Invest in Municipal Recycling Programs for Economic Benefits

by | Aug 9, 2018

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Americans currently recycle over 90 million tons of metal, paper, plastics, electronics, textiles and glass annually. What would happen if Americans didn’t recycle that amount? Our communities would have to pay over $3 billion annually in landfill disposal fees in order to landfill all of that valuable and sellable materials. Additionally, our communities would forego the over $100 billion in economic activity generated by the recycling industry in the United States, including 540,000 American jobs.

For Americans, recycling is a matter of economic self-interest. Recycling our cardboard, paper, beverage bottles, rigid plastics containers, and aluminum cans has three important outcomes. First, it reduces the cost to manufacture the products we buy. Second, it reduces the amount of our taxpayer dollars used every year to pay landfills. Third, it generates revenue for our communities via the sale of recyclable commodities. The average cost to landfill a ton of material in the United States is $50 and over $100 per ton in major population centers.

Bad News: Lack of Infrastructure to Recycle

Despite these economic incentives, large parts of the United States still have little or no recycling collection or processing infrastructure. Much of the economic activity generated by recycling is accomplished by long standing recycling programs on the West and East Coast as well as the upper Mid-West of America. For those who live in parts of the country with limited or no recycling infrastructure, their tax dollars are wasted on the cost of sending valuable commodities to landfill that could otherwise be sold.

While the 90 million tons currently recycled in the US saves American taxpayers and businesses over $3 billion annually in landfills disposal fees, over 180 million tons of recyclable materials are landfilled, costing American taxpayers and businesses over $5 billion annually in landfills fees. We are literally throwing money in the garbage.

Good News: Investment in New Recycling Programs

The good news is that we consistently see that investment in municipal recycling programs and infrastructure leads to economic benefits in parts of the county that are most in need of recycling infrastructure. Austin, TX, serviced by Balcones, one of the most profitable recycling companies in the country, has led a successful recycling program for over 20 years.

Prior to 2016, Memphis had a limited residential recycling program. Its local recycling facility, employing dozens of people, was preparing to close. In 2016, the City of Memphis provided large recycling carts to every household in the city. Two years later, Memphis is saving enough money from avoiding landfill disposal fees to pay off the cost of the recycling carts. Once the carts are fully paid for, the savings generated by recycling will provide Memphis with additional revenue that can fund important municipal programs (unrelated to recycling). All the while, their local recycling facility has continued to employ dozens of people. Austin, and now Memphis, serve as guiding lights to dozens of cities in the central and southern parts of the country interested in the economic opportunities that robust recycling infrastructure provides.

Cities today are faced with a choice when it comes to contracting waste management companies to service them?—?choose the traditional waste companies who make most of their money from hauling and filling their landfills or choose from a growing list of recycling companies that are solely focused on working with municipalities and businesses to achieve their goal of avoiding landfill disposal fees and increasing revenue from the sale of their recyclable commodities.

The recycling companies challenging incumbents include Sims and Pratt Industries that service New York City. Lakeshore Recycling Systems that services Chicago and large parts of Illinois. Recology that services San Francisco, much of the Bay Area and sections of Seattle. First Star Fiber that services Omaha, Balcones that services Austin and Eureka that services Minneapolis to name a few.

Major investment firms are taking note of the demand from municipalities to increase recycling and avoid landfill diversion fees, as well as demand from consumer goods companies to acquire recycled commodities to include in their products and packaging. As a result, there is a consistent and steady increase in investments into companies that provide advanced recycling programs. For example, Goldman Sachs recently became a major shareholder in Lakeshore Recycling Systems.

CPGs Making Recycling Commitments

We are also seeing a major trend amongst consumer goods companies looking to increase their use of recyclable material in the packaging and products they sell. It makes sense. At scale, along with the considerable environmental benefits, it should be less expensive for companies to manufacture using recycled material. That is why most major beverage companies including Coca-Cola, Dr. Pepper Snapple, Keurig, PepsiCo, Nestle Waters, and Danone as well as the world’s largest consumer goods companies such as P&G, Unilever, Johnson & Johnson, 3M and Colgate Palmolive are publicly communicating aggressive goals for the use of recycled materials in their products and packaging.

Like any industry, challenges remain. Too many products, such as plastic bags, plastic straws and styrofoam, are not recyclable, leading to confusion among consumers that causes contamination of the recycling stream resulting in a major cost to the system. The good news is that a number of municipalities are banning these products, sending an important message to industry that taxpayers will not subsidize the cost of sending products that are not recyclable to landfill. Additional good news is that beverage containers, clear plastics containers, carboard and aluminum cans are currently very profitable to recycle. Furthermore, we are seeing the development and introduction of robotics and artificial intelligence technologies that will improve the sortation and recovery of these high value items.

What about China?

Lastly, a note on how China, which has received much press as of late for their role in the American recycling ecosystem, impacts the industry. For much of the past 20 years, the US recycling industry was dependent on China as the leading export market. As consumption and waste has increased in China, the Chinese government has decided to develop their own domestic recycling infrastructure. This may cause some short-term pain in some parts of the United States’ recycling industry, but leading companies in the recycling industry, consumer goods and packaging industry, as well as a number of investors, see this as an opportunity to further develop and profit from domestic recycling and manufacturing infrastructure.

Leading municipalities, recyclers, manufactures and brands are starting to partner together to establish, and profit from, a circular economy in the United States where goods are continually manufactured using recycled material from local recycling programs. This partnership in developing a circular economy will result in one of the largest investment opportunities in the United States over the next decade.

By Ron Gonen, CEO of Closed Loop Partners

This article originally appeared on Medium and was republished with permission from the author.

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