Due diligence in the paper & packaging sector: Five areas to watch
Paper and packaging companies navigate a growing set of rules covering deforestation, forced labour, environmental claims, packaging waste and product design. These requirements increasingly reach beyond the compliance function into supply chains, product portfolios, customer relationships and transactions. For buyers, sellers and financial sponsors, the transactional implications are direct: a target with weak traceability or poorly documented compliance creates additional work and uncertainty, and affects how risk is allocated across warranties and indemnities. Regulatory readiness is becoming part of transaction readiness – a compliance gap does not necessarily stop a deal, but it can shape the work required to get it done and the price at which it is done.
A link to our EU and US regulatory map for the paper and packaging sector can be found at the end of this overview.
At a glance – five areas that deserve particular attention:
- Traceability
- Substantiating environmental claims
- Changes to the economics of packaging
- Allocation of responsibility across overlapping frameworks
- Designing for future requirements
1. Traceability
Traceability is now central to operating in this sector. The EU Deforestation Regulation (EUDR), the EU Forced Labour Regulation and the US Lacey Act differ in approach, but each raises the importance of knowing what is in the supply chain and where materials originate. For paper and packaging businesses, that means looking beyond the immediate supplier: where did the fibre come from, what other plant-based materials are used, and can supplier information be verified?
The question for any business is whether it has the information to understand its upstream supply chain, or whether there are still gaps. In a transaction, those gaps become the buyer’s problem. A target that cannot demonstrate traceability to the level that buyers now expect is a target with unquantified exposure, and that exposure tends to surface in diligence as warranty requests, price adjustments or conditions precedent rather than as a dealbreaker.
2. Substantiating environmental claims
Environmental claims are an area where a straightforward marketing statement can create a regulatory problem. Terms such as “eco-friendly,” “sustainable” and “carbon neutral” carry no single meaning; the regulatory question is what evidence supports the claim. In the EU, the Empowering Consumers for the Green Transition Directive restricts certain generic environmental claims and sustainability labels. In the US, the FTC’s Green Guides set expectations on claims such as recyclability and compostability, while state-level rules add a further, still-evolving layer.
A claim on a package or in marketing material needs to be clear about what it means, what evidence supports it, and which rules are in force (and enforceable) in the relevant market. For a business being sold, the position on claims matters in a different way: an unsupported or non-compliant claim is a contingent liability, and one that may not be visible without specific diligence on product packaging, marketing materials and customer-facing communications.
3. Changes to the economics of packaging
Extended Producer Responsibility (EPR) is changing the economics of packaging. In the US, several states have introduced EPR schemes requiring producers to register, report and contribute financially to post-use systems. In the EU, the Packaging and Packaging Waste Regulation (PPWR) takes a broader, more harmonised approach. For many businesses this is a cost question as much as a regulatory one.
Companies operating across several jurisdictions need to understand the rules that apply today while tracking developments that could shift the position tomorrow. In a transaction context, EPR fees and compliance obligations feed directly into the operating cost base and into forward-looking assumptions about margins. A target that has under-provided for EPR costs, or that operates in jurisdictions where the fee structure is still being challenged in litigation, brings a layer of financial uncertainty that needs to be priced and allocated in the deal.
For energy-intensive paper and packaging businesses, subsidies and electricity-price compensation schemes are becoming increasingly relevant. In cross-border transactions, differences in national implementation of EU rules can create uncertainty. Due diligence should therefore assess the duration and scope of support measures, any conditions attached to them, and their accounting treatment, as these factors can directly affect the target’s cost base, earnings and valuation.
Strategic buyers may benefit from acquiring targets in jurisdictions where they already operate and understand the local energy and subsidy framework, giving them greater confidence in assessing future operating costs and assumptions.
4. Allocation of responsibility across overlapping frameworks
Obligations do not always sit neatly within one piece of legislation. The EUDR, the EU Forced Labour Regulation and the Corporate Sustainability Due Diligence Directive (CSDDD) address different risks and operate differently, but each can require businesses to understand aspects of their supply or value chains. An integrated approach has value here: supplier information, sourcing data, risk assessments and remediation processes may be relevant to more than one framework, and keeping them separate creates duplication and obscures the real gaps.
The CSDDD also illustrates why due diligence needs to be kept current — it was substantively amended in 2026, and the practical runway is longer than the transposition deadline suggests. But the transactional dimension is worth emphasising. In an acquisition, the question is not only what the target has done, but whether its compliance architecture is built in a way that can absorb the next regulatory layer. A target with fragmented, framework-by-framework processes is harder to diligence, slower to reassure a buyer and more likely to throw up gaps that have to be addressed between signing and closing. Sellers and financial sponsors who address these issues ahead of a process make diligence more efficient and strengthen their position in price negotiations.
These sustainability-related obligations sit alongside established environmental and operational risks, which remain central to diligence for paper mill and manufacturing-heavy targets. Buyers will continue to focus on site-specific permits, including their transferability and compliance history, particularly those relating to hazardous substances, wastewater treatment, energy infrastructure and legacy coal-related operations. Such matters can materially affect transaction execution and post-closing investment requirements.
5. Designing for future requirements
Regulation is increasingly shaping the packaging itself, not just how it is sourced, marketed or disposed of. The PPWR phases in requirements on recyclability, design and labelling over the coming years, and already restricts PFAS in food-contact packaging. The US picture is more fragmented, with several states restricting intentionally added PFAS in food packaging alongside evolving federal requirements.
For product and innovation teams, timing matters: packaging designed today may need to meet requirements that apply years from now, and retrofitting later is more difficult and costly than designing for the rules at the outset. In a transaction, this is an asset and capability question. A target whose packaging portfolio is already aligned with forthcoming requirements is more valuable, and less likely to need capital investment or product reformulation post-acquisition. The reverse is equally true: a portfolio that will need significant redesign to comply is a cost that has to be identified and factored into the deal economics.
In short
Due diligence in this sector is becoming a continuous exercise rather than an annual or pre-transaction one. It requires knowing where materials come from, substantiating environmental claims, understanding the cost implications of packaging waste rules, connecting compliance processes and building regulation into product design. It also requires comfort with uncertainty – some requirements are in force, others are coming, some are being challenged in court and others are still being developed.
For paper and packaging businesses in particular, this also means understanding the regulatory environment around energy costs, subsidies, electricity compensation schemes and permitting frameworks, as these can have a material impact on operating economics, valuation and transaction risk allocation.
The businesses that manage this well, and the transactions involving them, will be the ones where regulatory risk is understood early, allocated clearly and not left to surface in the middle of a deal.
All details, including dates, penalties and procedural elements are set out in our regulatory map covering the EU and the US.
