Reduce. Reuse. Recycle.
It sounds simple. It’s not.
Just ask Bill Caesar, who runs the recycling and organic growth units of Waste Management, America’s biggest trash company, which has $13.3 billion in revenues last year.
It’s hard to get homeowners to figure out which plastics go into which bin.
It’s expensive to build out the infrastructure needed to separate materials, and ship them to customers.
And now, to make matters worse, the prices that buyers are willing to pay for cardboard, used paper, metals and plastics have fallen, on average, by about a third. A ton of solid waste used to yield about $150 in recycling revenues, more or less. Today, it’s closer to $100. Here’s a chart.
“The commodities are global in nature,” Bill told me the other day. “When the French stop buying things, the Chinese stop making things, and when that happens, they need fewer boxes and the price of recovered paper in the US falls.”
Who would have thought that the EU’s troubles would slow progress towards zero waste?
Bill and I met this week to after he spoke at Wastecon, the big convention organized by SWANA in the Gaylord National Resort and Convention Center outside Washington, where I cam across the recycling robot, above. (Of course you know SWANA as the Solid Waste Association of North America. Some time ago, garbage became solid waste and the city dump turned into a sanitary landfill.) Waste Management still takes most of the
garbage municipal solid waste that it collects to dumps sanitary landfills–it owns more than 250 active landfills–but Bill’s job is keep stuff out of the ground. His unit looks for ways to extract more value from waste, either by recycling, or composting organic waste, or turning waste into energy.
This is a big deal, and big shift for the company. [See my 2010 FORTUNE story Waste Management’s New Direction.] Dave Steiner, the company’s CEO, likes to say: “Picking up and disposing of people’s waste is not going to be the way this company survives long term. Our opportunities all arise from the sustainability movement.”
Still, the shift is happening slowly. Waste Management recycled about 10 million tons of materials in 201o, its latest sustainability report says, up from 8.5 million in 2009. Still, well over half of the garbage collected by Waste Management–about 70%, Bill estimates–still goes to landfill. The company’s goal is to recycle 20 million tons a year.
Today’s low commodity prices won’t change Waste Management’s core strategy, which is to extract as much value from the waste stream as possible, Bill says. Commodity prices will rise again. Commercial and residential customers want the company to recycle. Energy prices are likely to go up, so the company’s bet on waste-to-energy technologies should pay off.
“The long term trends are good,” Bill says. “We’re continuing to build facilities. We’re not going anywhere.”
Waste Management’s investment strategy, which he oversees, focuses on smaller companies that can help recover energy or materials from waste. It has a portfolio of more than two dozen acquisitions, joint ventures or project investments, some of which will surely fail.
“It’s advantageous to us to invest in a series of companies at small scale because we don’t know what’s going to work,” Bill says. “Our intention is to learn, and once believe there is something there, be in a position to commercialize those offerings.”
For example, Waste Management owns a stake in a Harvest Power, a Massachusetts-based company that processes organic waste (food, yard waste, etc.) to make renewable energy and soil, mulch and organic fertilizer. It’s also an investor in Agilyx, which takes difficult-to-recycle waste plastics and turns them into crude oil, essentially reclaiming the hydrocarbons used to make the plastic. Other companies in which Waste Management has invested include Enerkem, whose technology converts waste into ethanol and renewable chemicals, and Fulcrum BioEnergy, which turns household garbage into transportation fuels.
While these are all young companies that still need to prove themselves, what’s striking is how much innovation is going on in garbage industry. Wisely, Waste Management has decided that rather than stick with its old model of taking waste to the landfill, and risk being challenged by others, it is seeking to disrupt itself.
Bill told me that’s why he was excited to join the company. He was hired in 2010 as chief strategy officer, after more than a decade as a consultant at McKinsey & Co. Before that, and before business school at Duke, he worked for the CIA and the state department as a Russian specialist and spent a year in St. Petersburg after the collapse of the former Soviet Union. So he knows that big changes can happen, and they create opportunities.
“This industry is at an inflection point,” he says, “and that doesn’t happen very often.”
DISCLOSURE: I was paid to moderate a sustainability event for Waste Management last February.