Packaging data reporting is a growing CFO challenge. As corporate governance takes on more importance, the role of packaging data has expanded far beyond its traditional boundaries. What was once the domain of operations and sustainability teams is now becoming a critical focus for Chief Financial Officers (CFOs). As packaging information becomes increasingly intertwined with financial disclosure, risk management, and tax liabilities, CFOs must pay close attention to how this data impacts their organisations.
The Rising Importance of Packaging Data Reporting in Finance
Traditionally, CFOs might have regarded packaging data as something for the COO to worry about. It was more about products, production and logistics than about finance. However, as it now sits at the core of sustainability and corporate responsibility, the stakes have changed.
Today, packaging data reporting is playing a significant role in financial disclosures. The shift towards transparency and accountability alongside the demand for packaging producer transparency means that companies must now report in increasing depth and with high accuracy on their product packaging. Getting your packaging data reporting wrong can have direct financial implications.
As an example, the Extended Producer Responsibility (EPR) regulations requires that companies account for region-specific environmental impact of their packaging. That means different requirements across the UK, EU, and the rest of the world, including the cost of waste management, recycling, and the potential penalties for non-compliance. These costs directly affect a company’s financial statements. Packaging data has become a component of financial reporting.
Packaging Data Reporting and Risk Management
Beyond financial reporting, accurate packaging data reporting and management is becoming crucial for risk management. As global regulations around packaging continue to tighten, companies face significant risks if they fail to comply with a raft of regulations about waste, plastic use, disposability, and more.
Non-compliance can lead to fines, legal actions, and reputational damage, all of which can impact a company’s bottom line.
Moreover, the complexity of global supply chains means that packaging decisions made in one part of the world can have ripple effects across the entire organisation. For instance, the recent proposed updates to the EU’s Packaging and Packaging Waste Directive would introduce new requirements for recyclability and waste reduction. CPG companies with multinational markets that include EU countries must adapt. Those that do not may face disruptions in their supply chains, leading to increased costs and potential losses.
Tax Implications of Packaging Data Reporting Accuracy
Packaging data also has significant tax implications that CFOs can no longer afford to ignore. Several countries have introduced or are planning to introduce taxes on non-recyclable or single-use packaging. The UK’s Plastic Packaging Tax came into effect in April 2022, imposing a tax on plastic packaging that does not contain at least 30% recycled content.
The financial implications are significant for any in-scope business. They must pay £200 per metric ton of non-compliant packaging. For large corporations, this can amount to millions of pounds annually, directly impacting their financial statements. Knowing with a high degree of confidence whether you fall inside or outside the scope of PPT legislation and when this may change may be a significant cost factor for companies. Accurate information on packaging is also critical if they are to explore ways to minimise or mitigate such tax costs through optimising their packaging materials.
Companies need accurate packaging data about the plastic composition of every packaging component for every SKU to calculate their tax liabilities accurately for the purpose of reporting.
The risks associated with inaccurate estimations of packaging data are significant. Overestimating your plastic use could result in paying more tax than necessary, directly affecting your bottom line. Conversely, underestimating plastic usage can lead to severe fines and penalties, not to mention the reputational damage that comes with non-compliance. CFOs must ensure that their companies have precise and reliable data to avoid these costly pitfalls.
Packaging data and supply chain planning
Additionally, the implementation of Deposit Return Schemes (DRS) globally is set to introduce significant financial burdens and operational challenges. It will impact CFOs who must navigate these new complexities. According to the Impact Assessment from DEFRA, companies will need to invest heavily in both the infrastructure and processes required for these schemes. This includes retooling packaging to incorporate return instructions, collaborating closely with resellers and retailers to manage the logistics of returns, and investing in reverse vending machines to facilitate the process. The financial implications are substantial, requiring CFOs to manage new costs and risks that extend beyond mere compliance into strategic investment and supply chain adaptation.
CFOs need to ensure that their organisations have accurate and up-to-date packaging data. They need it to calculate these taxes correctly and to strategise ways to reduce their tax liabilities. This could involve investing in new packaging technologies, redesigning products to use less plastic, or increasing the use of recycled materials. All of which require detailed packaging data that is integrated into the company’s financial systems.
Packaging Data Reporting Tools are Essential
Given the increasing importance of packaging data, CFOs need to know that systems can generate complete, accurate packaging data reporting that can smoothly integrate with their financial reporting processes.
Many will assume that their ERP already in use for financial reporting will handle packaging data. However, this is not usually the case at all. The limitations of ERP systems in packaging data reporting are numerous.
Unlike traditional ERP systems, which are not designed to handle the complexities of packaging data, 4Pack provides a centralised platform that integrates product and packaging specification data and artwork into a single system.
It empowers teams across product and packaging management to enhance their efficiency. It also allows Finance to tap into detailed tracking, reporting, and analysis of packaging information. 4Pack can be integrated with SAP and other incumbent ERP systems to enable CFOs to:
- Ensure Compliance: Track and report packaging data in line with global regulations, reducing the risk of fines and legal actions.
- Optimise Tax Liabilities: Accurately calculate and minimise taxes related to packaging, such as the UK Plastic Packaging Tax.
- Enhance Financial Reporting: Integrate packaging data into financial disclosures, providing transparency and accountability to stakeholders.
- Improve Risk Management: Identify and mitigate risks associated with packaging decisions across the global supply chain.
Packaging Data reporting is part of every CFO’s future
Packaging data is becoming increasingly relevant to financial disclosure, risk management, and tax planning. CFOs in CPG, food and beverage and other sectors must increasingly have seamless access to such critical information.
The integration of packaging data into financial systems is no longer a “nice-to-have.” It is a necessity for consumer goods companies that want to stay ahead of the curve.
With 4Pack, CFOs have the tools they need to manage this complex data efficiently and effectively. They can ensure they are not only compliant but also financially optimised, based on real information.
