Some big companies want to turn around America's poor recycling rate
By E.B. | NEW YORK
TO PLACATE shareholders and shoppers, American companies are promising to use more recycled materials in their products. It’s a nice idea, but surprisingly hard to achieve. Coca-Cola committed to using at least 25% recycled plastic in its containers by 2015, but revised this downwards owing to scarce supply and high costs. Walmart is struggling to find the material to meet its goal to use 3 billion pounds of recycled plastic in its packaging and products by 2020. “The problem is supply,” explains Rob Kaplan of Walmart.
Most recycled materials should be cheaper than virgin commodities, but America throws too much stuff away. Low landfill fees and a fragmented waste-management system have kept the country’s recycling rate at around 34% for two decades—far lower than most rich countries. This waste comes at a cost. Making cans from recycled aluminium, the most valuable container material, requires 95% less energy and creates 90% less greenhouse-gas emissions than virgin stock, yet more than 40 billion aluminium cans hit America's landfills every year. The country chucks away $11.4 billion worth of recyclable containers and packaging annually, according to As You Sow, an advocacy group.
Part of the problem is that America’s approach to waste is a mess of incompatible local systems. Around 9,800 different municipal recycling plans operate around the country, and they all follow different rules. Most recycling facilities were built in the 1990s, and the machinery is often ill-equipped to handle changes in the country’s waste stream, such as the decline in paper (newsprint has fallen by half since a 2000 peak) and the swift rise in plastics. Diverting recyclable materials from landfills can save some money; cities spent about $5 billion on landfill fees in 2013. But this requires big capital investments, which cash-strapped governments are often disinclined to make. As a result, a quarter of Americans lack access to proper bins for collecting recyclable material, and another quarter go without any curbside recycling at all.
Some companies are starting to invest in recycling infrastructure. Walmart, Coca-Cola and eight other big companies have created a $100m Closed Loop Fund, which offers zero- and low-interest loans to cities and recycling companies for everything from better bins to more efficient sorting plants. The loans are repaid with the profits from diverting waste from landfills and selling the materials. “If a programme doesn’t work, we don’t get paid,” explains Ron Gonen, who created the fund with Mr Kaplan last year.
Private investors have waded into America’s recycling problem before, but the Closed Loop Fund is the most ambitious scheme to date. “I’ve never seen consumer brands put that kind of money in recycling in 20 years,” says Paul Gardner of Recycling Reinvented, an advocacy group. In principle, the business case should be there: revenues for the recycling-facilities sector are expected to grow by 5.7% a year over the next five years, reaching $8 billion in 2020, according to IBIS World, an industry analyst.
But proving the value of recycling is not easy. Although $100m is a good chunk of change, industry analysts say $1.25 billion is needed to fully modernise America’s recycling infrastructure. Another challenge is aligning the incentives of the different players. Companies may demand more post-consumer material, but the supply still relies on the whims of municipalities and consumers, and “there’s no real incentive built in to maximise recovery or material value,” says Kate Eagles of NAPCOR, a trade association for the plastic packaging industry in North America. Neither municipalities nor residents see much benefit from dutiful sorting. Even green-minded folks will throw away a soda can if a recycling bin isn’t readily available. Cities can boost recycling rates with higher landfill taxes or “pay-as-you-throw” plans, which charge households for the waste they create. But collecting and sorting this material is still a costly, complicated business, and the value of the goods does not always cover the cost of collection.
It is also hard to increase the quantity of recycled goods without compromising quality. Many cities now give residents bigger bins and demand less sorting, but the often-contaminated results are a costly headache for recycling companies. “We get soiled diapers and dead animals on the line,” complains James Devlin of ReCommunity, which operates 35 recycling facilities in 13 states. One recycling bin ended up holding a six-foot shark.
This is a particularly tough time to be telling businesses that using more recycled materials makes good economic sense. Falling oil prices have lowered the price of virgin plastic against the recycled stuff, which has put off manufacturers and hurt recycling companies (plastic makes up a growing share of their waste feed). Without a price on carbon, using recycled commodities does not necessarily help a company’s bottom line. “People aren’t going to pay more for recycled plastic just because it’s recycled,” says Tom Szaky of TerraCycle, which makes consumer products from waste.
The Closed Loop Fund will be an interesting experiment. But it is unclear whether market forces and a few public-private partnerships will be enough to fend off legislation to saddle companies with the full recycling bill. In nearly 50 countries, including the entire European Union, a policy called “extended producer responsibility” shifts the burden of waste disposal from taxpayers to companies. Such schemes are all over the place when it comes to costs and effectiveness, but they boost recycling rates and save cities money. Thirty-two states already force companies to handle discarded electronics, batteries, mobile phones and other products. Lawmakers in Rhode Island recently introduced a bill that calls on companies to recycle at least 80% of packaging by 2020. If Walmart hopes to prove that voluntary measures will be enough to raise America’s stagnant recycling rates, it will need to work quickly.
