The solid waste generated annually around the world in urban zones is reaching more than 10 billion tons, of which less than half is collected and disposed of. Municipal solid waste (MSW) management is valued globally at present at more than $300 billion in revenues, and is growing rapidly. The European Union (EU) produced in 2010 a total of 3 billion tons of MSW, or 6 tons per person per year. In spite of all reduce, reuse and recycle (3R) campaigns, the total volume is expected to increase with another 45% to 4.4 billion tons between now and 2020. The world’s distribution of waste indicates that North America with barely 5 percent of the population produces 30 percent of the waste; Africa, at the other extreme with 13 percent of the people is only responsible for 3 percent of MSW. However, even a few percent is a major threat to the health of millions and the environment.
In 2010, the German market for handling MSW was good for a total turnover of €35 billion. Remondis, the national market leader with 20,000 employees and €5.4 billion in sales over the same period, acquired over the years 400 local waste management companies. Apart from 10 major players, there are 5,000 small operators in Germany. Waste Management Inc. is the largest waste company in the world with a turnover of $13.1 billion and +50,000 employees. The hauling and landfill option is clearly diminishing around the globe. The number of landfill sites in United States decreased from 8,000 in 1988 to about 1,500 today. The trend toward incineration has been spearheaded by Japan which operates 1,800 of the 2,500 facilities worldwide, with 290 new stations planned outside Japan. The waste to energy (WTE) business is growing from a small base of €3.7 billion in 2010 to €13.6 by 2016. There are more WTE facilities under construction in China than anywhere else in the world.
WTE seems to be the only option for recycling, applied in 93.2 percent of the cases. Biological treatment (as described in Case 51), represents barely 6.8 percent. Composting, highly popular at small scale and practiced by million urban households, does not succeed in making a dent in the market even though it is the cheapest option for treating one ton of organic MSW. Incineration is the most expensive choice with a price tag on average of $125/ton and leaves operators with toxic ash that still requires landfill. Even though the content of MSW differs from city to city, concrete examples from around the world have demonstrated that 95 percent could be recycled in one or the other format generating more jobs and revenue than could ever have been produced burning waste.
One of the key challenges of the sector is that multiple vendors offer single solutions. The market has evolved in specialized engineering services with hardly anyone offering the full spectrum including composting, recycling, incinerating, biological treatment, and/or gasification. As a result, this broad portfolio of options competes for every contract each defending their solution, whereas these should be considered complimentary and the main focus should be on resource recovery. However, the greatest challenge is that MSW costs money. While urban mining has been widely debated as a business in the future, today it is not profitable. The dominant business model focuses on getting paid for dealing with waste, with long term state contracts as the norm covered by tax revenues. Since the barriers to entry are tremendous, and the capital requirements are beyond reach of many, there is little room for entrepreneurship.
Tom Szaky discovered when he was a freshman at Princeton University that worm castings are the best fertilizer. He could not believe how food waste from the cafeteria could end up in a landfill. So, he decided to feed it to worms bottling the output in used plastic containers. He believed to have produced the most environmental fertilizer ever. Better, he could sell it with a profit at a price lower than any competition. Tom went on to create a national collection program for used packaging and containers. He imagined a business model that permits to pay schools and not-for-profit organizations to collect all types of used stuff. He put people to imagine, design and produce high quality products like backpacks and kites using selectively collected waste as a raw material. Instead of recycling, he called this upcycling just like the title of the book published by the founder of the Blue Economy in the year 1999 in Germany. Tom went on to create TerraCycle, based in New Jersey, USA, a booming company that operates a new business model for waste. In his model, waste does not even get into the garbage bin. Tom Szaky discovered when he was a freshman at Princeton University that worm castings are the best fertilizer. He could not believe how food waste from the cafeteria could end up in a landfill. So, he decided to feed it to worms bottling the output in used plastic containers. He believed to have produced the most environmental fertilizer ever. Better, he could sell it with a profit at a price lower than any competition. Tom went on to create a national collection program for used packaging and containers. He imagined a business model that permits to pay schools and not-for-profit organizations to collect all types of used stuff. He put people to imagine, design and produce high quality products like backpacks and kites using selectively collected waste as a raw material. Instead of recycling, he called this upcycling just like the title of the book published by the founder of the Blue Economy in the year 1999 in Germany. Tom went on to create TerraCycle, based in New Jersey, USA, a booming company that operates a new business model for waste. In his model, waste does not even get into the garbage bin.
Tom’s model goes beyond mere recycling and creating valuable products out of waste: he puts a brand on waste. Until now, companies wished to hide their name in waste, blend it with other junk, or burn it since ashes do not carry a logo. Tom developed products that tell the consumer who was the originator of the raw materials from which a final product is made. Juice pouches from Capri Sun are converted to tote bags; used chip bags from Frito Lay are recycled into garbage cans and beverage coolers. Koolaid in Canada, and Tang in Mexico and Brazil follow the same concept. Twenty percent of TerraCycle’s waste conversion program is branded. This is one of the innovations that characterizes the Blue Economy since it permits the generation of value added and jobs, while sharing income building up social capital.
The first cash flow
Today TerraCycle works in +45,000 schools in America, and also with businesses, civic groups and gyms, which sign up on TerraCycle’s website to collect various waste streams like juice pouches and candy wrappers, toothbrushes and pens. It makes payments to schools and charities for sending the waste, and covers the cost of postage for shipping. While keeping waste from landfills, TerraCycle creates products and materials that replace other products made from virgin materials. Walmart (USA) featured TerraCycle’s upcycled products manufactured through licensees. During the 2010 Earth Month celebration, 4,300 Walmart stores sold TerraCycle’s products alongside the original one. So tote bags made from Frito Lay wrappers were sold with Frito Lay chips. Backpacks made from Capri Sun drinks were sold next to the juice. Purses and shoulder bags made from wrappers of M&M and Skittles were on sale next to the sweets and candy bars, from Mars.
None of the companies mind that their waste turns into a branded sales item; on the contrary these products promote consumer loyalty and repeat sales. Only a decade after he first proposed this business model at Princeton University, TerraCycle generated in 2010 an estimated annual revenue of $13,5 million with barely 50 employees and is expected to grow to $18 million this year. Demonstrating that the genius is in the design of the business model not in the technology, since all technologies needed to operate the business are off the shelf and readily available. TerraCycle’s environmental benefits have been confirmed by third party Life Cycle Analyses.
Tom Szaky has a simple goal, recycle “non-recyclable” waste. His global reach extends now to twelve countries. This business model could be applied anywhere where brands are prepared to help cover the cost of collecting the non-recyclable waste. Not only is there value in waste, but there are huge employment opportunities. Whereas many have practiced waste upcycling before like fashion from waste in Brazil, the selective waste recovery in Curitiba (also in Brazil) in return for public transportation, and waste to art in Africa, Szaky’s model mobilizes the young at grassroots level. This finances school projects and engenders a sense of responsibility of citizens who can designate $0.02 cents per waste unit to a school or charity of their choice. It is this network of institutions and people that has mobilized waste while unlocking its value with a sense of commitment and responsibility, a strong dose of enthusiasm, making everyone conscious and happy in the process.