we have on our consumers, the better—the better we’re able to serve them, the better we’re able to communicate with them,” elaborated Scott brand leader Ayana Green-Oliver.

Kimberly-Clark currently collects consumer data through several channels, including surveys and direct communications, such as emails to people who have signed up for brand-specific offers. Insights into customer preferences help drive sales, and these channels help overcome the

36 The Closed Loop Fund, which supports film recycling in other ways, does not invest in education or incentive campaigns. However, if a rewards program were associated with a new recycling program requiring an infrastructure purchase like recycling carts, the Fund would consider investing in carts or other equipment.

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challenges presented by the fact that, for Kimberly-Clark, retail purchases of its products are largely anonymous. For example, research conducted for the Scott paper towel brand found that consumers evaluate the product, in part, based on its natural health and environmental characteristics. Some consumers see paper towels as wasteful and may therefore feel guilty about using them, so Kimberly-Clark wants to reassure buyers that its products are not as harmful as they might think. Packaging and the product itself are the two primary ways Kimberly-Clark can influence consumer perception, and encouraging consumers to recycle packaging supports positive brand perception.

The company’s research typically does not include questions about consumer recycling of packages, but these questions could be added to surveys. However, according to Walter, the company would not commission a study specifically to research this behavior. She also points out that “it’s one thing for a consumer to say, ‘Oh, I think that recycling is important,’ but it’s another thing for them to buy a product or change their behavior.” A recycling rewards program would give Kimberly-Clark data on actual behavior, which it currently lacks. Such a program might show recycling rates are higher than the company expects. “If that’s the case, that would provide information back to the business that maybe we do need to do more to prioritize these kinds of programs,” Walter said.

To Green-Oliver, data collected on recycling behavior around SLPFs would also help draw a more complete picture of customer preferences. In particular, she would be interested in information on (1) whether the consumer drops off one or two films at a time or aggregates and deposits several films at once, (2) whether the consumer drops off the film at the store of purchase or another store, (3) how much time elapses between purchase and drop-off, (4) whether recycling depends on the consumer living in a suburban or urban area, and (5) how recycling relates to income level and demographics. Related to rewards, Green-Oliver would look at data on (1) whether recycling the films is unusual behavior for the consumer or consistent with other environmentally preferred behaviors and (2) the extent to which the consumer takes advantage of the rewards program.

Although Hall could not comment specifically on the potential for a rewards program, she noted, “Walmart loves data. You can’t manage what you can’t measure, so I definitely think data would be interesting.”

Kimberly-Clark has a rewards program for its Huggies diapers that rewards consumers for their Huggies Diapers and Wipes purchases. Members can earn points by purchasing the diapers and wipes and then going online or using the program’s new smartphone app to fill out surveys, read articles, watch videos, or engage with the brand on Facebook or Twitter. Rewards include merchandise, gift cards, diapers, and sweepstakes entries. Members can also choose to donate their points to provide diapers to families in need. Until recently, a unique code was printed on the inside of each Huggies package; rewards members entered these codes to earn points. Today, members take a photo of their receipt instead. Through these images, Kimberly-Clark will also begin to capture data on other brands in its portfolio. Members have the option to bypass photographing receipts by linking their Huggies rewards account to their loyalty card at participating retailers.

Several factors drove the decision to move to a mobile-based program: meeting the needs of mothers on the go, reducing supply-chain complexity, and addressing costs and fraudulent consumer activity with the codes.

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With any loyalty program, “you need to make sure there is a lifetime value associated with how many purchases you expect a consumer to make,” Green-Oliver said. “And make sure that, with whatever you have in your rewards catalog, the company can also realize some benefit, but it’s still a meaningful enough benefit that the consumer feels like she’s getting something for her additional effort.”

Green-Oliver both supports the idea of a loyalty program for recycling and thinks Kimberly-Clark has another opportunity to encourage behavior change among sustainability-focused consumers. Specifically, she believes the company could do a better job of demonstrating how small, individual contributions accumulate. In this case, that means translating SLPF recycling into tangible environmental impacts. “We need to do better at communicating what we’re doing and then reassuring consumers that, by supporting our brands, they are in turn making a difference,” she said.

Looking to the Future

As Opsteen and Locke survey the plastic film packaging lifecycle, they remain committed to leveraging the How2Recycle program to keep post-consumer films out of landfills. They are also open to new ideas about how to accomplish their goal, particularly ideas for identifying shared value across the plastic-film lifecycle. They hope to engage stakeholders across the lifecycle to further their work.

“Now, it’s time for us to start collaborating and thinking about how we take the next steps,” Opsteen added.

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Case Discussion Questions

1. When it comes to meeting Kimberly-Clark’s post-consumer product and packaging waste goal, what are the critical challenges facing John Opsteen, Daniel Locke, and the company?

2. What challenges are facing retailers and recycling companies?

3. Evaluate Kimberly-Clark’s idea to develop a program to reward consumers for recycling SLPF packaging. What are the potential benefits? What are the potential downsides?

4. Is a consumer rewards program necessary for Kimberly-Clark to reach its waste and recycling sustainability goal? Why or why not? Consider the three-step Fogg Method described on page six.

5. If Kimberly-Clark proceeds with developing a rewards program, what can it do to encourage other entities in the plastic-film lifecycle to help fund such a program?

6. If Kimberly-Clark does not develop a rewards program, what should it do to meet its waste and recycling sustainability goal?

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Exhibit 1 Examples of How2Recycle Labels

Store Drop-Off plastic wrap label:

Multiple-Component label:

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The different variations of the How2Recycle label:

Source: How2Recycle.info and How2Recycle presentation materials

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Exhibit 2 Selected Results from How2Recycle’s March 2016 Consumer Survey Report

Survey question: Do you consider yourself? A good recycler: 54% An excellent recycler: 36% Just learning about recycling: 10% N: 1,895*

How did you find out about How2Recycle? Saw How2Recycle label on package: 72% Other (media, word of mouth, Internet browsing): 28% N: 1,895

Did the label and/or website teach you something you didn’t already know? Yes: 45% Somewhat – helped refine my knowledge: 38% No: 17% N: 1,833

Did you change your recycling behavior based on the label and/or website? Yes: 50% No: 50% N: 1,833

What did you do differently? (Asked of those responding “yes” to the behavior-change question.) Recycled plastic bag or film via Store Drop-off: 46% Recycled more: 16% Recycled more accurately: 15% Understood more about recycling: 8% Will look for How2Recycle in the future: 7% Replaced cap: 6% Will change buying habits: 1% Frustrated/no action: 1%

Cumulative number of respondents who have started to recycle plastic bags and films at the store as a result of the How2Recycle store drop-off label: Early 2014: 158 Mid 2014: 218 Early 2015: 226 Mid 2015: 279 Early 2016: 320

If you saw the label on a product, is your impression of the company that makes that product: More positive: 77% The same: 18% Less positive: 5% N: 892

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Any specific reason why? More positive: I believe the company:

Is helping me. Cares about the environment. Is being honest and transparent even if something is not recyclable. Is doing the right thing. Has important sustainability goals. Is demonstrating leadership. Is more likely to be making packaging out of recyclable material.

Same impression of the brand: I expect this type of information. I’m not sure if the company is taking other steps towards sustainability. I already had a positive/neutral/negative impression of this company.

Less positive impression of the brand: Disappointed that the package isn’t recyclable. It doesn’t include the “recycling number.”37 It is confusing. No information on international recycling.

*Not all survey respondents answered every question; therefore, the Ns vary.

Source: How2Recycle’s March 2016 Consumer Survey Report

37 This number refers to the 1, 2, 5, 7, or other number often printed inside the recycling symbol on packaging.

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