Regulation & Public Policy Collaboration & Co-Creation

Carrot and Stick:
European & US Businesses Must Learn From Each Other to Become More Sustainable

As our North American operations continue to grow rapidly, we have witnessed in microcosm the sustainability benefits of marrying together US innovation and efficiency with European standards.

Brand Provided | By Thomas Körmendi | Published 1 year ago | About a 4 minute read

Image: Elopak

As a European, it can be tempting to fall into a false sense of superiority when it comes to sustainability. Maybe it’s the green public transport in our cities, or the lack of shock-jock climate-change deniers on our TV screens; but in general, we tend to feel like we’re among the leaders when it comes to tackling the climate crisis.

This sense of leadership occasionally spills over into the business world. Take the EU’s Corporate Sustainability Reporting Directive (CSRD) for example — which requires larger companies to report environmental, social and governance (ESG) data from next January. According to the Wall Street Journal, from 2025 this would affect nearly 10,500 foreign companies that have an EU stock listing or generate more than €150 million worth of revenue within the bloc. Of these, nearly a third are US-based corporations.

These regulations, which include requirements for companies to publish credible transition plans aligned with limiting global warming to 1.5oC, have inspired comparable measures in the United States. The Securities and Exchange Commission (SEC) is due to adopt new regulations that similarly require companies to publish net-zero transition plans, as well as disclosing information on greenhouse gas emissions throughout their value chains, as found in the CSRD.

Yet, while Europe might justifiably feel ahead of the curve when it comes to environmental reporting and regulation, the US has the edge on actively incentivising a ‘green’ transition. The generous support package for critical green infrastructure offered by President Biden’s Inflation Reduction Act (IRA) in 2022 caught EU leaders off guard, prompting the bloc to loosen state-aid rules for its own clean-energy sector under the terms of the EU’s Green Deal Industrial Plan.

Herein lies the fundamental difference in approach between the US and Europe: The former supports sustainable innovation through financial incentives, while the latter leads on boosting standards and building frameworks for cooperation.

At a consumer level, businesses know that sustainability matters to both markets. Within my own industry of packaging, research shows that the majority of shoppers in both Europe and North America strongly consider the environmental impact of the products they buy and are increasingly willing to pay more for sustainable packaging.

As our operations in North America continue to grow rapidly, Elopak has witnessed in microcosm the sustainability benefits that stand to be gained from marrying together US innovation and efficiency with European standards.

The increased availability of technology and capital in the US has allowed us to sell state-of-the-art carton-filling machines to our US customers — boosting energy and general efficiency while improving our offering. In the US even more so than Europe, it pays to be sustainable.

At the same time, we remain aligned with standards at our European operations by continuing to source 100 percent renewable electricity across our North American plants — a commitment we made in 2015 as part of the RE100 initiative. This sets Elopak apart in a country like the United States — where fossil-fuel energy is still relatively affordable and renewable energy forms a much smaller part of the electricity mix than in many European nations.

Elopak’s model for sustainable business benefits from the nexus of European experience with American ingenuity. This approach continues to bear fruit — with revenue from our North American market driving overall growth and profitability. In fact, we’re due to open a new plant in the United States in 2025 to capitalise on our growth momentum and increasing market share.

At an international level, we have seen the debate over issues such as the IRA transform from arguments about protectionism into constructive discussions over state aid and frameworks for further integrating US and EU supply chains and sustainability ambitions. Negotiators are working towards an agreement in principle to make European minerals eligible for US tax credits, boosting cooperation on electric-vehicle battery production. Likewise, the IRA has spurred the UK government to draw up similar plans to support industries such as clean energy.

Businesses should similarly search for common ground, recognising that the US’s preoccupation with growth can help deliver on ESG targets; or that European idealism can be appealing to customers and consumers alike. This is particularly important for businesses that don’t have the advantage of operating on both sides of the pond and might otherwise miss out on examples of transatlantic best practice.

Like their respective governments, US and European companies must learn from one another. A recent McKinsey study in the US illustrated the growing need for corporations to blend the two distinct approaches, finding a “clear and material link between ESG-related claims and consumer spending.” Despite global inflationary pressures, consumer trends only show rising concern for sustainable consumption. Even regional businesses will need to balance this need to hold themselves to higher standards while delivering efficiency and value for money to their supply-chain partners.

Thomas Körmendi

Elopak

Thomas Körmendi is CEO of Elopak — a global supplier of carton-based packaging solutions. Elopak has been carbon neutral since 2016 and was awarded with a platinum sustainability rating from Ecovadis in 2021.

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