There is an old saying that one man’s trash is another man’s treasure. This axiom has never been closer to the truth, with the cost of landfill continuing to escalate, government regulations getting tighter and environmental groups gaining power.
Elsevier Food International, Vol. 7 Number 4, November 2004
Len Lewis

Efficient waste management is very high priority and many companies are involved in a variety of initiatives to reduce or recover as much waste as possible,” said Isabel Pilkington, an analyst with the Innovest Group, an international consulting, research and management advisory firm. In New York State, alone, the Department of Environmental Conservation has estimated that approximately 13.3 per cent of solid waste is generated from packaging materials in grocery store products.
The food industry’s low profit margins should make it particularly sensitive to recycling and waste management, noted Marc Brammer, senior analyst with Innovest. “Up to now, many companies didn’t look at the cost. They just lumped them in with general operating costs as if it was part of the rent. They haven’t been thinking about this as an optional cost with alternatives,” he said.
However, a recent report on waste reduction in retail stores published by the UK government, proactive waste reduction measures can reduce costs by one per cent or more, a figure which is roughly equivalent to a 10 to 20 per cent increase in sales.

A variety of paths
In the US and Europe, retailers are taking a variety of paths to reach recycling and waste management goals. Boise, Idaho, based Albertsons is an active participant in the Environmental Protection Agency’s WasteWise programme. The chain has significantly stepped up donations to food banks across the country and has developed a package redesign guideline for suppliers to encourage 100 per cent recycled content.
Safeway, Food Lion, Hannaford, Supervalu and CVS, whose donation programmes include a broad variety of household, personal care and cosmetic items, are also using food banks more aggressively. “Companies are realising that if they have food that’s past its display date but not the sell-by date and send it to these organisations, product is diverted from landfill sites, thus saving considerable disposal costs,” said Pilkington, noting that it also helps enhance a company’s reputation as socially responsible.
Sainsbury’s in the UK has switched to reusable crates from cardboard boxes, stepped up food donation programmes and is running extensive trials of composting for food which cannot be donated. Additionally, the company, in conjunction with a supplier, has even developed an edible, potato starch packaging.
Whole Foods in the US built the first ‘green’ building in Texas and through the use of innovative materials and building methods achieved a 42 per cent reduction in construction waste.
Delhaize is testing reusable varieties of bags and boxes instead of disposable plastic grocery bags. Shop ‘n Save, a Delhaize subsidiary, has reduced the landfill waste it generates by 50 percent through composting food scraps.
Tesco is recycling about 60 per cent of total store waste and is sending 27 per cent less waste to landfill than it did five years ago.
Overall savings can be significant. In 2002, Sainsbury’s numerous recycling initiatives saved some US$207,000 in landfill tax and about US$3.7 million which would have been generated by 1,200 tons of packaging materials.
Albertsons recycled an astounding 700,000 pounds of scrap metal in 2002, 12.1 million pounds of plastic wrap, 620 million cardboard boxes and 900,000 truck and trailer tires-all of it  adding up to significant cost benefits.
Clearly, the incentive to reduce landfill waste is far greater in Europe than in the US. “If you focus on landfill, the cost in the US hasn’t increased dramatically so there’s not as much pressure on companies to look for alternative methods of waste disposal. But incentives depend on a company’s location. In the Northeast, disposing of waste in a landfill costs an average of US$60 per ton compared with  US$22 per ton in the western states,” she said.
         
Taxes and regulations  
Germany, Denmark and the Netherlands are leading the way when it comes to solid waste management. All three have considerable recycling operations and use waste to generate energy.
But a recent global retail sector report by Innovest noted the UK is lagging behind. It is only recycling eight per cent of waste, burning another eight per cent to make electricity, and composting one per cent. This means 83 percent still going to landfills. However, new targets have been set to comply with EU landfill directives and by 2005, 40 per cent of waste in the UK must be recovered or burned. The target for 2010 is 45 per cent and 67 per cent by 2015.
More than likely, retailers and manufacturers will have to coordinate recycling and waste management efforts. Burning may not be viable option due to the cost of greenhouse gas emissions and air pollutant regulations because much of the industry’s waste comes from plastic packaging that has high chlorine content-a component of dioxin.
Moreover, the ‘green tax’ or landfill tax in the UK, first introduced in 1996, is going to increase significantly to approximately US$33 per ton by the end of 2006 with increases of about US$5.50 per ton every year until the tax reaches its stated long-term goal of US$64 per ton.
Additionally, beginning in 2006, publicly held UK companies will be faced with mandatory corporate reporting on social and environmental issues and how they are managing them. The Operating and Financial Review (OFR) will require companies to state formally that they have considered specific issues, even if there’s nothing significant to report. “A poor record on environmental or health and safety matters could adversely affect a company’s standing and business prospects,” said Rob Lake head of corporate governance for Henderson Global Investors. “For regulated sectors, non-compliance could lead to the loss of license to operate and, in some cases, imprisonment for directors,” he said in recent comments on OFR.
However, companies that do comply with the new regulations will benefit from a host of new tax cuts for waste management as well as for using more fuel-efficient vehicles.

US resistance
There are no equivalent regulations in the US and any recycling or waste management statutes that are on the books are largely regional and local. Much of this can be traced to the consumer culture in the UK and Europe, which is far different than the US, said Pilkington. “Consumers there tend to voice a stronger viewpoint on environmental issues than they do here, particularly in Germany which has rigorous recycling and packaging laws,” she said.
“In the US, there’s been resistance to developing a more systematic approach to packaging that would fit with recycling efforts,” said Innovest’s Brammer. “The focus has always been on marketing and product display and not on the product’s full life cycle or what consumers are supposed to do with the packaging when it’s done. This is partly due to the patchwork quilt regulatory system and political inability to get something done at the federal level. Every time you have multiple systems you vastly increase the cost and decrease the effectiveness of the recycling programme,” he said.
However, Brammer also traces the problem to short-sighted manufacturers who don’t take advantage of recycled materials. “They haven’t enabled an economy of scale to take place which would reduce cost,” he said. “It makes no sense. If manufacturers recycled more aluminium it would be much cheaper to produce. But there is a prejudicial assumption that consumers will buy less Coke or Pepsi if they have to pay a deposit to fund the system.
But if you look at the data on sales of soda in states that have bottle bills versus states that don’t, there’s absolutely no difference. There’s no evidence that creating such a system deters people from purchasing. The price is elastic enough so that it doesn’t matter,” he noted.
However, attitudes could change if energy prices continue to escalate, according to Brammer. “The more a barrel of oil costs, the more people will look for ways to cut corners. And the way to do that in an energy cost situation is to increase recycling. This may be a lucrative niche market for thirdparty companies, he said, noting that a Norwegian firm called Tomra is providing recycling vending machines for consumers, and then reselling the materials. The company is now operating all over Europe, Japan and in South America where machines in Brazil are providing a living for people on the street, even though the city has no formal deposit system. I’m sure third-party companies like Tomra will create a cottage industry.”

WEEE directive
Recycling programmes in Europe will reach another level in 2006 when the WEEE directive Waste Electronics and Electrical Equipment-goes into effect. “Basically, anything in Europe with a plug attached to it will fall under strict recycling laws. Manufacturers will have to start building consortiums to share best practices on how to make products more recyclable. They will be building a cooperative model on how to address equipment, the most complex of recycling problems,” said Brammer.