At the start of the 21st century, new companies began to tackle the environmental problem created by the United States’ fast-accumulating trash. Rather than generating revenue from the use of their own landfills and other assets, these pioneers began creating profits for themselves by sharing savings with their customers. Data is at the heart of these approaches, which range from local to international. All are working to dramatically reduce, and possibly eliminate the need for landfills.
Today two companies, Waste Management Inc. and Republic Services, dominate the waste industry, but a large number of smaller players handle about the same amount of business as the two giants. As a result, even a modest-sized company, such as regional supermarket chain Wegmans Food Markets, says it can find itself dealing with an unwieldy number of suppliers.
Not long ago, Wegmans had just one person overseeing all of its waste management, handling interactions and invoices from haulers, recyclers and other suppliers throughout the chain’s six-state region. As the company grew, says Jason Wadsworth, Wegmans’ sustainability coordinator, “There was really no way that one person could manage all of that.”
Such problems led to the development of waste brokers who could help ease the burden of companies by providing a few key services: managing day-to-day interactions with suppliers, consolidating invoices and leveraging the combined purchasing power of the broker’s multiple customers to obtain better pricing for each.
The Beginning of a New Approach to Waste
In 1995, Oakleaf Global Holdings took the broker concept in a new direction. Key to Oakleaf’s approach was a concept inherent, but largely unappreciated, in the broker model: Oakleaf owned no waste facilities of any kind — no landfills, garbage trucks, dumpsters or recycling plants. It was, in the language of Wall Street, asset-light. This asset-light approach did offer two advantages. The company could take on huge national customers without investing in major assets. And without trucks and landfills of its own, Oakleaf could choose solutions for its clients from among all the available suppliers in each market.
Using this asset-light approach and fueled by Wall Street, Oakleaf grew rapidly, attracting major clients. By 2007, Oakleaf was working with 2,500 haulers, employing 650 people and generating $580 million in revenue. New Mountain Capital acquired the company that year for $655 million. Later, Waste Management acquired the company for $425 million in 2011.
Launched in 2000 to provide comprehensive waste disposal, Heritage Interactive is not strictly an asset-light company. Its parent, Heritage Environmental Services (HES), owns a nationwide network of Treatment, Storage and Disposal Facilities (TSDFs) as well as in-house transportation services. But Kurt Wirgau, director of international business development for Heritage Interactive, stresses that location is the determining factor in whether or not his company makes use of HES assets. “Using HES assets gives us a distinct advantage in the marketplace, but whenever necessary we use a network of independent audited and approved service providers,” he says. Heritage Interactive itself owns a single recycling plant in Iowa City, Iowa constructed for the benefit of a client in the area.
“Our goal is moving all of our material into something more sustainable than a landfill by 2022.” –Nate Morris
Cost reduction drives Heritage Interactive’s business model. Because the company shares whatever savings it can find with its customers, the more it reduces costs, the more money it makes. “When we find more sustainable solutions for our customers, that in turn pays our bills because that’s how we are incentivized through all of our contracts,” says Wirgau.
“Our sell is: we will take over all of your waste services as they stand today with no up-charge, and as we find ways to reduce your waste, we share those savings with you,” Wirgau notes, “whether it’s just a financial gain that both parties can split by reducing waste, or the financial gain we can uncover by pulling materials from the waste stream and turning them into valuable commodities on the back end.”
To do this, Heritage Interactive relies on an extensive network of service providers. “Just the number we need for our current customers,” says Wirgau. New suppliers are added only as needed and are monitored for compliance, since risk reduction is one of the key benefits the company’s customers seek.
Since these suppliers are crucial to its business, Wirgau adds, “We look at them more as partners rather than just suppliers we can beat up on pricing.” Instead of simply negotiating price with a supplier, “We take a closer look at the details of the service to target inefficiencies.” If the customer’s dumpsters are being picked up when only half full, for instance, (dumpsters sensors can gauge this), Heritage will refine the pick-up schedule to cut customers’ costs.
With costs critical for all stakeholders, sustainability has become the decisive factor in the company’s success. When the company started in 2000, Wirgau believed that cost savings would drive the business. But now he says, “All of our contracts have sustainability goals. That’s our bread and butter. If a customer is not interested in diversion, we would probably not be as effective as a big asset-owning company.”
The company currently services thousands of sites in a range of sectors. One customer is the Subaru plant in Lafayette, Ind., which joined Heritage Interactive in 2002 and three years later achieved its goal of being landfill free, well ahead of schedule.
Crossing the Rubicon
Rubicon Global is an asset-light waste and recycling company focused on sustainability. Its customers are primarily in the retail, food service and hospitality industries, as opposed to the heavy industrial sector that Heritage Interactive primarily serves. But the two firms have similar business models: Rubicon Global aims to cut costs for environmentally concerned customers by working with suppliers to reduce inefficiencies and divert material from landfills.
“Our goal,” says CEO Nate Morris, “is moving all of our material into something more sustainable than a landfill by 2022.”
Still, the conversation with customers often starts out focusing on cost savings, rather than sustainability. The company’s first point of contact in most corporations is a procurement officer preoccupied with reducing costs, according to Lane Moore, executive chairman of Rubicon Global and managing partner of QuarterMoore Capital, an Atlanta-based private investment firm. “So it’s important that Rubicon Global starts out focusing on cost reduction — renegotiating contracts and adjusting the frequency of pickups…. But then we start asking what materials are in the waste stream and what can be done with them.”
Although new technologies are being developed, there is currently no way other than physical inspection to determine the full contents of a waste-stream. And the piles of waste can be very large, indeed. One Rubicon customer, Martin Brower, a division of Reyes Holdings and McDonald’s largest distributor, looks to recycle about 950,000 pounds of cardboard, stretch-wrap, organics and other materials every month, according to Steve Kinney, Martin Brower’s vice president of supply chain solutions.
Once the materials are identified, however, technology takes over. Rubicon Global’s national database catalogues customers’ waste streams and the suppliers that recycle the materials. That enables even small, local suppliers to bid on the individual outlets of large companies.
The non- profit Appalachia Ohio Zero Waste Initiative (AOZWI) is developing a model zero-waste plan for two local counties.
Since 2012, for instance, Rubicon has been employing numerous small suppliers to service 3,000 7-Eleven stores. “We’ve been able to reduce our waste management spending from stores in the Rubicon Global recycling program by over 25%,” says Tom Brennan, vice president of infrastructure services for 7-Eleven.
Examples like that lead Peter Kellner, founder of Richmond Global and senior advisor to Rubicon Global, to view the waste industry as ripe for disruption.
At first glance, the group Rural Action bears little resemblance to Rubicon Global. It is a relatively small non-profit seeking to foster social and economic justice and fight the impact of waste in rural Ohio. The area has the lowest recycling rates in the state, and landfills that receive millions of tons of waste every year from New York City and New Jersey.
But four years ago, with sustaining support from a local foundation and in partnership with Ohio University’s Voinovich School for Leadership and Public Affairs, Rural Action launched Appalachia Ohio Zero Waste Initiative (AOZWI), a program that offers on a small scale many of the same benefits Rubicon Global does nationally. Michelle Decker, CEO of Rural Action, compares the two organizations. “Rubicon Global is working in a for-profit context for companies that want to bring down the cost of waste and improve their environmental impact; communities want the same thing, with the added element of wanting to grow jobs.”
AOZWI helps connect entrepreneurial suppliers with companies looking to reduce waste. “We are having entrepreneurs come to us with ideas about how to help other companies reduce waste, or how to use a material as a feedstock or if they are already doing that, how they can grow,” says Kyle O’Keefe, the coordinator of AOZWI. “What’s really unique about our project is that we are very much an intermediary type of organization. We know where people are collecting certain materials, where various feed stocks are and which companies need those materials, so we help them connect with each other.”
Rural Action also has connections with economic development agencies that can assist with planning and even potentially with start-up capital, “And as a well-established member organization in the area,” O’Keefe says, “we can also help market these fledgling businesses by giving them lots of visibility.”
“I believe this form of [sustainability] network, allowing companies to collaborate and differentiate, will play an absolutely critical role in everything having to do with waste management or recycling in the future.” –Thomas Odenwald
The Rural Action initiative does not have a sophisticated technology platform, but O’Keefe says that the group is essentially “an information broker.” In this capacity, AOZWI is also working with a national consulting company called Resource Recycling Systems to prepare an in-depth database of all the businesses in the region that are using materials from waste streams, whether they are buying cardboard and turning it into new fiberboard or pelletizing plastics. The database will document these businesses and “help build out a network that can feed them more materials and gain them visibility around their products,” according to O’Keefe. “This is something that’s never been done before, not in the state of Ohio at least, and probably not to the depth we’re going. We’ll even be working with cottage industries.”
For customers looking to find more productive approaches, AOZWI is developing a model zero-waste plan for two local counties. The plan is helping more than 60 different organizations including surrounding cities, solid waste districts and nearby Ohio University agree on common goals around recycling, education and outreach, illegal dumping and economic development. Once the plan is complete, says O’Keefe, “We are going to use the action plan as a guide to influence future solid waste district plans and new programs that get developed.”
This level of zero-waste activity is rare among non-profits, possibly unique, but it is, says Decker, replicable across the country.
Using Data to Eliminate Waste
Data has become increasingly important to the drive for zero waste. The AOZWI database is helping divert waste from landfills at the grassroots level by connecting suppliers and buyers within the organization’s regional marketplace. Rubicon Global’s database is helping the organization connect suppliers and buyers nationwide. Suppliers see information about the accounts they are invited to bid on, and customers see information about available solutions and costs.
“Big Data” is also being used to reduce waste at the global level. SAP, the multi-national software company, recently spent $4.3 billion to purchase Ariba, which Thomas Odenwald, senior vice president of sustainability at SAP, describes as “one of the largest B2B network communities in the world, where buyers and sellers can meet and exchange data.”
According to Odenwald, a segment of the Ariba network, the Product Stewardship Network (SAP PSN), is already allowing suppliers and product manufacturers to share relevant sustainability data, including, for example, detailed information about the waste generated in the manufacturing of a product. Companies using PSN can then “put their own scoring algorithm on top of that,” says Odenwald.
The resulting scorecard helps buyers make more sustainable sourcing decisions, which in turn, encourages suppliers to improve their scores by offering more sustainable raw materials and products. “I believe this form of network, allowing companies to collaborate and differentiate, will play an absolutely critical role in everything having to do with waste management or recycling in the future,” says Odenwald.
A similar approach is underway at Walmart. The company’s Sustainability Index, a measurement system used to track the environmental impact of products, has been rolled out across hundreds of product categories and thousands of suppliers. CEO Mike Duke announced in 2012 that by the end of 2017, the giant retailer will buy 70% of the goods it sells in U.S. stores only from suppliers who use the Sustainability Index to evaluate and share information about the sustainability of their products.
In addition to helping companies connect, Big Data is likely to become a vital asset if, as many expect, sustainability regulations continue to expand. Bob Wickham, a partner in the investment firm Rotunda Capital Partners and a member of the Rubicon’s global advisory board, sees “growing scrutiny around sustainability reporting, particularly for public companies.” And Perry Moss, president of Rubicon Global, believes regulations and restrictions that are already law in some states will spread nationwide, making compliance and sustainability reporting critical for U.S. companies.
Whether it’s the carrot of better business decisions or the stick of growing regulation, databases that provide easy access to sustainability data are only going to grow more essential to the drive for zero waste.