Should total cost of ownership include sustainability costs?

Total Cost of Ownership is a financial analysis that maps out all direct and indirect costs of a product or service throughout its entire lifecycle. For packaging, this means much more than just the purchase price: it includes production, transportation, storage, maintenance, repairs, and end-of-life processing.

When making packaging decisions, a TCO analysis gives you insight into the true costs of different options. For example, inexpensive cardboard packaging can end up being more expensive than a reusable plastic alternative when you factor in replacement costs, damage, and labor intensity. For companies that regularly transport expensive and sensitive equipment, these hidden costs can amount to hundreds of thousands of euros per year.

The analysis also helps you identify risks. Packaging that frequently fails during transport can lead to product damage, delays, and customer dissatisfaction. By identifying these costs in advance, you can make better decisions about where to invest in quality and sustainability.

Sustainability costs change traditional TCO calculations by adding new cost categories that were previously ignored. These costs manifest as compliance costs, waste disposal, energy consumption, reputational risks, and future regulations.

Compliance costs are becoming increasingly relevant as regulations, such as the EU Packaging and Packaging Waste Directive, become stricter. Companies must now account for extended producer responsibility fees, recycling targets, and reporting obligations. For large manufacturers, these costs can run into the hundreds of thousands annually.

Reputational costs are harder to quantify, but just as real. Customers and partners increasingly expect sustainable practices. A company that clings to non-sustainable packaging risks losing customers and damaging its image. In B2B markets, this can mean being excluded from tenders or partnerships.

Energy costs also play a role, especially in climate-controlled storage and transportation. More efficient packaging that takes up less space reduces transportation costs and CO2 emissions. This is becoming increasingly important as carbon pricing mechanisms are introduced.

A comprehensive sustainability TCO analysis must include material costs, waste disposal, energy consumption, compliance costs, carbon pricing, and risk management. These categories provide a realistic picture of the total impact of your packaging choices.

Material costs go beyond the purchase price. Renewable materials often have higher initial costs but lower lifecycle costs due to reusability. Recyclable materials can result in lower waste disposal costs, while bio-based materials help you meet carbon footprint targets.

Waste disposal costs are rising as landfilling becomes more expensive and recycling more complex. In some European countries, you now pay over €100 per ton for waste disposal. Packaging that is easily recyclable or reusable significantly reduces these costs.

Carbon pricing is becoming a reality due to the expansion of the EU ETS and national carbon taxes. Packaging with a low carbon footprint is therefore becoming more financially attractive. Transport-efficient packaging that allows for more products per shipment reduces both costs and emissions.

Circular packaging reduces TCO by maximizing reuse, repair, and recycling, thereby minimizing new material costs, waste disposal costs, and replacement cycles. The design focuses on durability and functionality across multiple usage cycles.

Reusable packaging has higher initial costs but can pay for itself within 5 to 10 usage cycles. For example, a high-quality flight case can last 20 years with regular maintenance, while disposable packaging must be replaced with every shipment. For companies with regular shipments, this results in significant savings.

Modular design allows for repairs and modifications without complete replacement. Components can be replaced or upgraded as needs change. This is particularly valuable for companies that handle different product sizes or have seasonal variations.

Design for disassembly ensures that materials retain value at the end of their lifecycle. Aluminum profiles, high-quality plastics, and rigid foam can be recovered and reused. This creates residual value and reduces waste disposal costs.

Short-term sustainability ROI focuses on immediate cost savings within 1 to 3 years, such as material reduction and efficiency gains. Long-term ROI encompasses strategic benefits such as compliance, risk management, and competitive advantage over 5 to 10 years.

In the short term, you see a return on investment through operational improvements. Lighter packaging immediately reduces transportation costs. More efficient designs reduce labor costs for packing and unpacking. Reusable packaging eliminates replacement costs after a few cycles. These savings are measurable and predictable.

Long-term ROI is more complex, but often more substantial. Compliance with future regulations prevents fines and operational disruptions. Early adoption of sustainable practices provides a competitive advantage when customers and partners begin to demand sustainability. Risk mitigation protects against supply chain disruptions and reputational damage.

The timing of investments is important. Early adopters of sustainable packaging benefit from learning curve advantages and can justify premium pricing. Late adopters pay higher costs for rapid compliance and miss market opportunities.

At Faes, we make sustainability ROI measurable by connecting it directly to the packaging choices in a customer’s supply chain. We do not only look at the material or purchase price of a case, crate or transport solution. We assess how often the packaging is used, how well it prevents damage, whether it can be repaired or reused, how much space it takes up in transport and storage, and what happens at the end of its lifecycle.

That insight helps us engineer packaging that performs longer and creates less waste. For example, this can mean developing a reusable custom packaging solution for sensitive equipment, improving the internal protection to prevent DOA deliveries, designing packaging that is easier to clean or repair, or standardizing returnable packaging flows with digital support such as IPMM.

In this way, Faes helps companies turn sustainability from a broad ambition into a practical packaging decision: one that reduces lifecycle costs, improves reliability and supports long-term operational performance.

You calculate the true environmental cost by quantifying lifecycle assessment (LCA), carbon footprint analysis, water and energy impacts, waste streams, and ecosystem services. This comprehensive approach provides insight into all environmental impacts throughout the entire lifecycle.

Lifecycle assessment measures the environmental impact from cradle to grave: from raw material extraction to final disposal. For packaging, this includes material production, manufacturing, transport, use, and disposal. LCA software can monetize these impacts by assigning environmental costs to different impact categories, such as climate change, resource depletion, and toxicity.

A carbon footprint calculation is becoming increasingly important due to carbon pricing mechanisms. You calculate the CO2-equivalent emissions for all life cycle phases and multiply this by current carbon prices (€50–100 per ton of CO2 in Europe). This gives you a concrete financial impact of carbon emissions.

Water footprint and energy consumption have direct costs, but also indirect impacts on resource scarcity and ecosystem health. These externalities are increasingly being priced in by governments and reflected in resource costs. Forward-looking companies are anticipating these trends by choosing water- and energy-efficient packaging.

At Faes, we help companies perform these complex calculations and translate them into concrete packaging management strategies. By fully integrating sustainability costs into TCO analyses, companies can make better decisions that are both financially and environmentally beneficial.