The Value of Recycling Services: We Can Make Recycling Better

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The value of recycling services has long been under-estimated because such services are bundled with waste removal services. Bernie Lee, commodities research analyst at the Institute of Scrap Recycling Industries (ISRI) talks with Earth911 about his recent Scrap Magazine editorial, “The Service, Value, and Labor of Recycling.” Perhaps, if we broke out the price of recycling, we’d see more clearly that it is time to spend more to close the consumer end-of-life waste loophole. 

Bernie Lee, commodities research analyst at the Institute of Scrap Recycling Industries

Bernie Lee, commodities research analyst at the Institute of Scrap Recycling Industries

The transcript of the interview follows. If you’d like to listen to the interview, click the Play button on the podcast player below.

Listen to “Earth911 Podcast, Sept. 14, 2018: Sustainability in Your Ear — The Value of Recycling Services” on Spreaker.

Mitch Ratcliffe: Hello! Welcome to Sustainability in Your Ear, the Earth 911 podcast. I’m Mitch Ratcliffe, and today we’re joined by Bernie Lee, who’s a commodities research analyst for the Institute of Scrap Recycling Industries, ISRI — they’re a sponsor of the site. And Bernie just recently published an editorial in Scrap Magazine called, “The Service, Value, and Labor of Recycling,” in which he called out a number of important issues about the changes in recycling happening due to the Chinese trade policy, but also highlighted the fact that it’s really what goes on in the neighborhood right there at the curbside that is the face of the recycling industry, and it’s underappreciated, and in many cases, under-compensated because people don’t recognize the value.

In fact, he says, “It’s a service that provides a public good, but unfortunately scrap is a product that devalues and sometimes ignores the service recyclers provide to the community by collecting and processing recyclables.” So, Bernie, welcome to the show first and foremost. Tell us, in your opinion, what’s current stand of the recycling industry in the United States because of the limitations on Chinese exports, and the following crises that have resulted from it?

Bernie Lee: Well, Mitch, thank you for having me, and I really appreciate that you recognize this aspect of recycling that’s often overlooked. I think your question is a very complex question on China and the globalization of the scrap and recycling industry. So, when we think about the ISRI stance, and I think it is a very reasonable stance, is that recycling is a part of the manufacturing supply chain. It closes the loop for materials that still have an inherent value. And part of that value is that it creates a common good for the people.

Now, many times when we hear in our discussion about capitalism or socialism is that often times there’s confusion about public goods, public common, and what is often times … usually boils down to what’s called the free rider problem, is that a public common is often times utilized by people who pay the least for it. Same thing with a public good. So, what happens here is that when it comes to these materials, there was an inherent value to these materials that it overcame the cost of reprocessing the material. Because of its environmental benefits and the amount of energy that was saved in using it.

Now, this works when energy costs are high, so you need to reduce the amount of energy in order to do so. It also works when the cost of labor is high so that the … No, sorry, when the cost of labor is low so that the reprocessed materials can still go back into the stream. But there’s a difference in the valuation of items, and that’s where this problem kind of results, and why globalization in some ways has exacerbated the problem but also allowed for certain systems to sustain themselves for as long as they have.

Consider Recycling Part of the Global Supply Chain

Mitch Ratcliffe: But the systems that have sustained themselves do seem to be struggling right now. And that’s a combination of the single-stream curbside pick-up, and the MRF [materials recovery facility] being essentially resorting what had been sorted at the curbside. Is that something that we need to be looking at as a challenge?

Bernie Lee: Yeah, absolutely. It is a challenge. It is definitely a challenge. And part of that challenge is because what was … This system is not part of a vacuum. When people look at sustainability, oftentimes they’re trying to control outside factors that really are not out of … Cannot be controlled for. They can’t be assumed will remain the same when other things change. So, what has happened is that, of course, the single-stream recycling system was perfectly sustainable as long as there was a supply of labor that was cheap enough in order to process the material, as well as available space with which to sequester any unusable materials or materials that had an even higher processing cost, and this becomes a scale of diminishing returns. The cost of recycling, of being able to capture 30 percent of the recyclable materials out of a waste stream is relatively low compared to the return.

So, the cost is low. But as soon as you try to raise that another 30 percent, the cost usually more than doubles, and hopefully the value of those materials will be more than enough to compensate for that, but it does squeeze the margin. And then if you try to go from the 30 percent to the 60 percent, the cost has more than doubled but the return has not, so you squeeze that margin. And then when you go even further, let’s say another 10 percent, it’s going to get even harder and harder, right?

So as this gets harder we needed labor costs to remain low in order to make that profitable. And those labor costs were found in other markets, and particularly in this case, China. China has a low enough labor market cost that, in many cases it was much cheaper … It’s even cheaper in terms of some agricultural goods, to source the agricultural good in the United States, send it over to China for processing, and then resell it in the United States.

So, that labor cost though was an import ban that was put into place due to environmental reasons. It skewed the valuation of what’s the environmental cost of recycling, what’s the labor cost of recycling, what are these different valuations that are involved? So, often times … Oh, sorry. When the system has been revamped, or just altered so significantly, and people have to reassess the valuation of how much recycling is worth to them, they want to keep certain things the same, but yet this is no longer a vacuum, again. So, this global marketplace effected it. It facilitated single-stream to make it cost effective, but now that it’s gone it’s no longer cost-effective.

Mitch Ratcliffe: So, the Chinese recyclable import ban, which is really a set of new limits that are just much more strict in terms of contamination. One of the things that I understand, and correct me if I’m wrong about this since the price of processing the recycling is going up here in the states because they have to slow down the sorting at MRFs in order to be more careful. They previously were operating at about 20 to 25 percent contaminated materials, and they need to get it down to .3 percent. So essentially, by slowing down the conveyor belt you have people working twice as long, ’cause they’ve slowed it by half, and so, therefore, the price goes up.

We’re also in a full employment economy, so there’s a lot of contention for different kinds of workers and their time. What’s a fair value for a recycling worker in this marketplace? Now I can give you an example where I am in Pierce County, Washington, it’s about $32 to $34 an hour. Are we talking about good middle-class jobs that could be populated by people working in recycling in the future?

Bernie Lee: Well, I think once again, trying to make that valuation on an absolute number amount, or a dollar amount is kind of difficult because when you look at the landfilling cost for Washington state and around Washington state, some of those will vary depending upon the municipality.

Mitch Ratcliffe: Right.

Public Services We Don’t Value Until They Vanish

Bernie Lee: And then even regionally, landfilling in the Pacific North West is generally much more expensive than it would be in the Mississippi Delta region. So, that cost-benefit analysis oftentimes breaks down in terms of what’s affordable and so forth. Then there’s the energy cost and the transport of movement of these things. So, bear in mind that not only is that MRF that has to run their conveyor slower, having to have a raised labor cost, because that conveyor belt is moving slower its output is also reduced. And because its output is reduced that acts as another multiplier to the cost.

But let’s dial this back for a second, let’s think about what happened in the North East, for example, during I think it was about two or three years ago, when there was a heavy, heavy snowfall in the North East of the U.S., and I think Boston, Buffalo, they were under so much snow. And there was a public health hazard because the hauling trucks couldn’t even move through the road to pick up trash for weeks.

So, the people felt that this was a service that often times they took for granted because they pay for it in their water bill and so forth, but now the service was no longer there. How much would you have to pay in order to get somebody who would be willing to trudge through the snow, grab those bags, and take them away from you? You know?

Mitch Ratcliffe: Like you were saying a public good is not recognized until it’s gone.

Bernie Lee: Absolutely. And those costs, once they become kind of assumed there’s always this idea that the market stays the same, and that’s not necessarily the case. Like I said, the labor cost for this sort of recycling in the residential curbside aspect of the industry was found in a different market. Now, environmental costs have become more apparent to the consumer, and so people are more concerned about it, it’s raised its value, and because it’s raised its value other country markets such as Indonesia, and Thailand, and Vietnam, and even parts of South America, Central America, they’re going to have to consider the environment as part of their cost of doing business, and they don’t want to ruin that as well. It hurts tourism, it hurts of a number of other revenue sources for them. That’s going to be a difficult puzzle to solve.

Mitch Ratcliffe: Absolutely. Again, as you said, my question at the beginning is complex because right now, we’re looking at all of this as problems to be solved in the future when they are current, present issues that we have to deal with today and have not expected. So, ISRI, which is the largest industry organization in scrap recycling has proposed some changes to the infrastructure. Can you give us a couple examples of how we can start to change the infrastructure here in the United States?

Choose a System That Fits Your Community

Bernie Lee: We have to be careful about characterizing the problem to its regionality. Urban areas, rural areas, areas where transportation costs are high, and where they’re low, and where there is a road network for moving goods. So in the Midwest, for example, you have a large train network that allows the movement of goods to be improved. So, I think that the infrastructure that’s necessary is that we need to have a community effort that’s tailored to each community.

And that’s one of the infrastructure investments that I think we need to look at. We need to see cart programs improve that work for their community. Pick-up schedules that work where they are. You can’t have the same type of cart program in a suburban area outside Indianapolis Indiana, as you may in the suburbs of Washington D.C., or the suburbs of Austin Texas. There are other factors that have to be considered. Also, the consumption habits of these areas, because the coastal regions used to have export markets very readily available to them because of the availability of the shipping line from those ports.

Now, in the Central United States, they might not be feeling it as much because they had to cover the transport costs just to get it to those places. But then again transport costs in the United States are going up because truck space, availability, and freight, those are all costs that are going up. There is a shortage of available truck drivers in order to meet the need of freight demand in the United States. The number of train lines have been cycling down because they were utilized less.

So, all of these things in consideration, it’s the labor of moving these things. That’s why I feel like the most important aspect that we have to recognize is that this is where the value is in the recycling, in that the consumer needs to understand, you are paying for having somebody take stuff.

 

Mitch Ratcliffe: I’ve been looking at this question of how do we take care of recycling, and often the cost is so hidden that we don’t think we’re even paying for it today. But you’re hitting on—

Bernie Lee: You were mentioning infrastructure investments, and I think cart programs was one of those things that ISRI has also advocated. But I think we also need an educational infrastructure investment in the sense that we need to re-inform the consumer about what is and isn’t recyclable on a regional level. And it may not seem like a building project, but it is something that we need to capture the hearts and minds, and that’s a sort of, I guess, an abstract infrastructure that I—

Mitch Ratcliffe: Is to build a culture of recycling that is embedded in our physical world as well. And so, what you’re describing, to use some other industries as examples, is an edge network problem. Right now, we have a very centralized approach to recycling, just as we had a very centralized approach to, for instance, electricity and television, until very recently. And now you can see that at the edge of the network consumers are choosing lots of different alternatives, rather than having to pick from one to three out of five options. So ultimately, if we have local solutions that are locally enabled as you’re saying, where the community has a particular set of problems and they have to continue their waste and recycling streams to progress it, we’re in a great position to start to reinvent the infrastructure.

Bernie Lee: Absolutely. And I think that it’s about the consumer choices that will inform how our manufacturing supply chain will adjust to those needs. If recyclables have a value, then the purchase of materials that contain recycled content is extremely important. Just because it’s recyclable doesn’t mean that it’s sourced from recycled material. So, that’s a very careful distinction that also needs to be highlighted so that the labor of recycling is not just in the knowing where to put it in the bin, but how you consume products in order to promote those products that recycle themselves well.

I would like to add one last thing though, is that the some of these costs, oftentimes, we can think of the short-term steps. I think of the plastic straws that people are trying to find alternatives for, and I think that’s, while well-intentioned, sometimes we have to be very careful about the economic consequences of this, of our actions. Oftentimes, we think of a simple solution that we want to have moved the needle, and unless we know its volumes and relationships to the market, sometimes it can be very difficult. So, I want people to consider that while there is a service, the service is not cheap, but it is valued, and to show that value and that diminishing returns are just part of it. But as long as we work together for a future goal that we’ve made, we can make improvements in that way.

Mitch Ratcliffe: Well, you are singing the Earth 911 song, Bernie! I’m so pleased to hear you say that. That’s what we’re trying to do every day. ISRI is also doing a great job in terms of getting education out and working with our regulators. Thanks very much for joining us, Bernie Lee. We would love to have you back to talk about this some more on Sustainability in Your Ear.

Bernie Lee: Absolutely.

Mitch Ratcliffe: Folks, this Sustainability in Your Ear, the Earth 911 podcast, and we’ll be back next week.

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Mitch Ratcliffe

Publisher at Earth911.com
Mitch is the publisher at Earth911.com. A veteran tech journalist, Mitch is passionate about helping people understand sustainability and the impact of their buying decisions on the planet.