When a new building-size machine cranks up this month, it will begin turning mountains of recycled cardboard into paperboard suitable for greener forms of packaging.

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. GPK 0.67% 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.

Graphic executives contend their customers have little chance of meeting emissions and waste targets without substantially cleaner supply chains. “A lot of those goals flow through us,” said finance chief Stephen Scherger.

Plastic makers, for their part, say that they are investing in recycling and waste-collection technologies, and that their products compare favorably with paper once factors such as shipping weight and avoided food waste are considered.

Graphic, based in Sandy Springs, Ga., sells packaging material to the nation’s biggest food, beverage and consumer-products companies: Coca-Cola Co. and PepsiCo Inc., Kellogg Co. and General Mills Inc., Nestlé SA and Mars Inc., Kimberly-Clark Corp. and Procter & Gamble Co. Its beer-box business generates about $1 billion annually. It sells some 13 billion cups a year.

Graphic and other producers of paperboard, a single-sheet cardboard used mainly in packaging, are working to introduce newfangled products such as fiber yokes for six-packs and microwavable meal trays molded from cardboard. Graphic has announced plans for a line of cups with a water-based coating to replace the polyethylene lining, one step closer to the holy grail of a compostable cup.

When Graphic announced plans for the new paperboard plant in 2019, investors initially questioned the cost and necessity. Green investing has since gained momentum, though, and new investors have lined up behind the project.

Posted in: USA