State of Michigan
Departments of Commerce and Natural Resources
December 1991
#9102
Recycling is a business. Like other commercial enterprises, recycling businesses are profit-motivated. Most must survive in a competitive environment. They try to delivery services and products that meet customer needs and return reasonable compensation. The one unique thing about recycling businesses is that their raw materials and products are used materials.
The fact sheet is intended to help companies that generate recyclable materials establish solid working relationships with companies that collect and process the materials. It explains recycling operations, identifies recycling players, describes recycling starts. The information is somewhat lengthy because many questions must be answered. Hopefully, the time that you spend reading will help make recycling easy and profit-enhancing for your company.
Five basic activities must take place for recycling to happen:
Successful recycling is driven by demand for the collected materials. The demand for the materials is determined by the marketability of their end uses. If the products made from recycled materials are in high demand, demand for the recyclable materials will be high. But, if demand for the end products is low, or non-existent, there will be little demand for the recyclable materials.
Prices for recyclable materials follow the laws of supply and demand like other industrial commodities. If supply exceeds demand, prices will be low and there will be little incentive for recycling businesses to take materials. In fact, recycling businesses are likely to charge for taking materials in such instances to cover costs. But, if demand exceeds supply, prices will be high and even small quantities of material will have value.
The demand for, and prices of recycled materials are heavily influenced by the availabilities and prices of comparable virgin materials. End users prefer to use virgin materials rather than recycled materials if availabilities and prices are the same. As a result, recycled materials have difficulty competing with virgin materials unless there are price advantages. The demand for recycled materials is greatest when virgin materials are in short supply.
If markets for recyclables are to be strong, individual and business consumers must put priority on purchasing products having recycled material content.
A variety of businesses play roles in the recycling industry. Some are small, some are large. Some offer specific services, while others are involved in all aspects of recycling.
Most companies that want to recycle scrap materials are likely to deal with collectors or processors. However, if your company generates large quantities of recyclable waste, it will likely be to your advantage to work directly with brokers or end users.
Players in the recycling business include:
Collectors - individuals or businesses that collect recyclable materials.
Generally, there are three types of collectors:
These collectors deal in "source separated" materials, which means that the recyclables have been kept free of or have been separated from other materials at the point of generation.
On-call collectors will pick up recyclables if the quantity of material is sufficiently large and the quality is acceptable. These businesses may or may not handle all types of recyclables. The collected materials are transported to processing centers.
Most on-call collectors provide services in addition to material pick-up. They will help you set up in-house collection systems, including training of workers on the "Dos" and "Don'ts" of recycling. Also, they often supply collection containers. At times, however, particularly when the quantity of collected materials is not large, fees will be charged for the use of containers.
An important service that is sometimes provided is periodic feedback on quantities of collected materials. This provides valuable promotional information for motivating employees to do the best possible job of recycling.
The quality of materials picked up by on-call collectors is usually high as a result of close surveillance of the materials during pick-up.
Milk Run collectors enforce the same high standards of quality as on-call collectors.
Cost for site separation services are usually about 75 percent of landfill disposal costs. Although the waste-generating companies typically receive no revenue for the recyclables, they benefit by paying less for refuse collection and disposal.
The quality of site separated materials is often poor. Only a few types of material, such as cardboard, wood, iron and steel, are collected with this process because contamination levels are too high for end uses of other materials.
Processors - these players are recycling experts. In order to be successful, they must know the various grades of recyclable materials, acceptable quality standards, current prices and potential markets for materials. Processors make profits by receiving higher revenues for the materials that they market to brokers or end users than the cost that they must pay in collecting and processing.
Processors often have a significant cash investment in the equipment required to prepare materials for end use. Storage costs are often significant, too. Additionally, labor cost can be high, particularly when materials are manually separated. These costs must be paid from the processor's mark-up. Obviously, processors must know how to control these costs to be successful.
Processors sometimes do their own brokering.
Brokers - the marketing of processed materials to end users is performed by brokers. Brokers play an important role in the recycling loop as they assure the availability of needed quality and quantity of materials to end users. They "pool" the outputs of several processors and arrange for shipment of the materials to the end users. Shipment may be by common carrier or contracted hauler and may include export to foreign countries.
Generally, brokers have no processing or storage facilities nor do they own transportation equipment.
Broker profits stem from the difference between the sales revenues received from end users and the incurred costs of buying materials from processors and shipping them to the end users.
End Users - the manufacturers of products having recycled content.
Consumers - individuals and businesses that purchase and use products having recycled material content. These people and businesses create market demand for recycled materials.
As a general rule, any material that can be collected in quantity, free of contamination and at a location not too distant from a processor or end user has recycling potential. Exceptions are materials that degrade readily and materials that cannot be reprocessed due to technical limitations.
One of the first questions that will be asked by a collector, processor or broker is, "How much material do you have?" This is a key question because pick-up costs are not proportional nor can they make a profit with small quantities of material. On the other hand, large quantities of recyclables can provide high profit-making potentials. In some instances, very large generators of recyclable materials make their scrap products available on a competitive bid basis, enhancing their own profitability.
Having small quantities of recyclables needn't be a complete barrier to recycling, however. Businesses can improve their businesses having the same types of waste. With common collection, quantities of recyclables can be increased to the benefit of all participants. The poling of recyclables can also reduce storage area and equipment investment requirements for individual businesses.
If your waste is not commonly generated by other businesses in your are, try to find a collector or processor (or end user) who specialize in the type of material that you have.
Quantity of material is sometimes expressed on a weight basis and sometimes on a volume basis.
Prices, for example, are quoted on a weight basis, such as dollars per ton or cents per pound. Processors, brokers and end users are understandably vigilant that materials that they purchase do not contain water, stones and other "weighty" contaminants.
On the other hand, collection, processing and shipping costs are usually based on volume, dollars per dumpsters, per box or per cubic yard for example. To keep transportation cost down, collectors, processors and brokers try to avoid shipping empty space. It costs about the same to transport a partially filled box as a full one. The dependency of shipping and handling costs on volume is the reason why recycling businesses put so much emphasis on preparing materials for maximum shipping efficiency.
Compaction - In most instances, brokers and processors want to receive materials as compacted as possible. Glass containers should be crushed, metal and plastic containers should be flattened and corrugated cardboard containers should be collapsed to maximize shipment payloads.
Businesses may wish to invest in compactors, balers, bottle breakers and other equipment for two reasons: first, to reduce their storage space requirement; second; to obtain higher prices. Compacted materials command higher prices than "loose" materials. An economic analysis should be made before ordering equipment to determine how quickly investment in the equipment will be recouped.
Note: Before investing in any recycling equipment or system, your should always discuss your plans with the processor, broker or end user that will be picking up or consuming the materials.
Sometimes, brokers and processors will not permit compaction, particularly during start-up of new recycling operations. This usually occurs when there is need for close visual inspection of materials for contamination or to determine if unwanted mixing of dissimilar materials has taken place.b>Standard Bale Size - Paper, plastics and metals are usually baled for lowest-cost transport to mills or processing areas. If bale size is not an even fraction of standard trailer width, height, and length, full loads are not possible. Suggest standard bale sizes are:
Bale dimensions are measured after post-baling expansion.
Many balers are being sold that produce "small" bales for ease of handling. Unfortunately, such bales may not be "good" sizes for recycling and it is not technically desirable or economically feasible to rebale materials to more desirable sizes.
Note: It is important that you discuss with your broker, processor or end user whether baling is desired and what bale dimensions are permissible before investing in baling equipment. Some paper mills are so particular as to require use of horizontal balers; bales from vertical balers are not accepted.
Storage Area Requirements - Every link in the recycling chain must consider storage space and environmental requirements. Space must be available at a centralized location to hold materials until there is sufficient volume for shipment. Ideally, the storage area should be located on or near a shipping dock. Many companies find that some space that had been used for trash storage is available for recycling storage due to decreased trash volume after recycling starts.
Storage space requirements can be estimated by dividing maximum expected quantities (i.e. weights) of materials to be stored by the densities of the materials in the physical forms in which they are to be sorted. Or, measure the volume of material collected over a period of time and multiply by the estimated number of time periods between pick-up.
The following data illustrates how density can change with physical form:
| Material | Pounds per Cubic Yard |
|---|---|
| Bond Paper Shredded Loose Sheets Baled |
30 - 50 300 - 400 700 - 1,000 |
| Cardboard Loose Sheets Compacted Baled |
200 - 300 400 - 500 600 - 1,000 |
| HDPE Milk Jugs Non-compacted Flattened Baled |
20 - 30 50 - 70 300 - 400 |
| Steel Cans Non-compacted Flattened |
100 - 150 2,000 - 2,200 |
Paper and some types of plastics, such as LDPE, should be protected from sunlight and rain. Other materials can be sorted outdoors. Avoid ground contact in outdoor storage to minimize dirt pick-up.
Every effort should be made to keep recycled materials as "clean" as possible. The end use, and hence the economic value, of each recycled material will be determined by how close the materials is to its "virgin" condition. Physical properties, such as the melt flow of plastics and the tear resistance of paper, readily degrade when unlike materials are mixed. Furthermore, the presence of "dirt" can destroy both appearance and function.
Segregate! Segregate! Segregate! - As a general rule, materials should not be mixed and then sorted. If at all possible, keep unlike materials separated as they are being discarded, i.e., source separated. Sorting is never as efficient or cost effective as having separate collection containers. Having separate collection containers helps to instill the recycling habit in employees, too.
There will sometimes be questions whether wastes are close enough in composition that mixing is permissible. Collectors, processors and brokers will provide instructions on what materials can and cannot be mixed. In some instances, different limits are given by different individuals in the recycling business. This happens because the end use requirements for the market that one broker or processor supplies may be different than the requirements for the markets being supplied by other brokers and processors. End use requirement always determine acceptable contamination limits.
Keep unlike materials segregated.
Even A Little Contamination Can Hurt - One of the most frustrating experiences in recycling is to have a large quantity of material rejected, or downgraded (which will lower material value), due to a very small impurity. For example, if one polypropylene container is shredded or granulated with a gaylord box of HDPE plastic containers, the material cannot be used for molding new containers. The value of the mixture will be approximately on-third the value of container-grade HDPE material. It is important that efforts be made to exclude even small amounts of contamination from recycled materials. Employee support of recycling is often the key to preventing such losses.
Transportation costs are a significant part of recycling costs. These costs must be paid each time that materials are transported. When market demand and prices for recycled materials are low, you will have to help pay these costs to have materials picked up either in terms of lower revenue or as direct charges. As trucking distances increase, of course these costs increase and your share will be correspondingly more.
Do-It-Yourself Trucking - One way that generators of recycled materials can increase revenues is to provide needed transportation to the processor or end user. The increased value received for the materials will sometimes offset the trucking costs. Virtually all collectors and processors will permit drop-off at their places of business.
Synchronized us of company vehicles to deliver recyclables to collection or processing centers along product delivery or supply pick-up routes is suggested as a way to "keep the lid" on recycling costs.
When evaluating proposed recycling costs and deciding whether they can be justified, consider the alternatives. To many businesses, recycling is justified on the basis of cost avoidance. Almost always, it is less costly to "get rid" of unwanted waste by recycling than by disposal in a municipal incinerator or landfill.
As has been indicated earlier, willing support by employees is essential for successful collection of recyclables by businesses.
The good news it that employee support is almost guaranteed. Most employees believe that recycling is important - to their like to see resources wasted. The recognize that out mineral, energy, water and land resources are limited and that recycling helps to preserve each resource for future generations. Such feelings provide a firm foundation for starting and operating an effective recycling system within your company.
Suggested ways to enhance employee participation in recycling include:
Management Support - There must be no question that management considers recycling important and that employee participation is expected. Top management support should be positive and visible. A letter should be sent to employees when the recycling system is activated emphasizing commitment and defining goals. Management also must show support by authorizing needed employee time and equipment to plan and run the system.
Half-hearted support by management will result in a half-successful system.
Employee Recycling Teams - It is a good idea to involve employees in the planning, implementation and maintenance of the recycling system. Select people from various department, including the maintenance staff, shipping and purchasing, to form a team. Appoint a leader who is aware of and concerned about environment issues. Management should encourage the idea that the recycling system is an employee system.
Provide Feedback - Keep employees informed of the results of their recycling efforts. A good way to do this is to express results in terms of environmental effects; for example, gallons of oil saved or number of trees spared. The Office of Waste Reduction Services can provide conversion factors of this type for common recyclable materials.
Employees should be told both the good and the bad of the collection system. Publicize contamination problems if they occur. Tell employees of lost value and lost end use opportunities. Be sure to tell them when problems have been successfully resolved as well.
Provide Incentives - Companies should recognize good recycling efforts in newsletters, on bulletin boards and in local news media. "Recycler of the Month" awards pay dividends in employee support and participation.
Some companies provide financial incentives for good participation in recycling. Part or all of the revenues received from recycling are assigned to employee educational, recreational or cultural programs. Charitable donations in the name of company employees are also great simulators to maximize collection.
Like other industries, there are some desirable organizations to work with in recycling and some that should be avoided. Companies that start collection materials for recycling are wise to establish working arrangements with collectors, processors and brokers carefully. The following approach is recommended:
It is sometimes possible to find a "better" price for collected materials. However, switching from one player to another to earn a few more dollars with each material pick-up is poor practice. It destroys any loyalty or good will that has been established. While it is important to compare average prices over time to ensure that competitive prices are being received, having a strong, cooperative relationship with your recycling partner pays dividends too. I can mean having materials picked up when markets are down, when other collectors, processors and brokers say, "Sorry, I don't want your material."
Start out with a three-month trial period with each recycling player, without a contract. If services are acceptable, extend the arrangement for six months. If you must sign a contract, do so only after a firm business relationship has been established.
Consider recycling contracts that extend longer than one year very carefully. Recycling markets and the techniques and logistics of recycling are changing rapidly. Recycling is a growth industry. Better methods of collection and processing and new end uses are being developed. You do not want to be locked in with a recycling partner who does not keep current with such changes.
Of course, long term contracts can provide some assurance that your recyclables will be collected when demand for materials is low. This security may outweigh the potential for higher long-term revenues in come companies.
The Office of Waste Reduction Services provides information to Michigan businesses and institutions (e.g. schools, hospitals) on recycling. It publishes the "Michigan Recycled Materials Market Directory," which is a listing of collectors, processors and brokers within the State of Michigan and nearby states. The office also provides "Why" and "How to" fact sheets on recycling. Information on specific recycling problems is also available. Call 1-800-662-9278 for information.
Both the Michigan Department of Commerce and the Michigan Department of Natural Resources are actively encouraging the development of stronger markets for products with recycled content. For example, the Solid Waste Alternatives Program (SWAP) provides loans and grants for a variety of solid waste projects, including the development of markets for recycled materials. This funding was made available as part of the environmental protection bond proposal (Proposal C) that was approved by Michigan citizens in November, 1988. Information on applying for funding and current SWAP projects can be obtained from the Department of Natural Resources by calling (517) 335-4863.
Although recycling is a desirable way to dispose of used and unwanted materials, waste prevention is better. Waste prevention saves more energy, has greater impact on environment improvement and has the potential for greater impact on your profitability than recycling.
A variety of simple approaches are available to help your company avoid, eliminate or reduce the amount of waste that you produce, including:
Waste prevention includes reusing unavoidable waste materials as raw materials in the same or other production processes.
Major waste prevention sometimes requires changes of product design, process, equipment or operating procedures. Businesses are urged to think "waste prevention" first and "recycle" second. Both your company and the environment will benefit.
For more information on the subject of waste reduction for businesses, contact the:
Office of Waste Reduction Services
Departments of Commerce and Natural Resources
P.O. Box 30004
Lansing, Michigan 48909-7504
517-335-1178 or 1-800-NO-2-WASTE
Last Updated: November 10, 1995