Why Waste Is a Profitable Thing to Mind

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by: Joel Makower

You don’t hear much trash talking these days, given the intense focus of corporate environmental managers on climate, energy, water, and other issues. Managing solid waste, of course, hasn’t gone out of style. It’s become part of everyone’s job, from office workers to those on the factory floor, as well as in warehouses, hospitals, hotels, and just about everyplace else.

In the 1980s and 90s, waste loomed large. We were told that we were running out of landfills — a bit of conventional wisdom about spaciousness that turned out to not be specious. We glommed onto recycling as a cure-all for many of the world’s environmental ills. The passion for the Three R’s of waste management came in part from the Mobro 4000, a barge made famous in 1987 for hauling the same load of trash from New York to Belize and back before a way was found to dispose of the garbage. The Mobro drove home the fact that there was no "away" to which we could conveniently throw things.

Since then, managing trash — from offices, manufacturing, packaging, and a wide range of other components of commerce and communities — has become a "normal," even habitual, practice. And a profitable one: The tales have been well told of companies that have reaped millions in cost savings from reducing the need to sort, bundle, compress, bale, store, and ship waste materials to recycling or disposal facilities. For example, I’ve often told the tale of how General Motors eliminated wooden shipping pallets from its North American assembly plants, requiring suppliers to use pallets made from corrugated cardboard, which is both recycled and recyclable. In doing so, GM saves about $100,000 from pallet disposal and earns about $50,000 reselling used cardboard . . . every business day.

We don’t hear such stories often, or often enough, but they exist inside most big and many smaller companies, tales of impressive savings and efficiency improvements from having to deal with less stuff. (You can find dozens of stories and resources here.)

I attended an event last week that reminded me of the growing sophistication of today’s waste world. It was a private meeting convened by Waste Management and the Tuck School of Business at Dartmouth (and facilitated by my colleagues at GreenOrder). The event, consisting of senior environmental professionals from 25 major companies and a smattering of academics and government types, aimed to shed light on some of the issues related to e-waste, construction waste, packaging waste, food waste, and other forms of detritus.

The event was also aimed at showcasing the transformation taking place at Waste Management, a 40-year-old company that is gradually morphing from one of the world’s largest trash haulers to one of the world’s largest recyclers to one of the world’s largest materials and resource efficiency companies. That transformation is leading WM to rethink its operations and business model, including engaging in new kinds of conversations with its corporate and municipal customers, such as the conversation at Tuck. (My friend and colleague Marc Gunther of Fortune wrote an excellent overview of the changes at Waste Management earlier this year. I queried WM’s CEO, David Steiner, about this on a panel at the Corporate Eco Forum in September, video here.)

The metamorphosis taking place at Waste Management is part of an overall transformation taking place in business. Waste, once seen as an inevitable cost of doing business, is no longer inevitable. It represents a costly inefficiency to be minimized or eliminated. Car companies like General Motors and Toyota are creating zero-waste factories, where nearly everything is recycled (a small percentage is burned to create energy to run the factories). Other companies are making radical shifts in their procurement and manufacturing processes to reduce waste, sometimes creating new business arrangements with suppliers to achieve their goals.

Companies like Waste Management are finding new business opportunities in all this, becoming materials efficiency experts. For some customers, WM is taking over much of the materials handling duties, creating performance-based contracts that reward WM for reducing the customer’s wastes and costs; the company has established a new division, called Upstream, that focuses on this. Doing so shifts the business model from one based on how much waste is removed from a customer’s premises, to how much the customer can save through more efficient operations.

Beyond that are new ways to "mine" waste streams that extract valuable components from dumpsters and landfills and put them back into the market. E-waste, for example, contains significantly more copper and precious metal per ton than the ore from which these metals are typically mined. If companies can make money from mining ore, why not from mining waste? (They can, I learned, but it’s no easy matter — for starters, there’s a logistical challenge of amassing e-waste in one place at sufficient scale.) There’s also potential in demanufacturing, remanufacturing, and refurbishing used goods to keep them, or their components, in service longer.

And then there’s the energy that can be produced from waste — both from burning it and from capturing the methane released when garbage rots, the latter of which also reduces greenhouse gases, since methane has 56 times the global warming potential of carbon dioxide, according to United Nations data. Waste Management already produces enough energy each year from waste to power about a million homes.

All of which must be taken into context. The mere creation of waste streams represents an inherently unsustainable process, one in which the value of materials is diminished or lost and new ones must be mined, manufactured, or otherwise produced to replace them. While we can celebrate these newfound efficiencies from reducing waste, they are only interim steps toward the development of a system in which there is no waste at all.

Moreover, the story of how much waste is created, and by whom, is a story that hasn’t been well told. In my new book, I tell a "tale of two circles," one well known, called "Municipal Solid Waste," which represents the garbage most of us know well — newspapers, yard clippings, glass, metals, plastics, etc. But there’s a much, much bigger cache of trash — what I’ve dubbed the "Gross National Trash," which is about 65 times larger than MSW. It is comprised of industrial wastes (from manufacturing pulp and paper, iron and steel, glass, and concrete; food processing; and manufacturing textiles, plastics, chemicals, and other things); something called "RCRA Special Waste" (including medical waste, septic tank pumpings, industrial process waste, slaughterhouse waste, pesticide containers, and incinerator ash); and industrial hazardous waste (a witch’s brew of toxic ingredients found in paints, pesticides, printing ink, and chemicals used in hundreds of manufacturing processes).

The annual 13 billion tons of Gross National Trash is a costly burden on the environment, not to mention the companies that create these wastes and have to responsibly dispose of them. And it represents a vast untapped business opportunity for Waste Management and the world’s other haulers and recyclers to find new ways to create value from these waste streams, or to eliminate them in the first place.

At the Tuck event, someone asked whether the "W" in Waste Management’s logo might someday be flipped upside down into an "M," reflecting a possible change of the company’s name to Materials Management. The WM folks weren’t saying, but I find it fitting: repurposing an existing resource in order to turn something old into something new.

Original Post: http://makower.typepad.com/joel_makower/2008/11/why-waste-is-a.html