Recycling and waste management are now big business. But the pickings are not always easy. Success depends on the ability to outpace regulatory change

The old adage "where there's muck, there's brass", has, it seems, never been truer. The government's rapidly unfolding sustainability agenda means there's more money than ever to be made from the stuff we throw away. The Environment Agency estimates that the UK produces around 400 million tonnes of waste each year, and with a major overhaul of the way that we deal with it, waste recycling and management has become one of the fastest-growing industry sectors.

Combined government Waste Strategy and EU Directive targets to reduce landfill and increase the levels of recycling have given rise to new, innovative technologies and processes that are competitive, cost-effective and ecologically sound. At the same time, the demand from overseas markets for materials such as aluminium, other metals and plastics has sent their prices soaring, boosting revenues for recycling firms.

Dirk Hazell, CEO of the Environmental Services Association (ESA), says: "Businesses can secure new and competitive sources of the materials they need from the recycling sector and they are increasingly incentivised to use their own material inputs more efficiently. The turnover of the waste and recycling industry will increase as more capital is invested in recycling infrastructure to replace landfill."

But waste management is also a stringently regulated industry, with EU legislation deemed by most operators to have had the biggest impact on their business. Andy Hartley, programme director at Resource Efficiency Yorkshire (REY), an initiative backed by Regional Development Agency Yorkshire Forward, argues that historically, UK waste firms have had a fairly easy time of it: "Until recently, the low cost of landfill tax and fewer recycling facilities made landfill the waste disposal option of choice and something of a cash cow for businesses operating in that sector."

All that has changed, and with landfill tax being increased at a rate of £8 a year, up to a level of £48 per tonne by 2010, and the imminent scrapping of landfill tax exemptions, companies have to find alternatives, and are increasingly turning to re-use and recycling. 

As a result, long-established waste management firms have scaled back traditional landfill activities and invested in recycling and energy recovery facilities, while a number of new smaller players, with backgrounds in business and management services, are entering the market.

Steady market growth and rising prices of recycled goods have also attracted interest from investors. "Some are coming into the waste sector for the first time, often seeing it as a very basic and dirty industry," explains Hartley. "Part of our role is to help businesses with a track record in this sector maximise growth opportunities and get access to investment finance, and to help investors gain a much better understanding of this industry."

The UK waste sector could benefit from proposals, made by the House of Lords Science Committee last August, for the government to extend its waste reduction efforts from domestic consumers to high-waste producing companies and industrial sectors, ensuring that everything possible is done to encourage all businesses to reduce waste.

Alex Albon is operations director of Earth Exchange, an organisation that helps construction firms, whose waste currently accounts for a third of the UK total, avoid rising landfill taxes and even profit from their waste by locating potential buyers who can re-use or recycle it.

He says simply that: "Businesses will have to respond or face the consequences. Recycling and recovery benefits the producers of the waste as well as those that manage it, and if the target of halving landfill by 2012 is to be met, it is the only way forward."

Metals attract new business
Company: Glazewing

In the east of England, scrap metal recycling company Glazewing is planning to tap growing export markets

One of the fastest growing waste management sectors is scrap-metal recycling. The industry is well established and estimated to be turning over £3.5bn a year, with the biggest demand for its products now in China and India. Demand for steel grew by 7.7 per cent between 2001 and 2006, and is forecast to grow annually by 7.6 per cent until 2010, driven by the strong economic growth of developing countries, specifically through their recent investment in manufacturing.

Glazewing, based in King's Lynn, is one of the east of England's largest metal recycling companies, with around 70 per cent of its revenue generated from metal recycling. The remaining 30 per cent comes from materials processing and disposal services. The company employs 77 people.

But it is a crowded marketplace, populated by a mix of large conglomerates as well as several small to medium-sized operators, such as Glazewing.

Director Jon Miles says: "The larger groups are geared towards the high-street market chains and multi-site industrial operations, which leaves a gap for regional operators such as ourselves to supply a service-led collection operation for commercial clients. We have a strong regional client base and a recycling infrastructure to ensure that high recycling levels are met, and that landfill content is reduced to a minimum."

He admits that EU legislation, such as that covering waste electrical and electronic equipment (WEEE) and end-of-life vehicle (ELV) de-pollution has an impact on the business, but doesn't necessarily see it as a bad thing.

Miles says: "The constant raising of the recycling legislation bar is actually a good thing for businesses in the UK—subject to secondary, preferably local, markets being available, proven technology for the processing of waste metal, sensible regulation with reasonable compliance lead times, industry-wide consultation, and, of course, allowing common sense to prevail."

A number of operators, he says, have made the mistake of failing to invest in their facilities, and have subsequently been consolidated into a larger conglomerate or a regional operator. Glazewing has already invested in new facilities and is now exploring global opportunities.  

The company recently opened its own export facility, allowing direct access to European markets from its own dock site, creating an infrastructure that will mean cost savings and less dependence on the UK market.

Miles adds: "The waste-to-energy sector is of growing importance. If statutory recycling targets are to be met, these technologies have a long-term future and will play a pivotal, albeit small, role in the impending energy gap, with the demise of the large atomic power stations."

From the kitchen to the car
Company Rye Biofuels

A small business in Sussex hopes to help make recycled cooking oil a viable alternative at the petrol pump

While the waste management and recycling sector is dominated by large operators, opportunities exist in some of the niche areas for smaller firms, such as Rye Biofuels. Based in Rye in Sussex, it turns waste frying oil from fish and chip shops into environmentally friendly diesel fuel for cars and vans. The company employs just 10 people.

Founder Peter O'Hara sources the raw material for the biodiesel from sister business, Edible Oils Direct, a supplier of cooking oils to restaurants, pubs and fish and chip shops, which he also founded four years ago.
He says: "We had been sending our waste oil to a recycling plant in Essex that converted it into animal feed and other products. Around this time, I had heard of a scientist in South America who had successfully produced biodiesel from waste cooking oil, which naturally got me interested."

So much so, he says, that even though biodiesel was largely unheard of, he sensed that its green credentials and potential profitability made it worth pursuing. In 2005, the firm bought a biodiesel reactor and began small-scale sales to local haulage, recovery and taxi companies, as well as sales to the public.

The company produces 12,000 to 15,000 litres of biodiesel per week, but successful expansion of the business, which hinges on pump prices at least 15 to 20 pence cheaper than the fossil fuel diesel alternative, has been hindered by, of all things, the price of oil.

O'Hara explains: "We have to buy in a certain amount of waste cooking oil. The problem is that the price is linked to that of mineral crude oil, and while regulation has helped to bring that price down, there is no similar regulatory driver to bring cooking oil prices down and that is squeezing our profit margin and hindering plans for growth."

He also insists that EU legislation has done little to level an uneven playing field, with similar firms in Holland, for example, enjoying better tax breaks to offset the higher waste oil prices. In the meantime, he is exploring the possibility of importing cheaper oil from overseas and in the long term he envisages Rye Biofuels running its own filling stations.

Clearly, the company is in tune with government drives to increase recycling rates. But, as O'Hara points out, it all comes down to price.
He says: "Like all things green, people like the idea of recycling and re-using waste and are keen to support environmental issues, as long as it doesn't cost them more."

Old Company, new direction
Company Grundon Waste Management

An 80-year-old business, Grundon has invested in state-of-the art technology to secure its future

Grundon Waste Management, one of the largest privately owned waste management services companies in the UK, is a good example of how operators in this sector have adapted to industry changes driven by the sustainability agenda.

Founded 80 years ago as an aggregate supply firm, it now employs 750 people and operates throughout the Slough, Reading and Oxford areas, dealing in all areas of waste management, from landfill and incineration to the recycling of materials such as paper, plastics, aluminium, steel and glass.

Managing director Richard Skehens says: "The market has undergone major changes in recent years, with consolidation resulting in four or five very large players, leaving a second tier of medium-sized operators and a fluctuating sector of newer and smaller enterprises, drawn by the prospect of making a fast buck when market prices rise, and disappearing just as quickly when prices fall."

Like many general waste management firms, Grundon has adapted and continued to grow by identifying key areas of development such as waste-to-energy processes and materials recovery. "At the start of the regulation-driven shift away from landfill to waste recycling and minimisation, we set about building a state-of-the-art materials recovery facility to sort waste materials for recycling," says Skehens.

The firm has secured a number of major contracts with high-profile public and private sector organisations, including British Airways and Heathrow, Gatwick and Stansted airports. Skehens says: "The key to success in this business is keeping ahead of the legislation and moving quickly."

There are those who argue that modern "waste-to-energy" processes damage the environment by producing more carbon. But, like other waste experts, Skehens insists that the methane gas produced by landfill sites is much more harmful than carbon dioxide and a significant contributor to climate change. The company places social responsibility high on its agenda, with plans to incorporate a visitor centre at the new Lakeside Energy from Waste plant, a £180m joint venture between Grundon and Viridor Waste Management, near Slough. It is also forging links with local schools and colleges, with arranged visits for students to view the various processes involved.

Skehens adds: "Youngsters are receptive to the benefits of recycling, and our hope is to educate future generations into better waste management practices of their own."