Until the operational efficiencies are realized in order to decrease diversion costs, and commodity prices increase through increased alternatives or greater range of necessity by expanded regions, there will be challenges in incentivizing companies nationwide to invest and engage in food waste recovery, diversion and conversion.
By Richard Gil
According to a recent IBISWorld Report, demand for the Waste Treatment and Disposal Services industries is highly correlated with consumer spending, as the vast majority of waste generated in the U.S. stems from consumer products and packaging. As employment rates and incomes have risen over the past five years, consumer spending has also increased, driving growth in industry revenue.
Demand in waste disposal and conversion services depends on the volume of waste generated, which hinges on the economy and consumer spending habits. And, since their services are a commodity sold on price, the success and profitability of each individual company depends on the efficiency of their operations. So while big companies enjoy economies of scale in purchasing equipment and establishing facility networks, smaller companies compete by offering specialized services or serving local markets. With a highly concentrated U.S. market, competition is fruitful with increased economic growth鈥攄riving new innovations and advancements across the market.
While waste collection services account for about half of U.S. industry revenue, waste treatment and disposal amount to about 20 percent and remediation about 20 percent. While large and small companies diversify across these segments, the competition, evolving legislation and increased production of waste generate innovative and new practices lead to more opportunities for end-of-life options.
Forecasted by the Industrial Waste Management Market聽report, (segmented by industry service and global geography), the industrial waste management market will grow from an estimated $863.8 billion in 2014 to $1,442.0 billion by 2019 with a compound annual growth rate (CAGR) of 8.9 percent from 2014 to 2019.
Evolution in Food Waste Legislation, Regulation and Conversion Opportunities
Given the chance to not only bolster their bottom line, while also decreasing their environmental footprint, of course companies would jump at the opportunity to engage and invest in food waste conversion. Unfortunately, most often, the economics do not work in favor of many businesses throughout the country, but are more so driven by regional legislation, resources and regulations.
However, as the focus on reducing food waste and landfill diversion becomes more and more of a priority, we continue to see government groups, politicians and businesses helping to mobilize legislation, technological innovation and industry best practices to generate more conversion and diversion programs that are economically appealing.
That said, there is an especially heightened focus in regions where there are limited resources and a need for compost in order to grow food. This increases the opportunities for companies focused on waste collection and management to diversify their offerings to include food waste collection and diversion, as well as invest in the equipment and technology to convert or compost.
Diversifying end-of-life options for food waste, the competitive nature of the industry is further driving innovation, new technologies and material development at a more efficient rate. This evolution will not only diversify the way waste services are managed for customers in regards to composting, but also in regards to municipal waste as well. Heightened awareness and consumer education will help to change how people and businesses handle their household and general waste.
One way the industry is seeking to increase consumer awareness and understanding is through the ICA Week initiative. International Compost Awareness (ICA) Week encourages composting nationwide and in many international countries, and is hosted the first week of May. The theme for 2017鈥檚 initiative will be: 鈥淐ompost! Healthy Soil, Healthy Food鈥濃�攁 timely message with the release of ReFED (Rethink Food Waste Through Economics & Data) and a goal of reducing food waste in the U.S. by 50 percent by 2030 set by EPA and USDA.
Aligning with the EPA and USDA, various cities throughout the country have been looking to turn their composting programs into larger-scale government run operations. As mentioned, waste companies would be smart to include diversified conversion and diversion solutions for food waste and compostable material if they鈥檙e able to justify it economically; that said though, there needs to also be a valuable end use for the resulting commodity in order for companies to profit. Ensuring value and need for the end-of-life commodity can offset or justify the operational and front-end costs of the more complex and advanced needs.
Increasing and Diversifying End-of-Life Opportunities
As legislation continues to evolve and there remains a steady increase in waste production, the industry continues to diversify across segments and competition continues to drive expanded services and innovative, end-of-life opportunities. While composting continues to gain momentum, anaerobic digestion (which produces the compost output as well as the highly-valued energy source, methane gas), and other value-driven processes for diverting and reducing food waste are taking hold.
Compressed Natural Gas continues to grow as one valuable alternative form of conversion. Both public and private landfill operators have been converting methane into clean, renewable electricity for years, and have now advanced their technology further to this cleaner and more fuel-efficient product. With fleets of trucks and haulers converting from diesel to natural gas, we鈥檙e seeing large-scale impacts from some of the largest waste collection giants in the country. Here is an example of the infrastructure working to improve itself, however there is still a need to realize many more alternative conversion methods for the waste collected.
Recognizing the legislative power that helps to drive so much of the industry鈥檚 sustainable initiatives and practices,聽Congress recently finalized a $300 billion transportation bill,聽helping haulers make the switch to compressed natural gas.聽According to SWANA鈥檚 CEO David Biderman, the bill鈥檚聽limited truck weight waiver for natural gas vehicles聽will continue to increase the聽expansion of CNG trucks聽in the public and private sector.
Further to anaerobic digestion mentioned previously, which produces two strong commodity outputs, the industry needs to grow in a way that provides an endpoint or need to the product or process output, or the output needs to align with regional needs. In the meantime, industry growth will be segmented and perhaps minimal in order to offset and accommodate costs; however, cultural and societal recognition of the food waste issue continues to strengthen. Donations of non-perishables are more common, consumers are more focused on sustainable purchasing trends (portioned, yet bulk), as well as realizing the importance of being less particular about what might be considered 鈥渦gly鈥� foods or produce.
Continued Challenges and Opportunities for Innovation
Commodity prices continue to decline while diversion costs climb. By leveraging strengths in logistics and building out an infrastructure that is able to efficiently collect, process and manage material, food and municipal waste through environmentally responsible practices, the industry can enhance diversion efforts and lower costs while converting waste material to its most valuable end-of-life commodity or form.
The greatest challenges facing the industry today stem from the economics of the process. It is ideal in theory, yet costly in practice. So, until the operational efficiencies are realized in order to decrease diversion costs, and commodity prices increase through increased alternatives or greater range of necessity by expanded regions, there will be challenges in incentivizing companies nationwide to invest and engage in food waste recovery, diversion and conversion.
Growing by region, though driving competition at a smaller scale to lend into a larger scale market, is one way to help drive the initiative. Another way to increase initiative is through legislative and organized regulations to direct the pace and urgency of innovation and adoption. Finally, continued consumer education and organization to help drive both of these elements can provide further incentive for waste companies and commercial producers of food and municipal waste.
Richard Gil is VP of Recycling and Waste National Accounts for HAVI Global Solutions (Downers Grove, IL). He has an extensive background in the waste and recycling industry and is a seasoned senior executive with 31 years of sales and operational experience. Prior to HAVI, Rich led the National Accounts Sales Team at Republic Services, the second largest waste hauling company in the North America. He can be reached at [email protected].