It’s an old legend of the waste industry from back when I joined it in the early 90s. Every year before Christmas holidays, a long lunch of leading bosses was held at a steakhouse in inner Sydney. With their Jaguars and Rovers parked out front, and over great T-bones and excellent wine, the next year’s commercial arrangements were divided up and decided. Or so the legend goes.
As one fellow silverback gorilla said to me when I asked: “You could say so, but I couldn’t possibly comment.”
The good news is that legends are of the past. I’ve witnessed remarkable change for the better in the resource recovery industry (and the new name is no accident). Now, there are many like me who believe there is equally remarkable future opportunity – and they’ve put over $2 billion in capital investment on that view in the last five years or so.
Let’s look back and let’s look forward. Here are past practices now as dead as the dodo.
- Low regard for workplace safety, such as no substance testing, no hi-vis, “runners” for both waste disposal and recycling collection trucks, literally recruiting untrained blokes at early opener pubs, and nasty manual recyclables sorting facilities
- Customers in the dark about costs, processes, contents, destinations etc and exploiting the notion of “lifting air” (empty bins per service fee) as a profitable path
- Focus on transport and logistics – or what we used to call “the wheels” – as opposed to being part of both customers’ and manufacturers’ supply chains
- Accepting – or at least turning a blind eye to – Dodgy Brother operations who benefited from low barriers to entry
- Averting environmental regulation whenever possible (and now increasingly recognising public policy can be an opportunity)
What’s emerged over the last 20 years, and especially over the last five or so, is a transformed industry with some 50,000 employees and at least $10 billion in annual value. It’s shaped by factors other than what’s the cheapest, hygienic management of the by-products of human activity. Those factors have included:
- A community that expects professionalism, accountability and transparency from resource recovery operators (which we saw in the form of the high-rating War on Waste TV series on ABC)
- Massive public support for and participation in – despite their confusion – in recycling at households and businesses
- More appropriate pricing of landfill disposal, including via Government waste levies, which enables increased recovery, especially for heavier and homogenous materials like building rubble or compostables
- Decreasing number of affordable, acceptable and accessible landfills near capital cities
- NASA-like gains in technology whether its from automated collection vehicles to electricity-generating landfills to GPS routing to high-tech sorting facilities to development of new recycled content products like plastic roads
- Changed ownership models and “corporatisation” of the sector, including via European-based multinationals, publicly listed structures, and high-end venture capital investment
- More players who see themselves as recycled material suppliers or product manufacturers, and are actively integrating their supply chains from collecting stuff, to processing stuff, to making stuff for sale
- Full engagement by Governments in public policy for the sector, including milestones like National Waste Policy, appointment of the world’s first Assistant Minister for Waste Reduction, and unprecedented availability – over $1 billion – in public funding support as the industry transitions to greater domestic sovereignty.
That Minister – the persistent and positive Trevor Evans MP – and his accessible and activist counterpart, the Minister for the Environment Sussan Ley MP, like to talk about “turbo-charging” the sector and driving it forward as one of the six modern manufacturing industries where Australia can be a regional winner. They know they’re on a winner.
In that respect, smart money is on four parts of the industry who are spending up and counting on big future returns – according to their “movie names”.
Big Daddies (such as Veolia, Cleanaway, Suez, Remondis and Visy)
In this category, we have the industry’s largest and most established players whose Australian operations tend to be part of multinational corporations and who offer a broad suite of services and technologies, ranging across waste streams and across specified results. Most of the Big Daddies continue to offer waste disposal as part of their mix – and continue to find landfill operations very profitable.
The Big Daddies use tried-and-true methods and get national contracts from other big corporates. They have all the benefits (but sometimes delays and overheads) of very strong corporate governance.
Generally, the Daddies ride as a very successful and well-drilled peloton who are awesome at chasing down the occasional industry breakaway (eg. risk leader) as required.
While Visy broadly sits in the category, it has always been and forever will be different. Very committed family ownership; investment flexibility; a business aimed at making boxes and other packaging and using recycling operations for feedstock, and; a long-standing record of environmental results.
An interesting development is the global buy-out of Suez by Veolia, including its possible implications for a previous local deal between Suez and Cleanaway (and its NSW assets including landfills.)
The likely strategy for the Big Daddies going forward is: a) consolidating existing markets with broader/deeper service offerings; b) grabbing market share from competitors through cost competitiveness; c) transacting mergers and acquisitions, and; d) moving into value-adding on some collected streams, like secondary plastics, processed fibre, and residual waste.
The Fast and the Furious (such as Bingo Industries, ResourceCo, RePurpose It, Re-Group, and Downer Reconomy)
It’s not right to call these companies “second tier” because it undersells the amount of innovation and investment they are all currently undertaking to significant degrees. They are smashing it.
To greater or lesser extents, all are involved in site acquisition, the deployment of new services and technologies, and enhanced customer relations. They’re defined by dynamic management teams who often come from other sectors, have bigger risk appetites, and like to move fast on opportunities. Bingo, which is publicly listed and subject to a big buy-out offer now, actively positions itself as a disrupter, as do others.
The Fast and the Furious identify as recyclers or re-manufacturers rather than “wasties” or “garbos” (and most don’t have landfills), and see a future in supplying value-added feedstock for recycled content products or making them. They’ve seen Visy’s successful re-manufacturing model and are essentially applying it.
The likely strategy for the Fast and the Furious is; a) product diversification; b) supply chain integration; c) customer relations management, and; d) extracting maximum value from newly acquired sites.
This category draws from the above two as well as other players as the overall industry looks to the energy-from-waste (EfW) opportunity. With pressure on landfills and with governments increasingly feeling comfortable with EfW, there’s some 10 active multi-million dollar projects under different stages of development across the country.
I share the view of leading energy expert, Matthew Warren, in a recent analysis for the Australian Council of Recycling, who broadly predicts that the most successful proposals will be those integrated with renewable energy provision, on existing waste or power sites, and involving residual waste (after application of the waste hierarchy).
The production of refuse-derived fuel (RDF) from specific sources (whether its plastic and fibre from businesses or residuals from recycling sorting plants) is an interesting sub-set opportunity.
It’s a niche, but niche’s aren’t necessarily niche-like because waste generation is always increasing. In a report released this week, the Clean Energy Finance Corporation (CEFC), estimated new and expanded infrastructure for waste, recycling and bioenergy in Australia has the potential to generate between $4 billion and $7.8 billion in investment to 2025 and up to 1400 additional jobs.
The Mighty Ducks
Many companies – some large and many smaller – are here. They are mightily working and competing in specialised areas involving forms of product stewardship from mattresses to chemicals to batteries to containers to child safety seats to medical supplies to solar panels to plastic car panels to steel drums to e-waste to sporting goods to You Name It.
Did someone say ‘how about bicycles’? Quack, quack, say I.
Pete Shmigel is a writer who is in recovery after 25 plus years of executive roles in politics, major corporates, consulting, charitable NGOs and the resource recovery industry. He likes bikes and has decided to recycle and repurpose them through the new start-up, Revolve Recycling.