I’ve been invited by colleague Jerry Powell to participate in a roundtable composed of waste and recycling editors at his Resource Recycling Conference at the San Antonio Marriott, October 26–27.
To be perfectly honest, my first inclination was to respectfully decline, because I felt that many of my views on the direction recycling has gone over the last two decades would likely cast me as a heretic if not a downright villain. But the more I thought about it, the more I became intrigued by the possibilities, so I recanted, and asked Jerry if I could join the group.
I’m glad I did, for a number of reasons, beginning with the professionalism with which the session has been arranged and will be staged. But even more compelling in my opinion is the list of questions that Jerry has posed for us to address, not only because they should lead to some lively discussion, but because they go to the heart of the matter…diversion-wise.
So what I intend to do in this column over the next several weeks is present some of the questions we will be addressing in San Antonio, followed by my knee-jerk responses and then the suggestions (occasionally scoldings) of others from whom I’ve sought help. So here we go:
Powell: We continue to experience consolidation of the recycling industry, especially among waste management companies and scrap metal processors. What’s your take? Will this continue, or will it slow down? Has it been helpful or harmful to recycling’s growth? And do you see any other recycling and composting sectors prime for consolidation?
1. Changing conditions set new organizational requirements, but while there will be readjustments as we go forward, it appears we are involved in a period favoring centralization.
2. To this point, consolidation has been helpful to recycling for a couple of reasons: (a) From an economy of scale standpoint, recycling favors those working with large material streams (helps overcome quality inconsistency problems, and allows more latitude in materials to reject and send to the landfill); (b) for the private sector whose revenues are aligned with cost, since recycling costs are greater than disposal costs, the profit potential is greater regardless of what happens with the materials after they are separated out and labeled as recyclables.
3. Not any time in the near future. Institutional forces such as government and environmental blocs are rooted in the status quo, opposing both the entry and growth of new practices and technologies.
Responses of others:
Respondent #1: Consolidation (and the attendant economies of scale) have allowed large companies greater access to and leverage in the secondary materials market, both foreign and domestic. Regarding future consolidations, it may be worth noting that large companies such as Waste Management are beginning to make substantial investments in new conversion technology companies (i.e. InEnTec, Terrabon, and Enerkem) as part of their expanded “organics growth” division. These investments are moving beyond composting to target future “advanced (next generation) recycling” markets for organics in the energy products area.
Respondent #2: Consolidation probably exacerbates the reporting privileges larger companies feel entitled to—i.e., they don’t report squat that’s meaningful in order to protect their market share. As result, the rest of us are often at a loss from a planning/tracking perspective with regard to quantities managed, process efficiency, actual diversion, etc. We are working (slowly but surely) to change this trend not by regulating the private sector in terms of what/how they do but in terms of requiring that haulers and processors at least share aggregated annual totals or service, tons, residue, etc., relative to what they did. If government is going to back off and let the private sector do what makes sense, the private sector has to share some of the metrics, and there are ways to do it without giving up all the family secrets.
Respondent #3: Waste management companies make some profit on recycling when the customer (city or county) pays extra for the recyclable collection service. Consolidation helps when the market prices are higher than the processing and shipping costs. Companies consolidate under one management and then sell off select portions under a new or replacement management.
There are some signs of consolidation in the food and greenwaste composting business (WM’s new Organics group is an example). The decision will be driven by the customer’s “willingness to pay” extra for separate collection of organic wastes.
Now then, it’s your turn? What’re your thoughts on consolidation? Opportunities? Advantages? Pitfalls? Disasters in the making?
Let us know either by responding here at the end or by e-mailing me at firstname.lastname@example.org.
Next week’s topic? Extended Producer Responsibility.