Believe it or not, one of the biggest victims of falling energy prices has been the recycling industry.
The problem is that, from a bottom line perspective, recycling doesn’t always make economic sense when commodities are cheap.
Take Waste Management Inc (N:WM), the nation’s biggest recycler, for instance.
One year ago, it was able to sell a bale of translucent plastic for $230. Today, that same bale reaps a mere $112. And that’s all due to the glut of cheap oil flooding the global markets.
When commodity prices were high, recyclers would pay municipalities for used aluminum cans and cardboard packaging, as they could still turn a profit selling the recycled materials.
Now that trade has been turned on its head. Most local governments are receiving nothing for their recyclables – and in many cases, they’re now paying companies to take the recyclables off their hands.
Furthermore, recycling isn’t cheap. In fact, the energy, labor, and machinery costs necessary to recycle materials can sometimes be double the cost of sending them to a landfill.
For this reason, Best Buy Co Inc (N:BBY) recently changed its in-store e-waste program, which was losing the company money. Now the retailer charges customers $25 for each TV and computer monitor recycled at its stores.
Problematic Plastics
At the end of the day, recycling is still a commodities business.
That means everything that’s recycled – paper, plastics, metal, and glass – competes with the originally manufactured material, or “virgin” goods.
Crude oil and natural gas prices are the lowest they’ve been in over a decade. And because energy is a large input cost for virgin goods, the end result is that it’s now more economical to buy the virgin materials than it is to use recycled materials.
Indeed, virgin plastic, made from the by-products of oil and natural gas production, is now much more competitive with recycled plastic, and that’s caused the decline in the market value of recycled plastic.
The end result is that recyclers are struggling to stay in business.
United Plastic Recycling filed for bankruptcy in 2015, while Waste Management reduced the number of its recycling facilities to 100 from 130 and let go of over 900 personnel in the last two years, according to The New York Times.
Just last week California’s largest recycler, rePlanet, announced that it will close 191 recycling centers and reduce its workforce by 278 people.
Single Versus Double Bottom Line
The problem, of course, is that recycling is good for the environment even when it’s not economically sensible.
Put another way, the single bottom line is measured in dollars and cents, but the double bottom line factors in the environment. And recycling is an important part of the double bottom line.
When we stop reusing old materials, the land, sea, and air all suffer along with the health and well-being of the Earth’s inhabitants.
Luckily, we’re improving corporate sustainability goals and devising ways of building a recycling infrastructure that would make the industry economical. However, this takes years to accomplish.
Fortunately there are innovators, game changers, and disruptive businesses that are already doing something to reduce or even eliminate recyclable waste, particularly in the area of single use plastics – and they’re generating decent revenue in the process.
These businesses are getting smarter about design with some help and funding from the Silicon Valley-based, for-profit organization Think Beyond Plastic, an innovation forum, business accelerator, and investment fund.
The only fund currently investing in solutions to plastic pollution, Think Beyond Plastic sources and advances broad-based disruptive innovations that measurably reduce plastic pollution. Of special interest are material, manufacturing, and design innovations, as well as recycling innovations (when it makes sense).
One business working with Think Beyond Plastic is Mango Materials, which produces biodegradable plastics from waste biogas (methane) that are economically competitive with conventional oil-based plastics.
Another business, Thread International, sources plastic from the developing world and turns it into fabric. Thread not only cleans up the environment, but it also creates jobs around the world.
Still other businesses eschew the recycling route, acknowledging that it perpetuates the use of single-use plastic, and instead choose to design new products to replace commonly used plastic ones.
Eco-Baggeez, for instance, manufactures re-sealable sandwich bags, which are a great alternative to the traditional plastic ones, while Weed Recede has created biodegradable (disappearing) mulch bags for farmers, landscapers, and home owners.
Finally, there’s NewGen Surgical, which manufactures sustainably designed and biodegradable medical devices and surgical products from bagasse, the fibrous matter that remains from crushed sugarcane or sorghum stalks.
These are just a few examples of better alternatives to traditional plastics, all of which end up in landfills, oceans, and the air and never really go away.
So how does one profit from all of this?
Beyond just shorting traditional recyclers, one can invest in the businesses that are genuinely addressing the plastic problem with creative, practical, and economic solutions.
Good Investing,