In the mid-'90s, the waste industry engaged—again—in self-reflection. What would constitute a winning business strategy in the years ahead? At the time, poor returns on recycling activities had impelled many waste-management firms to laud a "back-to-basics" strategy—a strategy focused on familiar hauling and disposal activities. Gazing into my own crystal ball, I saw a different future, one in which waste firms would become "industrial ecologists." They would begin to offer their business customers waste audits and waste-reduction services. Recent trends confirm my guess. As Yogi Berra once quipped, "the future ain't what it used to be."
My initial prognostications encountered dubious head shaking. For a few years, the skeptics seemed to be right. Many companies retrenched, spinning off other environmental services, focusing on core hauling and disposal businesses, and viewing recycling merely as a different hauling pathway. But some signs point to a shift. A few firms are tiptoeing into waste auditing and waste-reduction services.
Waste auditing and reduction is gaining ground Waste Management, for example, has field-tested some standardized waste-reduction and recycling auditing procedures. Many property management and janitorial companies now include waste reduction and recycling among their services. Waste consultant Eugene Tseng reports that Waste Management has responded to these initiatives by helping to implement waste-reduction programs for businesses. Several waste management firms are working closely with large manufacturers to implement end-of-life product return programs to facilitate remanufacturing.
In California, the state's Integrated Waste Management Board embarked on a Waste Reduction and Recycling Technical Assistance Audit Program. Among other goals, the program's architects attempted to obtain data useful to local governments, haulers, and businesses interested in developing targeted waste-diversion programs. A number of haulers participated in the test program.
These waste-reduction efforts can yield substantial environmental benefits, ones often overlooked during the past 10 years in which recycling became the preferred "proxy" measure of environmental performance. As Tseng points out, a firm that manufactures 5,000 two-pound employee manuals each year will reduce paper consumption and waste by 10,000 pounds if it moves to electronic manuals in a computerized workplace. That same company will recycle 10,000 pounds less paper, an apparently negative outcome if bean-counting recycled tons is the measure of environmental success. But that reduction in recycling would actually represent an environmental improvement of fewer resources consumed and discarded. Without waste audits such opportunities can go unfulfilled—and unacknowledged in public-sector waste diversion programs.
Customer demand drives changes Waste-management firms operating under the old "haul and dispose" model generated revenues by handling more and more tons of waste. In many respects, this framework stood directly at odds with environmental goals of waste reduction. Hauling firms whose bottom line benefited from more waste had little interest in waste-reduction.
But waste management firms, like those in other industries, are largely driven by customer demand. As more and more businesses seek to reduce their costs through waste minimization and selective recycling, haulers that can apply their expert knowledge of where to look for waste-reduction opportunities will retain�or attract new—customers.
This slow evolution of the waste industry parallels changes elsewhere in the economy—changes in which sellers of "stuff" become sellers of knowledge. Some firms selling agricultural chemicals, for example, have begun to sell packaged programs and technology that reduce chemical consumption per acre. Others offer product "servicizing" in which they lease rather than sell equipment, then offer modular upgrades, and take the product back for remanufacturing at the end of its useful life. Dell worked out just such an arrangement in providing computers to at least one large firm.
A need for some elbow room here There is, however, a risk in all this emerging focus on waste auditing and waste-reduction services. That risk lies in the press by some policy watchdogs to transform market-driven trends toward industrial ecology into government-mandated programs. As firms, including those in waste management, look for new ways to add value to their customers by reducing waste, they need the market elbow room to "discover" what waste-reduction programs best achieve both economic and environmental goals in tandem.
Firms also need elbow room to decide what long-term business strategies best fit their capabilities. Even in a waste-minimizing context, hauling and disposal will fill critical waste management needs. Some firms may specialize in that niche, leaving the "knowledge services" of waste audits to others. But my own prediction of five years ago was that the waste industry would not long be immune from the industrial ecology strategies surfacing in manufacturing and other businesses. Major firms like Waste Management seem to be confirming that prediction.
Lynn Scarlett is president of Reason Foundation.