Sometimes it's OK to litter. After unwrapping soap from Pangea Organics, a Boulder, Colorado-based maker of skin care products, customers are supposed to plant the packages in the ground. In a few weeks, the biodegradable cartons—made of recycled newspaper and a sprinkling of seeds—begin to sprout flowers or herbs.

It's a nifty trick, but before creating Pangea's soapboxes in 2006, the company's packaging supplier had never tried such a thing. "They went into it kicking and screaming," says Joshua Onysko, founder and CEO of Pangea. However, customers, who now spend $4 million a year on Pangea's line of organic cleansers and moisturizers, were enthusiastic. Within a year of the introduction of the plantable packages, sales had nearly quadrupled. Onysko partially credits the packaging for the increase.

Although Pangea was something of a pioneer, these days many more companies are introducing packages to appeal to eco-conscious consumers. Other businesses are being pushed into environmentally friendly packaging alternatives by large retailers such as Walmart and Target, which have recently put pressure on suppliers to focus on sustainability. But making the switch to greener packaging can be challenging.

For starters, although there are many new options—such as biodegradable packing peanuts and plant-based plastics—whether these really reduce a product's environmental impact is sometimes murky. "A lot of these materials are so new that there isn't good data," says Victor Bell, president of Environmental Packaging International, a Jamestown, Rhode Island–based consultancy that specializes in green packaging. Entrepreneurs need to find out how the material was made and what kind of energy is being used to ship it, he says. "Companies sometimes just pick one thing and focus on it," says Bell. "Is it recyclable? From a renewable source? Biodegradable? You need to look at all those things."

Often, companies end up hiring an outside firm to answer those questions. The Sustainable Packaging Coalition, which is run by a nonprofit organization, licenses software for $2,000 that will analyze a package's environmental impact. But even after such a study, the right decision may not be crystal clear. Stonyfield Farm, a $360 million organic yogurt company based in Londonderry, New Hampshire, hired an expert when debating whether to switch some of its yogurt cups from a petroleum-based polystyrene to a nontoxic plastic made from corn. The company paid Roland Geyer, a professor of industrial ecology at the University of California, Santa Barbara, to study the issue. He found that corn-based plastic would reduce greenhouse gas emissions, but it wasn't clear whether producing the material would consume any less water than making polystyrene. "It was never a slam dunk," says Nancy Hirshberg, Stonyfield's vice president (and sister-in-law of Inc. columnist Meg Cadoux Hirshberg), who heads the company's environmental initiatives. Still, the improvements in greenhouse gas emissions and toxicity persuaded her to change the packaging to corn-based plastic for Stonyfield's multipack yogurt containers.

Once a company decides to switch to green packaging materials, finding a reliable manufacturer can prove challenging. Gora Ganguli, president and CEO of VitaSound Audio, a $1 million company in Hamilton, Ontario, ran into problems when creating green packaging materials for a line of high-end earbuds. Ganguli wanted to use a cardboard-like plant-based fiber that is compostable. The material, it turns out, is also tricky to work with. The first packaging manufacturer VitaSound hired couldn't make it work. The boxes lacked clean seams and looked sloppy. By the time Ganguli found another supplier—Be Green Packaging of Santa Barbara, California—the product launch date had slipped several months. Ganguli says he learned the hard way that it's important to ask a lot of questions.

Companies must also cope with the fact that green packaging materials are often more expensive than other options. And if customers aren't willing to shell out more for a product with eco-friendly packaging, the difference usually ends up coming out of the company's bottom line. That was a worry for Jennifer Lewis, founder of Petit Four Legs, a Seattle-based maker of high-end pet treats. To make her product stand out in boutiques, she wanted to switch from regular cellophane bags to compostable cellophane packaging. But the move would raise packaging costs 30 percent. Before making the change, she wanted to make sure customers would support it.

Lewis, a graduate of Northwestern's Kellogg School of Management, contacted a marketing professor there and got some M.B.A. students to help with market research. The students surveyed 2,500 consumers and found that people would be willing to pay 12 percent more for an environmentally friendly package when buying natural pet snacks. That persuaded Lewis to make the switch, but so far, the company has been eating the extra cost. Lewis says she is hesitant to raise prices until consumer spending picks up.

What's driving prices even higher is that some recycled materials are in short supply. That has been an issue for Charlie Sweat, CEO of Earthbound Farm, an organic produce grower in San Juan Bautista, California, with 1,250 employees and $450 million in annual revenue. Since the company switched to recycled plastic for its prepackaged salads in 2008, it has had difficulty sourcing enough of the material. The type of recycled plastic Earthbound Farm uses—which is made from consumer products like water bottles—is in high demand, because it's used in textile manufacturing in China. Sweat must also pay a consulting firm to test the recycled material for traces of low-quality industrial plastic, which could taint food. "We've seen some recycled plastic that isn't what it claims to be," he says.

Increasingly, companies are dealing with these added costs by finding ways to reduce the amount of packaging used. At Stonyfield, Hirshberg worked with her manufacturer to make the yogurt cups thinner. That helped offset the added cost of using corn-based plastic and helped the company avoid raising prices for consumers.

At Method, a San Francisco maker of home cleaning products, the process of reducing packaging starts with product design. Last year, the company launched a highly concentrated laundry detergent, a small bottle of which can wash 25 loads of clothes. The container, which is partially composed of recycled plastic, is smaller than a soda can. Adam Lowry, one of Method's founders, says the company will continue to look for ways to reduce packaging, but he expects that companies will soon have more—and better—green packaging options. "We are only at the beginning of the cycle of innovation in eco-friendly packaging," he says. As packaging makers continue to innovate, the decision to switch to green materials may prove easier for more entrepreneurs.