The Circular Economy
Waste Management Corporation – the folks that pick up your trash – is a remarkable example of a business in pursuit of Sustainability, unlikely though that may seem. Waste Management’s 2014 Sustainability Report is titled Creating the Circular Economy. They mean it. The company focuses their efforts on profiting by converting wastes into useful materials and Green energy. Today, over 60% of Waste Management’s revenues come from recycling and upcycling[i] your rubbish into profits.
Recycling or, better yet, upcycling is a good thing. It applies to essays as well as to scrap metal. This post recycles an essay from late in 2013, and upcycles it with some timely updates. Waste Management provides real insight to the possibilities that can arise by founding a business model in Sustainability.
A Case Study in Sustainability – From 20 November 2013
It is one thing to talk about Sustainability as an abstract sort of business quality that one might desire. It is often quite another to examine examples of businesses that actually demonstrate Sustainability in practice. From case studies, one can learn what Sustainability in practice actually entails, and how it works. This essay discusses one such business.
The best expression I have seen of what Sustainability means in a business context comes from Adam Werbach: [ii]
“… being a sustainable business means thriving in perpetuity. In this business context, sustainability is bigger than a public relations stunt, bigger than a green product line, bigger even than a heart-felt but part-time nod to ongoing efforts to save the planet. Imagined and implemented fully, sustainability drives a bottom-line strategy to save costs, a top-line strategy to reach a new customer base, and a talent strategy to get, keep and develop employees, customers and your community.”
In Werbach’s view, clearly Sustainability is nothing less than a key driver of business strategy — an organizing principle that drives strategy at the business model level. Let’s apply Werbach’s ideas to an example — Waste Management Corporation.
Waste Management’s traditional business has been in refuse collection — guys with trucks that charge to collect trash from your home or business and haul it to the dump. In recent years, that business model has expanded and changed focus. As Waste Management’s CEO puts it: “Sustainability is a central motivation for our transformation from a waste collection and disposal company to one that views and uses waste as a resource.”[iii] In other words, Sustainability drove a change in Waste Management’s business model from focus on profiting from collection and disposal to focus on profiting from the waste itself.
To Be More Specific
Here are some of the ways the new business model is working:
>> Shift in focus to profiting from the waste itself — In 2011, 57% of revenues came from Green services (up from 49% in 2007), the balance from disposal related collection and landfill activities. David Steiner, the CEO, says: “Our ultimate goal is to use all of the waste we receive and leave nothing discarded.” The company plans to continue to profit from collecting wastes, the difference being that they want to profit from that waste, rather than simply disposing it. (Update: in 2013, 59% of revenues came from Green activities.)
>> Recycling — In 2011, Waste Management profited from recycling almost 13 million tons of stuff that you and I threw away. That includes collection and brokerage of waste materials usually associated with recycling, such as paper products, metals, plastics and glass. It also includes specialized recycling services, like electronic equipment and organic wastes. (Update: in 2013, 15 million tons of “stuff” was recycled)
>> Green Energy — There are three primary ways to produce power from rubbish. One is by using trash as fuel to generate power. The second is to collect landfill gas (mostly methane) and use that gas like natural gas. The third is to transform certain wastes into more specialized fuels, such as diesel fuel. Waste Management uses all three routes. In 2011, Waste Management produced (and profited from) Green energy equivalent to almost 23.5 million barrels of oil or nearly 6.1 million tons of coal. That’s many times more than the total solar energy production in this country in the same year! (Update: in 2013, revenues from sales of landfill gas were restrained by competition from cheap natural gas. Revenues were “flat” – approximately unchanged from 2011 figures)
>> Fleet Efficiency — Operating Waste Management’s fleet of collection vehicles constitutes a major portion of the company’s operating expenses. Vehicle operating expenses are being reduced by several means, the most important of which is conversion to natural gas — WM’s 1,600+ natural gas powered vehicles constitutes the largest heavy-duty natural gas fleet in the U.S. Natural gas burns cleanly and costs less than diesel fuel. (Update: by year-end 2013, WM’s natural gas fueled fleet increased to 3,075 vehicles)
Sustainability in a Business Context
Look again at the quote from Adam Werbach with which this essay begins. “Sustainability”, says Werbach, —
“drives a bottom-line strategy to save costs” — like fleet operating costs and landfill disposal costs reductions.
“drives a top-line strategy to reach a new customer base” — like generating fresh revenue streams from waste materials that were previously buried.
“… a strategy to get, keep and develop employees, customers and community” — like 80 annual hours of driver training that has resulted in almost 50% reduction in recordable injuries since 2005; or creating 100 certified wildlife habitat sites on over 25,000 protected acres; or making wholesale reductions in greenhouse gas emissions.
Waste Management’s Sustainability based business model is very clearly successful. It offers a case study worth investigating, especially since, as an NYSE listed company, financial information is readily available. Will a Sustainability – based business plan work for your business, even if you aren’t in a sexy, high-tech industry like garbage collection? If you intend to thrive in perpetuity, maybe you should give it some thought
Thoughtful comments and experience reports are always appreciated.
… Chuck Harrington (Chuck@JeraSustainableDevelopment.com)
P.S: Contact me when your organization is serious about pursuing Sustainability … CH
This blog and associated website (www.JeraSustainableDevelopment.com) are intended as a resource for smaller manufacturers in the pursuit of Sustainability. While editorial focus is on smaller manufacturers, all interested readers are welcome. New blog posts are published on Wednesday weekly.
[i] The term “upcycle” means more than “reuse” – it infers adding value. The term, and the concept, are from McDonough and Braungart, The Upcycle, North Point Press (2013)
[ii] Adam Werbach, Strategy for Sustainability, Harvard Business Press (2009), page 9. Adam Werbach founded and led Saatchi and Saatchi’s Sustainability practice. He is also a former President of the Sierra Club.
[iii] Facts and figures on Waste Management Corp. are from Waste Management’s 2012 Sustainability Report, available at: www.wm.com/sustainability/pdfs/2012_Sustainability_Report.pdf. Update figures are from the 2014 Sustainability Report, available at: http://www.wm.com/sustainability/pdfs/2014_Sustainability_Report.pdf
Note: I recommend the 2014 Report as a real world take on Sustainability in practice.