13 Jan 2020
An inside look at the global waste and recycling market
By 2025, the value of the global waste management industry is expected to hit USD $530 billion, from $330.6 billion in 2017.
Global recycling rates are also rising, with metal predicted to reach USD $434.55 billion by 2023. Paper will climb from USD $4.29 billion in 2017 to $5.42 billion in 2024. Plastics are also part of the story and are expected to rise from USD $25 billion in 2018 to $33.8 billion by 2023.
Waste management, on the whole, is handled by local authorities. While 70% of countries have developed policies that regulate their waste industry, so much more needs to be done. According to the World Bank, 2.01 billion tonnes of solid waste is generated annually, with at least 33% of that being managed in an environmentally unsafe way.
For the most part, waste collection rates vary by levels of income. High-income countries only make up 16% of the world’s population, yet they generate 34% of the world’s waste. High earners have more disposable income, which translates to more goods purchased, and with it, the packaging for those goods. (In Germany alone, 221 kg of packaging waste is generated per inhabitant each year. However, Germany recycles more than any other country.)
In high-earning regions such as Europe, North American and Central Asia, at least 90% of waste is collected. In low-earning countries, that figure drops to 48%.
Recycling is difficult to break down and compare among countries. Each has their own definition of what constitutes solid waste, for example. Take Sweden; It’s often claimed that they recycle nearly all of their waste, but according to Eunomia, Sweden counts energy recovery from waste incineration as recycling. That’s not how the recycling is defined, however. Wales reported a 64% recycling rate, but they include rubble in that figure. Overall, however, Europe does well when compared to other regions. For instance, they recycle 30% of plastics, while the U.S. only recycles 9%.
With population growth and the migration of people to cities, municipals and local authorities are dealing with mountains of waste, especially in the wake of economic development and increasing prosperity. Today, 55% of the world’s population lives in cities. That figure is expected to rise to 68% by 2050.
While Asia has a relatively low level of urbanisation, it still accounts for 54% of the world’s urban population. Europe and Africa are next on the list, with 13% each. Despite that figure, 74% of Europe’s population lives in urban areas.
Every facet of waste and recycling management faces the same dilemma. How do you deliver environmental sustainability while reducing business and operational risk? Digitalisation and globalization are driving more competition. We are no longer restricted to our own regions to do business. Regulations targeting environmental considerations change customers’ requirements. It’s up to the waste and recycling management industry to adapt.
The industry is being driven to create new business models that align with new strategies. Strategies, in turn, are being influenced by new technologies, from bins armed with sensors to optimisation software solutions. As more operations move away from paper to digitalising and automating workflows, they’re finding new growth opportunities.
It really is a whole new world out there.
Private equity firms play an integral part in the M&A environment in Europe and North America. They find the industry appealing due to the continuous revenue generated while being shielded to a large degree from downturns in the wider economy. Waste must be collected, whether we’re in a recession or not. The more profitable a company is, the more attractive to these firms, of course. And one of the ways to create efficiencies and increase profit margins is through integrating digital solutions and standardising processes.
Environmental sustainability is incredibly valuable to private equity firms as well. Here again, digitalisation plays an important role. Waste and recycling management companies who implement technologies that enable sustainability, such as single-stream recycling, are far more appealing to these firms than companies who still use manual processes.
Reducing business and operational risk is always a priority. In order to stay agile and reduce costs, waste and recycling firms are also reducing their capital assets and associated costs in operations and instead relying more on subcontractors. Another factor, solely impacting the recycling industry, is and will always be commodity market shifts. It’s the nature of the industry that prices for raw materials fluctuate, diminishing margins. To offset this problem, it’s an urgent need to optimise efficiencies and quality to offset negative prices.
The industry is struggling to find ways to reduce their operational risks due to China’s 2018 ban on 24 categories of solid waste. This includes paper, textiles and most plastics. Up until then, China had handled half of the world’s recyclable waste, but the flood of contaminated materials at their processing centres created an environmental problem. This has led to a global shift in where and how materials are recycled. China’s plastic imports fell by 99% and mixed paper by around a third. (Aluminium and glass have remained relatively unaffected.)
The ban and restrictions have led to more plastics and other waste being incinerated – England alone burned 500,000 million tons in 2018 – or sent to landfill. Another consequence has driven to the treatment of waste in the country where it was produced.
Obviously, incineration and landfill create environmental havoc. Local authorities and companies have to find alternatives. The first step is to educate the public on recycling. Reducing contamination rates will reduce the amount of waste sent to landfill.
That will help meet landfill reduction targets and alleviate some of the pressure that companies are feeling. Regulatory fleet policies add to the challenges, but this could turn into a positive for companies who comply. Companies who don’t will miss out on contracts – customers want to know companies are meeting standards, and they’ll want proof.
In order to meet regulations and landfill reduction targets and somehow stay profitable, companies must improve operational efficiency and drive margin expansion. We come back to the need for digitalisation. Companies can create significant efficiencies with end-to-end visibility into operations and reporting capabilities of every process. Decisions are based on accurate, real-time data instead of relying on estimates. By knowing exactly what’s going on, companies can minimise revenue leakage. For example, it’s easy for lifts and weight disposed to go unbilled, but digital solutions ensure companies don’t miss anything.
Automating processes with these solutions will improve customer engagements, which is always the first step in accelerating top-line growth. For example, an online customer portal allows them to get account information 24/7, review their contract, make payments and so much more. This also relieves company call centres so that they can concentrate on other tasks.
We’ve already touched on many of these, such as the trend for companies to reduce their assets. We’ve also mentioned mergers and acquisitions, which is predicted to remain high, even in Britain post-Brexit. According to Experian in 2019, waste management was the only industry to see a rise in overall deal value in H1 2019 compared to M&A activity during the same period in 2018.
Driving legislation and government guidelines is sustainability and the move towards a circular economy, replacing the linear system of produce, use and throw away. Instead, a circular economy changes how value is created with the strategy of reduce, reuse, and recycle. Resources are used as long as possible so that maximum value is extracted. Then materials are recovered and used to regenerate new products. At some point, these products will have an end of life, but waste will be dramatically reduced.
The goal of reducing business and operational risk continues to contribute to the industry’s digital transformation and exploration of new technologies. Automating services with integrated solutions are driving efficiencies, enabling companies to experience growth. Worldwide, we’re seeing the rise of smart cities, and waste management is on their agenda. Smart cities are connected, making use of the Internet of Things (IoT). For example, we’ve already mentioned collections determined by bins’ fill-level sensors so that bins are only emptied when they need to be. This eliminates unnecessary efforts and wasted fuel, mileage and CO2 emissions.
There are other technologies too. Augmented Reality (AR) is being explored for use in the recycling sector. Operators wear glasses that use cameras, motion, and depth sensors. Real-time information is over-layed on the glasses how to handle items. AR is already being used in manufacturing and it can help in waste and recycling too. Operators will see where screws are located on an item, for instance, and show prying points and how to retrieve critical materials and components.
Machine Learning (ML) is another possibility to improve performance and efficiencies in tasks. For instance, rather than rely on control systems determined by rigid tolerances defined by human analysis, ML could do the same thing with little data. So a control system could identify, say, a laptop, and determine its condition and that of its PCB components along with is estimated material value.
So what’s on tap for companies? We’ve found these strategies at work within the industry:
- Cost reductions, which can be found through efficiencies, are being undertaken to support margin expansion and top-line growth. This will be achieved via operational excellence. That is, streamlining processes with integrated software solutions.
- Mergers and acquisitions, which will bring new skill sets and services to companies. This, in turn, can take them into new markets or attract new customers.
- Centralising or decentralising is another strategy some companies are pursuing. Some are consolidating operations across regions while others are reorganising operations across regions. Companies who do one or the other have determined there’s added value in their choices. For some, centralising reduces commercial flexibility and initiative while for others, decentralising allows for better customer service and quicker decision making.
- Management and strategy consultants are becoming more involved with recycling companies especially, helping to identify new waste streams and identify opportunities for improving separation and reducing costs.
This is the state of the global waste and recycling industry market today. But if there’s one thing we all know about this industry, it could very well be a different story tomorrow.
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