The Circular File

Zero Waste Does Not Mean “No Waste”

First of all, the term “zero waste” is confusing and misleading. Zero waste does not mean no waste but rather a preferred hierarchy of reduction, reuse, recycling, and energy recovery, with landfill as the choice of last resort. Many programs have a stated goal that over time they want to be zero landfill, but currently a diversion rate of 60-70% is typical in even the more mature and successful zero waste programs, according to Gershman, Brickner and Bratton (GBB), the well known solid waste consulting firm which kicked off the session. GBB also noted that 60% diversion/30% energy recovery/10% landfill is an oft stated goal of many programs. That said, Caterpillar, the major manufacturer in the program, put its current diversion rate at 80%, with a 90% goal set for 2015. Obviously, zero waste programs are not monolithic.

Zero Waste Programs are Increasing in Number

Although we do not have a total count of announced zero waste programs in the US, press reports indicate they are proliferating, and across all segments of the business—residential, commercial and industrial, as shown in the session participants. Major cities with announced programs include: Seattle (who presented), San Francisco, and surprisingly, Austin. Other cities may not have embraced zero waste per se, but are moving in that general direction, i.e. Florida’s 75% recycling goal. Roughly 20 states have yard waste bans or organics diversion programs, while even New York City, in recently expanded recycling requirements, will study residential food scrap composting. A number of prominent corporate players, including Wal-Mart (who presented), Nike and GM, have also announced programs, though the majority of large companies are currently more inclined to adopt less rigorous green/sustainability programs. Either way, corporations are finding that implementing these programs actually reduces costs and becomes a competitive advantage. This, in turn, will spur more programs.

Organics and C&D are the Main Differentiators Between Recycling and Zero Waste

To move from traditional recycling programs to zero waste, the main drivers are organics (both food and yard waste) diversion (either to composting or energy recovery) and C&D debris recycling. According to the EPA, organics represent roughly 25%+ of MSW generation, roughly half of which is food waste. Currently, food waste has a negligible recovery rate of 2.5%, while yard waste has a 65% recovery rate. A recent study from The Center for a Competitive Waste Industry found that organics processing fees (composting) range from $15 to $90 per ton, with an average of $44 per ton—not that different from landfill tip fees. Additionally, as RJM noted in the opening comments, the “fractionalization” of the waste stream is also a driver. Increasingly, e-waste, light bulbs, batteries, etc., are diverted from the landfill, due to either product stewardship programs or outright regulatory bans. In the manufacturing and commercial arena, additional efforts also include production changes, packaging changes, and sourcing changes to reduce the waste generated (and brought out to the curb) from the outset.

Waste Service and Equipment Companies Integral to This (Albeit Slow) Evolution

Most things move glacially in the solid waste industry, and the zero waste movement is no exception. Although announcements of programs are proliferating, they take time to implement. As one industry participant noted, zero waste is a lot easier said than done! That said, it appears to be a rather immutable secular change that is occurring across the industry. As such, it can create uncertainty, and even be unnerving, for members of the industry accustomed to the old industry model.

But in reality, the waste industry, both services and equipment, is an integral part of any zero waste initiative. Not only are waste companies in the middle of the equation, but they are most often in the position to control the disposition of the waste. Currently at issue is whether it is better to own the processing facilities (and thus be able to extract the resource value) in order to meet the diversion requirements as they evolve, or to have the ability and flexibility to use different third party vendors to satisfy those same requirements, but in all likelihood lose some if not all of the resource value. When considering the latter, the larger private regionals are not necessarily at a disadvantage to the majors—not being as committed to internal landfill disposal capacity may actually be an advantage—but we would still maintain that, in general, green/sustainability initiatives (and the greater capital requirements to enable them) strain the smaller hauler. Waste Management has made more numerous and notable investments in diversion technologies/waste to energy, but we would note that Republic recently made a commitment to food waste composting in Oregon.

Additional opportunities for the waste industry lie in the front-end upstream consulting and advisory business. Oakleaf, Quest Recycling and Waste Management are working with Wal-Mart to help it meet its diversion goals. Solid waste management is not a core competency for corporate America; thus, it will be outsourced. Related to that, corporations do not have the processing, sorting, composting and recycling networks to meet zero waste goals--the solid waste industry does. Finally, as RJM pointed out, zero waste initiatives inevitably cause more sorting and processing; therefore, it is likely to be a boon to the container and equipment manufacturers.

It should be noted that NSWMA has a position paper out on zero waste.


The $64,000 Question: What’s The New Normal?

Despite zero waste programs, solid waste generation will continue to grow, reflecting not only population growth, but new types of convenience packaging, and relatively new, fast growing waste segments, such as e-waste. Historically, MSW had grown an average of 2.3% annually prior to the recent downturn, but the increase in waste generation will slow in the future (almost certainly below 2%), due to waste reduction efforts. According to EPA data, MSW generated per person has leveled off since 1990, and actually declined from 4.65 lbs/day in 2000 to 4.5 lbs/day in 2008. MSW volumes into landfills have been stagnant for two decades, hovering around 140 million tons and falling more sharply in 2008 to 135 million tons, in part due to the economy. Due to secular changes, we would expect that landfill volumes are most likely to gradually decrease over time. The wild card to this scenario is something like coal ash, which was discussed last month.

Over the near to intermediate term, however, the secular trends will be clouded by a cyclical recovery in volumes as the economy recovers (hopefully). Therefore, it may be some time before we can more accurately answer the $64,000 question: What is the “new normal” for volume growth?