The busi­ness of re­cy­cling

Good for the planet but not im­mensely prof­itable

Executive Magazine - - Economics & Policy - By Matt Nash

Ear­lier this year, for-profit Con­tra In­ter­na­tional faced a prob­lem with a de­cid­edly not prof­itable re­cy­cling ini­tia­tive it op­er­ates in Le­banon. The com­pany was do­ing a residential door-to-door pick up of pa­per, card­board, alu­minum and all types of plas­tics, los­ing money in the process. Residential pick­ups were not in the com­pany’s plans when it started its ini­tia­tive, Zero Waste Act, in 2011. Salim Barakat ex­plains that, based on opin­ion sur­veys Con­tra con­ducted, the com­pany started its re­cy­cling work in schools as it found that older Le­banese were un­will­ing to sort their trash at home. The idea was to “fo­cus on the new gen­er­a­tion.” It worked well, he says. Kids soon be­gan pes­ter­ing their par­ents to sort at home, and those par­ents brought the idea to work with them, so Con­tra’s first pick up ex­pan­sion was to of­fices. Home pick up fol­lowed later, and Con­tra was col­lect­ing free of charge. In May, that changed.

Barakat says that residential clients were call­ing to have their re­cy­clables picked up when 60-liter ca­pac­ity garbage bags be­gan over­flow­ing. Peo­ple wanted to re­move what ap­peared to be mas­sive amounts of waste from their homes. In re­al­ity, Barakat ex­plains, that 60-liter bag only ac­tu­ally amounts to a kilo­gram or two of plas­tic – which Zero Waste Act then sells on to lo­cal in­dus­try by the ton – mean­ing the “valu­able” re­cy­clables be­ing picked up don’t cover the cost of re­triev­ing them. He says in four years of col­lect­ing, Zero Waste Acts’s rev­enues from selling re­cy­clables have yet to cover the ini­tia­tive’s op­er­a­tional ex­penses. In May, he says, Zero Waste Act be­gan charg­ing a fee for at-home pick up. Barakat says the com­pany was pick­ing up re­cy­clables from more than 800 homes be­fore im­pos­ing a fee. The num­ber plum­meted af­ter­ward. Two months later – af­ter the Naameh land­fill was closed and Le­banon plunged into its smelli­est cri­sis yet – he says his phone does not stop ring­ing as he shows Ex­ec­u­tive a four-cen­time­terthick stack of new Zero Waste Act mem­ber ap­pli­ca­tions.

Bas­sam Sab­bagh, the Min­istry of En­vi­ron­ment’s solid waste ex­pert, does not be­lieve Le­banese peo­ple will sort their trash at home. The min­istry has ig­nored the mag­a­zine’s in­ter­view re­quests in the past two months, but in pre­vi­ous con­ver­sa­tions, Sab­bagh has cor­rectly noted that not even Cal­i­for­nian res­i­dents sort at source 100 per­cent, from which he con­cludes Le­banon is a hope­less case, de­spite ev­i­dence to the con­trary supplied by Zero Waste Act and sev­eral NGOs with re­cy­cling pro­grams. That said, re­cy­cling is not a cash cow. Barakat notes that prices paid for some re­cy­clables – par­tic­u­larly plas­tic and alu­minum – are volatile. He ad­mits that, in the past, Zero Waste Act would store these ma­te­ri­als in a ware­house to wait for prices to re­bound.

Ar­cenciel, another NGO that has been re­cy­cling also since 2011, is also not mak­ing money from the op­er­a­tion. “Cur­rently, the rev­enues we make from selling re­cy­clables,” says Ar­cenciel’s Olivia Maa­mari, “do not cover the costs of the ser­vices we pro­vide.” The lim­ited eco­nomic value of re­cy­clables was a les­son learned in Saida as well. When IBC – a pri­vate com­pany with Le­banese and Saudi part­ners – wanted to build a waste treat­ment plant in the coastal city, CEO Na­bil Zantout tells Ex­ec­u­tive that ini­tially, the idea was not to charge mu­nic­i­pal­i­ties for bring­ing their waste there as profit would come from selling re­cy­clables. Zantout says re­al­ity soon set in, and the plant now charges $95 per ton to re­ceive trash.

There is an in­for­mal re­cy­cling sec­tor in Le­banon as well, but Ex­ec­u­tive has not found any re­search on the con­tri­bu­tion of scavengers to re­cy­cling in the coun­try. Zantout ex­plains that IBC loses some po­ten­tial rev­enue to this gray mar­ket, but he views it as min­i­mal. Some mu­nic­i­pal­i­ties have even banned scavengers (Ex­ec­u­tive saw a sign an­nounc­ing such a ban in Kfar Aabida, south of Ba­troun). What their ex­is­tence in­di­cates, how­ever, is a lo­cal mar­ket for re­cy­clable ma­te­ri­als, even if the size of that mar­ket is dif­fi­cult to es­ti­mate. Ev­ery­one Ex­ec­u­tive in­ter­viewed for this ar­ti­cle says they sell re­cy­clables lo­cally. It is un­clear how elas­tic de­mand is, but the an­swer to that ques­tion may present it­self if, and when mu­nic­i­pal­i­ties start ramp­ing up their own re­cy­cling ef­forts – as en­vi­sioned in the latest na­tional waste man­age­ment plan (see story page 44). What is clear, how­ever, is that re­cy­cling will not com­pletely fund mu­nic­i­pal­i­ties’ trash schemes. An ex­pert who helped write Agri­cul­ture Min­is­ter Akram Che­hayeb’s waste plan notes that re­cy­cling rev­enues are un­likely to cover more than “15 to 20 per­cent” of mu­nic­i­pal garbage bills.

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