The Business Opportunities in Recycling December 13, 2011 The recycling industry has an endless, abundant supply of resources.

Every product that businesses make today will at some point in its life cycle become waste. Recycling in terms of waste management turns trash into a resource that can be used to remanufacture materials into new raw materials or finished products. Another way to look at recycling is as resource recovery. The understanding of solid waste as a resource is not a new concept, but becoming an ever-growing part of how businesses look at their operations. Large manufacturing companies not only recycling materials, but actually natural resources such as water. Managing waste is not only an environmental issue; it is a major factor influencing the profitability, manufacturing, and brand image of businesses today. In the case of social responsibility, businesses not only have to deal with the eyes of the consumer, government regulation also shapes the way they operate. The biggest motivator for businesses, undeniably, is seeking profits through their waste generation. Recycling is a major opportunity for businesses to grow more sustainably in the coming decades. Several benefits of waste management are attributable to recycling including 1.) reduction in the need for disposal capacity, 2.) lowered emissions from landfills and incinerators, and 3.) reduced litter and improper disposal. The industry as a whole also benefits from using recycled materials resulting in 4.) reductions in energy use and related emissions, 5.) reduction of impacts and emissions during the extraction and manufacturing process, and 6.) the long-term value of conserving

raw materials (Ackerman 21). The social and economic value from recycling exceeds that of virgin material costs in almost every instance. Refer to Figure 1 for a diagram of how much energy is conserved through recycling by material. The United States currently recycles approximately 30% of all solid waste. Approximately 15% of all waste is incinerated and about 55% of waste is put into landfills (Recycling). Cost-benefit analysis is used to measure the economics of recycling compared to traditional waste disposal. When dealing with waste management, pollution is evident in both practices. Solid waste in landfills and litter on the road are considered pollutants while reprocessing of waste materials requires large amounts of energy. Therefore, it is impossible to have a zero emission waste management system when reprocessing emits carbon, landfills release methane, and incineration can discharge harmful chemicals into the atmosphere. Landfills, which release methane gas 21 time more potent than carbon dioxide, account for nearly 3% of greenhouse gas emissions in the U.S., making them the most significant non-energy contributors to climate change potential (Ackerman 22). In tracing the steps of recycling niche markets can be found in where profits can be turned. The process of recycling is described as collecting recyclable materials that would otherwise be considered waste, sorting and processing recyclables into raw materials such as fibers, manufacturing raw materials into new products, and purchasing recycled products. Collecting and processing secondary materials, manufacturing recycled-content products, and then buying recycled products creates a circle or loop that ensures the overall success and value of

recycling (EPA). Throughout all parts of the cycle, different companies handle the materials and add value to them. This can be done simply by sorting through trash to find products with value, or by synthesizing the materials into new refurbished goods. The raw materials put into the product determine how and if it can be recycled after it becomes waste. Materials such as plastics, paper, ferrous and nonferrous metals, tires, textiles, glass, and electronics can be recycled back into the raw material market. These materials can enter the recycling market through private or government curbside-pickup, scrap yards, or recycling centers. Recycling of scrap materials occurs at processing plants that range from small Mom-and-Pop shops to large companies. The recycling industry produced about $77 billion in sales last year and created approximately 10,000 jobs (ISRI). Material recovery facilities or MRFs are where waste is sorted, broken up, melted, or synthesized into post-consumer raw materials that will be sold to manufacturing firms. It is a lengthy and very extensive process requiring lots of capital to operate productively. Recycling in comparison to landfill disposal shows great benefits and opportunities. Aluminum cans, for example, give the greatest energy savings per ton, as shown in Figure 1. These savings reflect the nature of aluminum production; manufacturing aluminum cans from virgin inputs is very energy intensive, whereas relatively little energy is required to manufacture cans from recycled aluminum. Recycling carpet also results in significant energy savings, since the recycled material is turned into secondary products and the energy-intensive processes that

would have been used to manufacture those secondary products are avoided. Although all processes save money, energy, or reduce air and water pollution, none are quite comparable to nonferrous metals such as aluminum. The next most profitable, not energy saving, materials would be ferrous metal such as iron and steel, followed by paper recycling. However, incentives for the recycling market have had little success in gearing production away from virgin materials and towards the reuse of recyclable raw materials. Promoting recycling through incentives has been increasingly popular through methods such as unit pricing for garbage collection, elimination of subsidies for virgin material production, or an addition of a disposal fee to the sales cost of products. However, when put into place these incentives have shown little success at reviving the market for waste management (Ackerman 4). When landfills are priced below a materials marginal social costs to reprocess it, the incentives are inadequate for businesses to reduce their waste streams. In addition what ultimately becomes manufacturing waste is passed on to the consumer in the packaging. However, the price of waste can induce businesses to prefer smaller, lighter, and more compact packages and products. An attempted incentive program was implemented in Germany in 1991. The Green Dot Program in principal was a take-back program. A green dot was placed on products that could be placed in specialized collection bins. This turned out to be an operational failure because of it was nearly twice as expensive, many people abused the bins as trashcans, and much of the to-be-recycled waste was just shipped

outside the country to landfills. Two good results were derived from the program. Businesses began to find cost savings through simplified or reduced packaging. The evolved knowledge was shared with the rest of the world. The volume of recyclables also dramatically increased, yet the costs were unnecessarily high. Perhaps if the products were recycled properly the market could have grown for recycled materials (Porter 33). To make manufacturers aware of the cost of disposing their products an advance disposal fee or ADF could be levied. The ADF would be an estimated tax based on the marginal social cost that a product bears at the end of its use. The fee would have minimal effect on the price of products, but produce significant government revenue. However, ADFs might be used for the wrong reasons by politicians and not facilitate the cost of waste management. Few states in the U.S. are using ADFs and only for specific products such as car batteries or tires (Porter 35). Today, businesses need incentives to recycle because it isnt enough to say they should due to the fact that its the right thing to do. Coca-Cola has found incentives for water recycling because it allows them to manufacture in more countries where the resource is scarcer. It has mandated that all water used in production to be treated, filtered, and returned to the source as of 2010. Also it has a goal set for 2012 to increase water efficiency by 20% from their 2004 baseline (Coca-Cola). Coca-Cola has developed a PlantBottle PET package for its products, which uses sugar-based ethanol to produce the same quality of plastics while having a lower carbon footprint. It also has invested in six bottle to bottle recycling plants,

allowing them cheap reuse of their packaging materials. Coca-Colas goal is to recover the equivalent of 50% of the bottle and cans it sells worldwide (Coca-Cola). In South Carolina, the recycling industry has a $6.5 billion economic impact. It is directly responsible for more than 15,000 jobs, $1.5 billion in personal income, and $69 million in tax revenue each year. The industry in expected to grow at a rate of about 12% annually. The South Carolina Materials Exchange is a free matchmaking service that was created to facilitate the exchange of reusable materials by businesses, government, and non-profit institutions. Users can gain access to find information on materials available or wanted, sometimes eliminating the need for waste disposal and recovery (Recycling in SC). The economic benefits vary from state to state, and there are many other costs which factor into the viability of recycling. The important issues to address with recycling include the social and economic costs, government policy, and downcycling or material quality degradation. Not every material can be recycled; however, those that are reprocessed back into the market will eventually have an end to their life cycle. Downcycling is essentially the degradation of material as a result the remanufacturing process (Green Planet). Organic material such as paper fibers break down and eventually cannot be reused. In time these materials end up in a landfill, but paper conserves up to 65% of energy through a single reprocessing, and glass can reduce air pollution by 20% (ISRI). Technologies are increasing; however, to make higher quality, secondary market raw materials a more practical solution.

So is recycling a major business opportunity for businesses in the coming decades? It is inarguably going to be in the future if it is not already today because of rising prices for virgin raw materials. Today, the largest issue with recycling is the lacking incentives for business as a result of low re-sale value of recycled materials, not the lack of recycling markets (Porter 178). Private recycling firms can make large profits, but only from those materials with a high retained value after being recycled. The best way to look at recycling is as a future business opportunity because the current cost-benefit ratios are not valued enough to induce recycling of all waste. One material may make perfect economical sense to recycle and another too costly or energy inefficient that it actually hurts the environment during the reprocessing stage. Landfills will never fill up, and never will every product be recycled. The best approach to resource conservation and industry efficiency is to educate individuals and businesses about the potential benefits with hopes that the market will follow as green trends play a larger role in business operations.

Figure 1

http://dnr.wi.gov/org/aw/wm/climatechg/reducegreengases.htm

Bibliography

Acherman, Frank. Why Do We Recycle? : Markets, Values, & Public Policy. Covelo, CA, USA: Island Press, 1996 The Coca-Cola Company Sustainability Review http://www.thecoca-colacompany.com/citizenship/pdf/SR09/20092010_The_Coca-Cola_Company_Sustainability_Review.pdf Environmental Protection Agency. http://www.epa.gov/osw/conserve/rrr/recycle.htm Frank Hefner and Calvin Blackwell. The Economic Impact of the Recycling Industry in South Carolina. College of Charleston Department of Economics and Finance. http://www.epa.gov/osw/conserve/tools/localgov/docs/economicimpact-of-recycling-sc.pdf Industry Facts Sheet. Institute of Scrap Recycling Industries. < http://www.isri.org/imis15_prod/CMDownload.aspx?ContentKey=1d7c41b368a6-46a6-a128-ae75323136f4&ContentItemKey=6ea979cb-689a-4fec-aff9f31b0d22ddd7> Jane S. Shaw, "Recycling." The Concise Encyclopedia of Economics. 2008. Library of Economics and Liberty. 22 November 2011. <http://www.econlib.org/library/Enc/Recycling.html>. Planet Green. Green Glossary: Downcycling. http://planetgreen.discovery.com/work-connect/green-glossarydowncycling.html Richard C. Porter, The Economics of Waste. Resources for the Future. Washington D.C. 2002