BioCycle October 2007, Vol. 48, No. 10, p. 32
The emerging class of social/business entrepreneurs will help the Zero Waste Movement fulfill its promise by creating profitable businesses to recover society’s discarded resources.
Eric Lombardi and Katie Rogers
NOW THAT we’ve learned how to do Zero Waste Events, and some of us have learned how to create Zero Waste Zones at such places as farmers markets and zero waste businesses, it appears the world is waking up to Zero Waste. It’s catching on as a new approach to sustainability for business and community leaders. Requests are coming in from all over the globe for support and direction in Zero Waste planning and implementation. Herein lies the challenge for building the Zero Waste Communities of the future: Who will service this new and increasing demand for Zero Waste Services?
To answer that question, it’s helpful to review the birth of recycling and recall who serviced all its growth. The recycling movement of the 1970s and 1980s grew through a combination of social advocacy and new recycling collection services provided by a network of primarily nonprofit organizations. The first services offered were the community drop-off centers and curbside collection programs. For over 20 years recycling in America grew significantly, until around 1997, when the growth curve flat-lined.
The reason it flat-lined is complex, but one thing we know for sure is that the service providers who had been pushing-pushing-pushing all that growth, the mission-driven recyclers, had essentially disappeared by the mid-1990s, and the recycling “movement” had become a business where both the government and corporate sectors were now dominant and working hard to transform recycling into a low-risk, high-profit industry. The mainstreaming of the recycling industry was probably an essential evolutionary step, and it pushed many of the spirited social change recyclers to the next level. It also pushed many of them out of business.
It was at that time, the mid-1990s, that the next social movement was born. The Zero Waste Movement has grown steadily over the last decade, thanks again to the social activism from a growing number of mission-driven, social change organizations. Zero Waste as a resource conservation strategy goes beyond recycling in a few significant ways, including its focus “upstream” at the source of the waste stream, before a product is created, rather than simply collecting materials “downstream.” Emphasis is placed on the industrial design of products and packaging, on redirecting the government regulations and subsidies that currently provide hidden support for the status quo (landfill and incinerator industries), and on the purchasing behavior that is fueling the wasting behaviors in American society. Of course, Zero Waste also calls for the adoption of “downstream” goals and social policies that will gradually lead to a reuse, recycling, composting rate of over 90 percent of society’s discards.
CALLING ALL ZERO WASTE ENTREPRENEURS
As the Zero Waste Movement continues to grow, we are met with this question of who will provide the services necessary to achieve these goals. It’s one thing to create a drop-off center to collect newspaper, but it’s quite another to provide comprehensive Zero Waste services to a whole community.
Eco-Cycle Inc. in Boulder, Colorado is a nonprofit recycler that has transformed itself into a full service Zero Waste Service provider, and in that transition we find ourselves nearly alone in the marketplace. And it’s no wonder, since the challenges are immense and the services required are numerous and complex. To be a successful recycling organization since 1976, we had to have four core competencies: Collections, Processing, Marketing and Public Education.
Today, we figure we have to be good at 19 different things! The four skills mentioned above must now be applied not just to recyclables, but also to compostables, hard-to-recycle items and reusables, expanding our activities to 16 specific focus areas. In addition, there are “Upstream” elements to Zero Waste that require a focus on: (17) Producer Responsibility – creating local opportunities for the commercial sector to become part of the solution rather than the source of the problems; (18) Zero Waste Purchasing – getting everyone to think about both the source and the end-of-life management of their purchases before they make them, and creating convenient local systems to buy the right things; and finally, (19) Zero Waste Politics – to work with your elected officials so they create Zero Waste Goals for the community and establish a public policy position that establishes once and for all that ‘waste’ is a social issue first and a market issue second.
This is a long “to do” list for any entrepreneur to consider taking on, so it’s no wonder that the provision of comprehensive Zero Waste Services is lagging behind the vision and rhetoric. Eco-Cycle, as a nonprofit mission-driven organization, has ventured forth on all fronts at once under one roof, but we don’t expect our way to necessarily be the only model. In the future, we expect (and hope) that a diversified “ecosystem” of local service providers develops in a community where specialists will create profitable businesses recovering society’s discarded resources. But considering the stagnant state of recycling in America today, who will those future businesspeople be? We call them the Zero Waste Millionaires and they are an emerging new class of social/business entrepreneurs who will help the Zero Waste Movement fulfill its promise. Known as “social enterprises,” they are emerging as a group to define what is being called the “Fourth Sector.”
THE FOURTH SECTOR APPROACH
The traditional view of how society functions says that there are three “sectors” of stakeholders that behave in different, yet often complementary ways. The first sector is the marketplace, which goes all the way back to the first days of trade and the village central market. The second sector is the government, which has primarily acted to protect the people and support the growth of the first sector, the market. And finally there is the third sector, the nonprofits that have emerged to address social problems that neither the market nor the government were addressing, such as human rights and environmental abuse. In the last few decades, the nonprofit world has exploded in numbers across the globe.
And now enter the new Fourth Sector, social business stakeholders that make a profit in the name of supporting their social mission. The blending of missions and income strategies working in tandem is called “social enterprise,” and has been a building movement in the United States for almost a decade (see Social Enterprise Alliance in Website sidebar). Social enterprises can be either for-profit or nonprofit in form. On the for-profit side, businesses use profits to support a chosen cause or mission, keeping profit-making as the primary goal. On the nonprofit side, organizations use earned income strategies to strengthen their causes, with the mission taking precedence over profit. In both cases, the goal is to use market-based approaches to solve society’s problems, using economic resources for the public good.
The social enterprise movement is a global phenomenon, and has deep roots in the United Kingdom. According to figures from the Government’s 2005 Annual Small Business Survey and existing data for the social enterprise sector, there are at least 55,000 social enterprises in the UK with a combined turnover of £27 billion per year. Social enterprises account for five percent of all businesses with employees and contribute £8.4 billion per year to the UK economy – almost one percent of annual GDP (see Social Enterprise Coalition website).
Literature abounds on social enterprise in the nonprofit sector, but sources on the for-profit side of the phenomenon, sometimes called “for-the-benefit-of” companies. are few. This is largely because businesses have always had flexibility as to what they can do with their profits, but also because the IRS (Internal Revenue Service) hasn’t assigned a tax-status to this type of organization yet. There are a few large organizations, such as the Skoll Foundation, that are providing resources to grow the movement, and there is a global online network, Social Edge, where social entrepreneurs and other practitioners of the “social benefit sector” connect to network, learn, inspire and share resources (see sidebar).
For nonprofits, social enterprise presents a great opportunity. Through earned income strategies, nonprofits could obtain more reliable resource streams, achieve greater efficiency and innovation, better target services to clients’ needs, operate with increased legitimacy and possibly increase accountability. With diverse income streams, nonprofits could become more independent and be less tied to donors. This also means that organizations could spend less time searching for funds, and have more energy and resources to actually accomplish their missions. In addition, cash flow gives confidence and boldness, and nonprofits could operate without fear of losing funding.
THE 10% SOLUTION
In the world of free market capitalism, profit margins can be small or very large. In the modified market, such as the controlled government monopolies like water and electric-power utilities, profit margins are controlled and held to a level under 10 percent. Eco-Cycle has operated successfully as a social enterprise for over 20 years, and is proposing a fourth sector “Zero Waste Social Enterprises” approach where the public sector links arms with the emerging eco-entrepreneurs and create “open-book, cost plus ten” contracts that seek to advance the goals of the Zero Waste Community.
Eco-Cycle is currently in such an arrangement with the Boulder County, Colorado government to operate a large publicly-owned Materials Recovery Facility. The public-private relationship has settled into a cooperative focus on mutual success on behalf of the community benefit. The government plays an oversight role to protect the public’s interest, while Eco-Cycle plays the skilled entrepreneurial role. Success is defined by both parties as a double-bottom-line, including financial and environmental benchmarks. The contract requires that the facility operator’s financial books are transparent and that certain investments and expenses must be preapproved. In exchange for this intimate involvement, the private sector operator, Eco-Cycle, is given three benchmarks to achieve with the resulting reward being a guaranteed 10 percent return over expenses. The benchmarks are related to low processing cost, high sales revenue and increasing amounts of material processed.
There are social enterprises all around the world that are working on waste issues, and the numbers are growing each year. For example, the Social Enterprise Coalition “Green-Works” project in England contracts with public bodies and companies in the city of London to dispose of their waste furniture. According to their website, “Green-Works got started thanks to an entrepreneur with social commitment, drive and skills to make it work. It has found, and delivered to an untapped niche market. Its added value means that clients are prepared to pay more to fund its social goals. Green-Works is an example of how a social enterprise can ‘join up’ the agendas of private, public and community sectors.” Googling the term “social enterprise recycling” produced two million hits; jumping randomly around, the hits reveal the widespread global impact of this issue.
But let’s return to one of the central themes of this piece – the problem of too few service providers to fulfill the growing market demand for Zero Waste Services. It is clear that due to the scale of the global environmental problems that surround us, a whole new approach to the concept of “waste” is needed, and along with that a new look at what role the marketplace will play in solving our problems and growing our opportunities. The Fourth Sector and Social Enterprise could play a contributing role immediately in moving us all closer to a waste-free world, and in the process creating social benefits through job creation, reduced pollution and sustainable local economies.
The Zero Waste view on the current situation is that between entrenched government subsidies, the nonmonetized economic externalities (such as air and groundwater pollution) and the entrenched assets of the landfill industry (“cheap” landfills), the marketplace will continue to be skewed away from a resource recovery social system. Intervention on behalf of the community benefit is required to stop the trend toward mega-landfills and “fantasy clean” garbage-energy projects, both of which destroy precious resources at a time that our planet is starting to run low and resource wars for oil, timber and minerals have begun.
Once a Zero Waste goal is established in a community and the intervention process has begun, then the dawn of the social enterprise era can bring new light to the resource opportunity that exists in each community. And if the Zero Waste Movement succeeds in taking over even half the existing MSW (municipal solid waste) industry, valued at $50 billion in 2007, then a 10 percent profit margin on that would be $2.5 billion. And therein lies our 2,500 Zero Waste Millionaires waiting to get down to business.
Eric Lombardi is Executive Director of Eco-Cycle, Inc. in Boulder, Colorado. Katie Rogers worked as a summer intern at Eco-Cycle. A graduate of the University of Washington, she is working on a Master’s Degree at the University of Salzburg in Austria. To learn more about Eco-Cycle, visit www.ecocycle.org.
WEBSITES AND RESOURCES
THE accompanying article cites several different organizations and websites that are advancing social enterprise and zero waste service businesses. Here are direct links to the websites:
Eco-Cycle: www.ecocycle.org. Eco-Cycle is a champion of Zero Waste and social enterprises in North America (see accompanying article).
Social Edge: www.socialedge.org. Social Edge is the global online community where social entrepreneurs and other practitioners of the social benefit sector connect to network, learn, inspire and share resources. Social Edge is a program of the Skoll Foundation.
Social Enterprise Alliance: www.se-alliance.org. SEA is working to develop a thriving social sector of the economy based on applying business strategies to generate social value, and thereby create a society that is more sustainable, abundant and inclusive. Over 1,000 enterprising leaders are working to advance this vision.
Social Enterprise Coalition: www.socialenterprise.org.uk. SEC is the United Kingdom’s national body for social enterprise. As the “voice for the sector,” it supports and represents the work of its members, influences national policy and promotes best practice. For a link to the SEC’s Green-Works project described in the accompanying article, click on “Case Studies” on the home page and select Green-Works.