I. Executive Summary and Strategic Overview

The sustainable development of the global packaging industry has irreversibly shifted from a phase of voluntary corporate commitments to a stage of mandatory regulatory compliance. The recyclability of packaging is no longer an ideal design goal but a requirement with strict legal constraints. Its enforcement is supported by robust economic incentives (eco-modulation fees), substantial administrative fines, market access restrictions, and legal liabilities for misleading claims ("greenwashing").

In response to this shift, multinational enterprises must immediately elevate "Design for Recycling (DfR)" to a core strategic priority to mitigate rising compliance costs driven by eco-modulation mechanisms under Extended Producer Responsibility (EPR) systems. This pressure is particularly acute in the EU market—where the legal framework is increasingly refined—and the U.S. market, characterized by "fragmented" state-level regulations. Failure to proactively address these requirements will not only expose enterprises to direct financial penalties but also risk reputational damage and sales bans in key markets, posing significant business risks.

II. Foundational Regulatory Requirements for Packaging Sustainability

This section establishes the mandatory nature of global packaging regulations and compares key differences in regulatory frameworks across major economies: the EU’s centralized coordination, the U.S.’s decentralized state-level system, and China’s directive-based governance.

1. EU’s Packaging and Packaging Waste Regulation (PPWR)

The EU is replacing its existing directive (PPWD 94/62/EC) with the Packaging and Packaging Waste Regulation (PPWR), marking a major policy shift. The regulation entered into force on February 11, 2025, and is expected to be fully applicable approximately 18 months after entry into force, around mid-2026 1. Unlike directives, the PPWR is a regulation that applies directly in all EU Member States without the need for transposition into national law. This significantly enhances coordination in the EU’s internal market, particularly in areas such as recycled materials, manufacturing, recycling, and reuse 1.

A core mandatory objective of the PPWR is: by 2030, all packaging placed on the EU market must be recyclable in an economically viable manner 1. This goal underpins the operation of the entire regulatory system and supporting incentive mechanisms.

Mandatory Design Requirements and Material Restrictions

The PPWR introduces several key design and efficiency requirements for packaging placed on the market, which will take effect in August 2026:

· PFAS Restrictions: From August 12, 2026, food contact packaging containing per- and polyfluoroalkyl substances (PFAS) at specific concentrations (sum of target PFAS analytes, polymeric PFAS) will be banned from the EU market 1. Removing these materials entirely from packaging designs is an urgent priority for global enterprises to mitigate regulatory risks.

· Volume Efficiency Requirements: The regulation sets strict rules for packaging volume and space efficiency. Unless technically unavoidable, the empty space in packages (including e-commerce packages) must not exceed 40% 5. Additionally, when providing consolidated packaging, transport packaging, or e-commerce packaging to end distributors or end-users, economic entities must ensure that the ratio of empty space between such packaging and sales packaging does not exceed 50% 4.

· Digitalization and Traceability: Starting in 2027, packaging must bear a digital identifier (e.g., QR code) linking to structured environmental information, including material composition, recyclability details, and reuse specifications 5. This requirement provides a data foundation for EPR reporting and law enforcement.

The PPWR establishes a framework of regulatory certainty for the EU. By implementing unified legal requirements through a directly applicable regulation, it supports the stability of secondary raw material markets and the development of recycling infrastructure. This centralized model stands in stark contrast to the U.S.’s current fragmented state-level regulatory landscape, offering multinational enterprises a clear path for long-term compliance strategies in Europe.

2. Decentralized Landscape of Extended Producer Responsibility (EPR) in the U.S.

The U.S. adopts a "fragmented" model of state-level EPR laws, shifting the responsibility for packaging waste management and associated costs from local governments and taxpayers to producers 6. As of 2025, at least seven states—including Maryland, Washington, Minnesota, Colorado, California, Oregon, and Maine—have enacted packaging EPR laws 6.

The coexistence of multi-state laws significantly increases compliance costs and complexity for global operators. A key operational consideration is: while the EU PPWR addresses compliance across all 27 Member States through a single regulation, the U.S.’s decentralized model requires enterprises to engage with multiple Producer Responsibility Organizations (PROs), navigate varying reporting deadlines, and interact with different enforcement agencies—greatly increasing the complexity of multi-state operations 7.

California’s SB 54: Mandatory Provisions and Penalties

California’s Plastic Pollution Prevention and Packaging Producer Responsibility Act (SB 54) regulates single-use packaging and single-use plastic food service items 10. The act sets key milestones and mandatory measures:

· EPS Ban: SB 54 requires producers of expanded polystyrene (EPS) food service items to demonstrate that their products achieve a 25% recycling rate by January 1, 2025. Due to failure to meet this requirement, California has banned the sale, distribution, or import of EPS food service items (e.g., single-use takeout containers and cups) 10. This demonstrates regulators’ willingness to use market exclusion as a tool to address materials that recycling infrastructure cannot handle.

· PRO and Reporting Requirements: The Circular Action Alliance (CAA) has been selected as California’s first single PRO 11. Producers must report 2023 packaging data by the November 15, 2025 deadline; this data will be used to determine fees to be imposed starting in January 2027 12. Accurate reporting—particularly of SKU-level (Stock Keeping Unit) Bill of Materials (SMRM) data—is critical to avoiding substantial administrative fines for inaccurate or late reporting 9.

Washington State: Mandatory Recycled Content Requirements

Unlike California, which focuses on recycling rates and bans, Washington State’s laws emphasize minimum post-consumer recycled (PCR) content requirements. For example, the state mandates that plastic garbage bags contain a minimum of 10% recycled content (2022), increasing to 15% by 2025; beverage containers require a minimum of 15% 14.

This directive-based requirement will expand in scope: by 2036, Washington State’s laws will cover many common types of consumer packaging and mandate a minimum of 50% recycled content 14. Companies failing to meet these minimum recycled content requirements have already been penalized—23 plastic producers were fined a total of $277,000 for non-compliance 14.

3. China’s Green Packaging and Standards for Restricting Excessive Packaging

China’s sustainable packaging system focuses on accelerating the phase-out of non-recyclable and non-degradable single-use plastics and strictly restricting excessive packaging, adopting a directive-based and "command-and-control" regulatory approach 15.

Restrictions on Excessive Packaging (GB 43284-2023)

For food and cosmetics, mandatory national standards impose strict quantitative restrictions on excessive packaging 16. These requirements include:

· Void Rate: Limiting the amount of unused space inside packaging 16.

· Packaging Layers: No more than 3 layers for grain products and no more than 4 layers for other products 16.

· Packaging Costs: Excluding inner packaging in direct contact with products, the cost of all other packaging shall not exceed 20% of the product’s selling price 16.

Producers or operators failing to comply with mandatory standards for restricting excessive packaging will be required to make corrections; refusal to correct will result in fines 17.

Material Bans and Restrictions

China has set clear deadlines for phasing out non-degradable plastic products. For example, a ban on non-degradable single-use plastic tableware in food delivery services took effect at the end of 2020 and will be further expanded by the end of 2025 18. Regulations encourage a shift to recyclable mono-material solutions, paper-based alternatives (e.g., molded fiber/bagasse), and certified degradable/compostable substitutes 15.

Strategic Observation

The ban on PFAS, California’s sales restrictions on EPS, and China’s phased phase-out of non-degradable plastics all indicate that regulators adopt a zero-tolerance attitude toward materials deemed high-risk or inherently non-circular 4. This requires enterprises to prioritize R&D investment in avoiding these material categories to proactively address potential global bans and prevent market access losses due to product prohibitions.

III. Technical Compliance: Defining and Achieving Recyclability Standards

Globally, achieving "recyclable" status requires meeting strict technical standards covering design, infrastructure accessibility, and the quality of recycled materials—far exceeding simple material labeling.

1. Dual Pillars of Recyclability: Design and Infrastructure

Whether packaging is recyclable depends not solely on its material composition but on a complex system of four parallel criteria. According to the definition of the Association of Plastic Recyclers (APR), packaging can only be considered recyclable if it meets all four criteria:

1. Design: The item must be designed in accordance with "Design for Recycling (DfR)" guidelines 19.

2. Access: Consumers must have access to recycling collection systems that accept the item 19.

3. Acceptance: The item must be explicitly or implicitly accepted by the collection system 19.

4. Markets: The recycled resin must have market value or be supported by legally mandated programs 19.

This comprehensive definition indicates that the threshold for recyclability has shifted from theoretical possibility to requiring proof of sufficient economic viability and infrastructure capacity of the recycling system.

Efforts to Harmonize International Standards

Non-profit cross-industry organizations such as the U.S.-based APR and Europe-based RecyClass are actively collaborating to promote global harmonization of DfR guidelines and Recyclability Evaluation Protocols (REPs) for plastic packaging 20.

RecyClass focuses on enhancing transparency in recyclability and has developed recycling evaluation protocols based on scientific testing methods, which form the basis of its DfR guidelines 21. While the factual content of the guidelines of the two organizations is highly similar, there are still detailed differences. For example, RecyClass recommends that the PET content in packaging should exceed 90%, while the APR requires PET resins to meet specific standards but currently does not provide guidance on minimum PET content 21.

2. Design for Recycling (DfR) Protocols and Material Purity

The assessment of technical recyclability is verified through specific testing protocols and scientific analysis. For paper packaging, testing includes at least the degree of fiber separation, appearance after forming, level of sorted waste, content of interfering substances (e.g., adhesives, metals, plastic films), and content of dissolved or colloidal solids 22.

Rigorous Assessment of Components

Evaluation systems such as RecyClass require that to certify the recyclability of packaging, detailed material composition of the given packaging must be provided, and auditors must consider the behavior of each component (e.g., bottle body, label/sleeve, closure system, adhesives, inks, printing) during sorting and recycling 23.

Financialization of Technical Decisions: Regulatory systems are shifting the burden of proof for recyclability from theoretical material composition to actual technical compatibility. RecyClass classifies recyclability into Grades A, B, and C, and only grants certification to packaging that can produce high-quality recycled materials 23. If packaging design fails to meet circularity requirements, the quality of the recycled materials produced will decrease 23—resulting in the highest eco-modulation fees under EPR systems, which constitutes a direct penalty for R&D failure. Therefore, enterprises’ compliance teams must directly integrate technical R&D (testing protocols) with financial planning (EPR fees) to ensure that design decisions translate into significant cost savings.

Necessity of Mono-Materialization

EU and Chinese regulations explicitly discourage multi-layer non-recyclable laminates and difficult-to-separate paper-plastic-aluminum composites 15. Transitioning to mono-material packaging (e.g., pure PE, PP, or PET) is the most direct way to achieve compliance and reduce costs 24. This is because even if the material itself is recyclable, enterprises may still be penalized under EPR if design choices make it difficult to process (e.g., labels, adhesives, and inks interfere with sorting or contaminate recycling streams) 24.

3. Challenges of Flexible Packaging and the Rise of Advanced Recycling Technologies

Flexible plastic packaging (FPP)—particularly multi-layer packaging (MLP)—is widely used in food and beverage packaging due to its light weight, low cost, and excellent barrier properties 25. However, MLP is composed of multiple polymer layers combined with other materials (e.g., aluminum foil), making inter-layer separation and recycling extremely difficult 25. MLP is a major bottleneck for consumer packaged goods (CPG) companies in achieving their 100% recyclability goals (e.g., Unilever’s flexible plastic packaging has a recyclability rate of only 13%, compared to 76% for rigid packaging) 28.

Traditional mechanical recycling technologies are insufficient for efficiently recycling MLP, leading to such waste being primarily incinerated or landfilled 25. Therefore, advanced recycling technologies (often referred to as chemical recycling) are emerging as a necessary solution to this challenge 30.

· Key Technologies: Depolymerization breaks down plastic polymers into their original monomers, which can be used to produce high-quality new plastic products; pyrolysis and gasification convert non-recyclable plastics into fuels or industrial feedstocks 31.

· Strategic Positioning: Chemical recycling can effectively support PCR mandates and the circular economy, particularly in areas where mechanical recycling struggles to meet food-grade packaging requirements 31.

Dilemma Between Technology and Policy

While advanced recycling technologies offer a technical solution for flexible packaging, current regulatory drivers (EPR eco-modulation and PPWR bans) prioritize the avoidance and phase-out of complex materials—i.e., mandating a shift to mono-material designs 15. Enterprises must adopt a dual strategy: on the one hand, immediately implement incremental DfR improvements (switching to mono-materials); on the other hand, make long-term strategic investments to ensure their products are compatible with the expanding chemical recycling infrastructure. Enterprises that delay design optimization while waiting for large-scale chemical recycling will face substantial eco-modulation fines.

IV. Financial and Economic Impacts: Analysis of Eco-Modulation Mechanisms

EPR fees are the primary economic lever driving sustainable transformation. The introduction of eco-modulation mechanisms ensures that the true costs of managing non-circular packaging are borne by producers, making sustainability a core financial metric.

1. EPR Fee Structure and Responsibility Shift

The core objective of Extended Producer Responsibility (EPR) systems is to require brand owners, importers, and distributors to take responsibility for the entire product lifecycle—from design to disposal 8. PROs (e.g., CAA in California/Oregon) collect fees and use these funds to develop and fund programs aimed at achieving state-mandated recycling goals and infrastructure improvements 8.

Financialization of Sustainability: The eco-modulation mechanism is a key component of the EPR fee system. It adjusts the fees producers must pay based on the recyclability and environmental impact of packaging materials.

· Incentive Mechanism: Packaging that is easy to recycle, contains recycled content (PCR), is reusable, or has a low environmental footprint will qualify for lower fees or discounts 33. For example, increasing PCR content or switching from multi-materials to mono-materials can reduce EPR fees 24.

· Penalty Mechanism: Materials that are difficult to recycle, disrupt recycling infrastructure, cause pollution, or end up in landfills in large quantities will be subject to higher fees or punitive surcharges 33.

2. Quantification of Eco-Modulation Risks

The structure of eco-modulation forces senior management to focus on packaging design decisions, as environmental impacts are directly translated into operational costs. Difficult-to-recycle materials (e.g., multi-layer composites) not only incur standard EPR material fees but also additional penalties 36.

Example of Base Rates in the UK (2025)

Taking the UK’s 2025 EPR base rates (before eco-modulation adjustments) as an example, the disposal cost differences across materials are significant, reflecting variations in recycling difficulty:

Note: Rates are based on the 2025-2026 local authority disposal cost model 37.

The highest rates are concentrated on fibre-based composites (£461/ton) and plastic (£423/ton), reflecting the environmental and economic burdens they impose during collection, sorting, and processing—while also indicating the highest eco-modulation risks for these materials. Through eco-modulation, producers of low-rate packaging receive subsidies, while those of difficult-to-recycle materials pay punitive fees 36.

Strategic Observation

Packaging design has become a key factor determining long-term Cost of Goods Sold (COGS). Poorly designed packaging (low DfR scores) will trigger penalties, forcing enterprises to conduct rapid Return on Investment (ROI) analyses for material redesign to avoid profit erosion due to high fees.

3. Industry Response to Targets and Performance Gaps

Faced with regulatory pressure and consumer expectations, major CPG companies have set ambitious sustainability goals—typically aiming to achieve 100% recyclable, reusable, or compostable packaging between 2025 and 2030, while significantly reducing virgin plastic use 38.

· Examples of Corporate Commitments: Coca-Cola has committed to achieving 100% recyclable global packaging by 2025 38; PepsiCo has pledged to design 100% recyclable, compostable, or biodegradable packaging by 2025 38; Clorox has committed to 100% recyclable, reusable, or compostable packaging by 2025 39.

· Performance Gaps: While some enterprises have made progress in reducing virgin plastic (e.g., SC Johnson exceeded its targets) 40, many major global signatories (e.g., Nestlé, Unilever) face challenges in achieving 100% recyclability goals—particularly for flexible packaging 28. Unilever has delayed its target of 100% recyclable flexible plastic packaging to 2035 28, while Colgate-Palmolive has also expressed doubts about meeting flexible packaging recycling goals 29. These performance gaps highlight the severity of technical challenges and indicate that packaging failing to meet DfR standards will face sustained high eco-modulation fees in the coming years.

Market Intervention Mechanisms

EPR systems are not merely taxes but purposeful market interventions. Fees paid by producers are used to fund infrastructure improvements, outreach education, and the development of end markets for recycled materials 8. This ensures that the "market" element of recycling systems (i.e., demand and value for recycled materials) receives financial support, helping producers achieve their long-term recyclability goals and ensuring long-term system stability. For example, Oregon has used PRO funding to implement unified recycling services across the state 8.

V. Quantification of Legal Risks: Analysis of Law Enforcement and Penalties

Non-compliance now triggers three distinct and severe legal risks: administrative fines, market exclusion/sales bans, and civil liability for misleading environmental claims (greenwashing).

1. Administrative Fines for EPR/PPWR Non-Compliance

Major global regulators have established enforcement measures that are "effective, proportionate, and deterrent" 5 to enforce packaging recyclability requirements.

EU: Substantial Fines and Market Exclusion

Non-compliance with the PPWR can result in severe financial consequences. In major markets such as Germany, non-compliance can lead to fines of up to [amount redacted] and immediate sales bans—resulting in catastrophic business losses 41. This clearly indicates that for the EU, the greatest risk is restricted market access. Additionally, any packaging failing to meet PPWR requirements will no longer be allowed to be placed on the EU market 42.

U.S. State-Level: High Daily Fines

Failure to comply with U.S. EPR requirements is primarily enforced through daily civil fines to compel enterprises to promptly rectify and report data, with risks highly time-sensitive:

· California SB 54: Any entity failing to comply with SB 54 may be subject to administrative civil fines of up to [amount redacted] per day, per violation 43. Fines begin accruing 30 days after a violation notice is issued 43. Additionally, producers providing false or misleading compliance certifications face fines ranging from [amount redacted] to [amount redacted], plus civil penalties of up to [amount redacted] 45.

· Oregon EPR: Producers failing to register with and report material data to the PRO (Circular Action Alliance) in a timely manner may face escalating fines of up to [amount redacted] per day 46. The Oregon Department of Environmental Quality (ODEQ) has formal enforcement authority, and PROs are required to publish lists of non-compliant producers—introducing reputational risks 47.

· Washington State Recycled Content: Producers failing to meet minimum recycled content requirements are fined based on the sales volume of non-compliant plastics and the extent of the shortfall, with actual fines ranging from [amount redacted] to [amount redacted] 14.

China: Administrative Rectification and Fines

In China, if producers or operators fail to comply with national regulations on restricting excessive packaging or prohibiting/restricting the use of non-degradable plastics, they will be ordered to make corrections within a time limit; refusal to correct will result in fines 17.

2. Greenwashing Liability: Legal Risks of Misleading Claims

Enterprises face growing legal risks for environmental claims on packaging—particularly regarding "recyclable" claims.

FTC Green Guides Standards

The U.S. Federal Trade Commission (FTC)’s Green Guides aim to prevent misleading marketing. For unqualified "recyclable" claims, the guides recommend that marketers may only use such claims if at least 60% of consumers or communities have access to appropriate recycling facilities 48. If facility access is low, marketers must emphasize the limitations of recycling 48. Additionally, any recyclability claim may be deceptive if any component of the packaging significantly impairs recyclability 50.

California SB 343: Truth in Labeling Act

California’s SB 343 (Truth in Labeling Act), passed in 2022, significantly tightens greenwashing risks and is also known as the "Recycling Truth Act" 49. The act prohibits the use of chasing arrow recycling symbols or any suggestive recyclability claims on products or packaging labeled as recyclable that are distributed or imported in California—unless the item meets specific market recyclability standards determined by CalRecycle 52. This act effectively links labeling claims to actual recycling infrastructure and market acceptance.

Legal Consequences and Consumer Confidence

Consumers rely heavily on recycling information on product labels, with up to 82% of consumers stating they would feel deceived if a product labeled as recyclable is not actually recycled 54. This strong consumer trust and subsequent disappointment are driving class-action lawsuits and regulatory enforcement against false environmental marketing 56. Legal consequences may include being ordered to pay settlements, refunds, label modifications, and civil fines imposed by regulators 56.

Synergy of Legal Risks

There is an inherent link between greenwashing liability (based on misleading claims) and EPR non-compliance risks (based on technical performance). If packaging is deemed difficult to recycle or non-circular in EPR assessments (resulting in high fees), it is highly likely to fail the actual recyclability standards required by SB 343—rendering its "recyclable" claims deceptive 53. Therefore, failure to invest in DfR optimization exposes enterprises to two high-risk enforcement pathways simultaneously: administrative fines (EPR) and civil litigation (greenwashing).

Ultimate Penalty for Market Access

Compared to administrative fines, the most severe penalty is market exclusion or immediate sales bans 41. The EU PPWR explicitly threatens "immediate sales bans" 41, while California has already implemented sales bans on EPS 10. For a multinational enterprise, being forced to recall or discontinue product lines in large markets such as the EU or California would result in losses far exceeding the value of any administrative fine. Therefore, compliance strategies must prioritize avoiding market access restrictions—for example, strictly complying with PFAS restrictions and volume efficiency requirements before the 2026/2027 deadlines 4.

VI. Conclusions and Strategic Recommendations

The current regulatory environment requires enterprises to transition to a design-driven compliance model. Future market competitiveness will directly depend on the ability to integrate "Design for Recycling" principles early in the product lifecycle to avoid substantial non-compliance fines and reduce ongoing operational costs through favorable eco-modulation rates.

1. Strategic Compliance Priorities

· Prioritize DfR Investment: Systematically audit the entire packaging portfolio against APR/RecyClass standards 21, focusing on high-volume materials and high-risk composites (e.g., flexible packaging and multi-layer laminates) 24. Switching to mono-materials is the most direct way to obtain lower EPR fees.

· Establish Robust Data Infrastructure: Upgrade or implement internal systems to accurately track and manage SKU-level material composition data (SMRM)—the foundation of EPR reporting 9. Data accuracy is the key defense against fines for inaccurate reporting.

· Geographically Specific Compliance Strategies: Adopt a dual strategy for different regulatory environments: centralized compliance management for the harmonized EU PPWR; decentralized management focused on reporting and PRO registration for the fragmented U.S. state-level EPR requirements 6.

2. Risk Mitigation Checklist

· Mitigate Eco-Modulation Risks: Proactively redesign packaging to maximize recyclability, increase PCR content, and switch to mono-materials—treating this investment as a direct reduction in COGS 24. Companies failing to act proactively will face profit erosion due to high modulation fees 9.

· Phase Out High-Risk Materials: Immediately phase out materials facing regulatory bans or strict restrictions—such as PFAS in food contact materials or EPS that fails to meet California’s recycling rate requirements 4.

· Audit Label Claims: Carefully review all environmental claims in accordance with the FTC Green Guides (60% accessibility rule) and state laws such as California SB 343 to eliminate greenwashing liability and prevent class-action lawsuit risks 48.

Appendix: Key Analytical Comparisons

This report aims to provide quantitative and qualitative comparisons to support senior management’s strategic decision-making.

Table 2: Quantification of Administrative Non-Compliance Fines and Market Sanctions (Selected Jurisdictions)

Table 3: Technical Definitions of Recyclability: Comparison of APR and RecyClass Standards