The $600-million project, the first new paperboard production line built in the U.S. in decades, represents an enormous bet by owner Graphic Packaging Holding Co. on a future without foam cups, plastic clamshell containers or six-pack rings.
Graphic wants to be able to offer more environmentally friendly packaging so that the consumer-goods companies that buy its products can tout a cleaner supply chain to their own investors and consumers. Once Graphic shuts down four smaller and less-efficient machines, including one at its Kalamazoo complex that is 100 years old, it will use a lot less water and electricity, it says, and emit 20% less greenhouse gases.
ESG investing has put trillions of dollars into the control of funds that promise to invest it with environmental, social and governance goals in mind, as the abbreviation implies. That, in turn, has companies striving to operate with less waste and greenhouse-gas emissions.
Graphic says green investing has opened up a market worth more than $6 billion a year for replacing plastic with paper on store shelves, even if that might result in consumers seeing slightly higher prices.
Graphic’s gamble is a big test of whether the flood of ESG capital can transform supply chains. Plastic packaging is frequently less expensive than paper, is more effective in many applications, and sometimes even has a smaller carbon footprint. Consumer-goods companies will have to be persuaded that their customers will pay more and that paper packaging really is greener.