Sustainable business practices

The recycling industry has faced several challenges in the last decade. First, the recession of 2008-2009 drastically affected the trade of secondary commodities. Then China began cracking down on imports of scrap material into that country in 2013 with the introduction of Operation Green Fence, which also had a disruptive effect on some secondary commodities. In the last year, that initial scrutiny has intensified with China’s National Sword inspection program and new thresholds for contaminants in incoming overseas shipments of recyclables. These moves again have proven disruptive to world markets for some recyclables.

Casella Waste Systems, Rutland, Vermont, has successfully weathered these and other challenges that it has encountered over its 40-plus-year history. The company owes its success in part to steps it has taken to ensure the economic sustainability of its recycling operations as well as their environmental contributions.

From refuse removal to recycling

Doug Casella founded Casella Refuse Removal, the predecessor to Casella Waste Systems, in 1975 with a single pickup truck that he purchased with money from part-time jobs he worked while attending high school. With that truck, Doug Casella collected garbage from a few customers in the Rutland and Killington, Vermont, areas. His brother, John, joined him in the business roughly one year later. Then, in 1977, the company built its first recycling facility, which also happened to be the first such facility in the state of Vermont. From that point, Casella says its recycling business grew rapidly because of changes in technology and public policy and the emerging environmental ethic. The company’s move into recycling also anticipated the opportunities around resource recovery and the integrated approach to waste management that the wider industry would come to embrace, as Casella says on its website.

Since 2000, the company says it has moved aggressively to supplement its traditional waste management services with recycling and sustainability services. While Casella sold off some of its former FCR Inc. material recovery facility (MRF) assets outside its primary operating region to Pegasus Capital LLC in early 2011, which formed ReCommunity, recycling continues to play an important role in the publicly traded company’s operations today.

Casella owns and operates six single-stream MRFs in Massachusetts, Vermont, New York and Maine; six smaller MRFs in Vermont, New York and Maine; and an industrial and commercial facility in Maine that targets source-separated recyclables from these sectors. It also has a dual-stream operating contract in Rockland County, New York, and a commercial operating contract in Tompkins County, New York. Casella’s brokerage division trades more than 150,000 tons per year of “mill direct” traditional recyclables, says Bob Cappadona, the Casella vice president who oversees the recycling segment.

Casella processes and markets more than 800,000 tons of recyclables annually, with 650,000 tons coming from the company’s single-stream operations.

Built on a sound foundation

Cappadona says Casella attributes its success in the recycling segment to a number of factors, the foremost being its focus on quality and on meeting the specifications set forth for recyclable commodities by the Institute of Scrap Recycling Industries (ISRI), Washington.

“Second,” he says is “being transparent with our customers on swings in the commodities markets and the implications of those swings,” he continues.

Casella has done this in part by introducing its Sustainability/Recycling Adjustment (SRA) Fee in 2015. The SRA “adjusts monthly on our collection customers’ bills depending on commodity market values and other factors, shares the risk and reward of the commodities cycle and makes recycling more economically sustainable,” Cappadona says. “It also ensures a return on the significant capital we’ve invested in our recycling infrastructure.”

In its 2016 annual report, the company explains its rationale for instituting the fee: “The average mix of recycling commodities generated by residential and commercial customers has historically sold at an average price that covered the cost of processing the materials, including an adequate return on our investment in the processing equipment, facilities and rolling stock necessary to process the recyclables. From early 2011 to the end of fiscal year 2015, recycling commodity prices declined by approximately 60 percent to historically low levels as global demand for fiber and metal materials significantly dropped and plastics pricing declined with lower crude oil pricing.

“At these low recycling commodity pricing levels,” the company’s 2016 annual report continues, “we were not able to generate adequate revenue from the sale of commodities to cover the cost of processing the materials or generating a positive return on our investment in recycling infrastructure. In order to continue to provide these necessary services to our residential, commercial, municipal and industrial customers, we changed our pricing model for these services by introducing the SRA fee in fiscal year 2015 and fiscal year 2016.”

Cappadona says the company’s municipal contracts have been structured to cover operating costs and to provide a return on capital. “So, if commodity values go above this threshold level, we share a portion of these revenues with our municipal customers. Conversely, if commodity values fall below this threshold level, we charge a tipping fee or processing fee to our customers,” he adds.

An emphasis on employees

Another factor that has contributed to Casella’s success, Cappadona says, is the company’s emphasis on “building our people, our teams and a culture of respect, excellence and safety.”

The company has done this by selecting managers who have extensive experience in processing and by stressing the importance of leadership skills.

Joseph Fusco, a vice president with Casella Waste Systems who focuses on developing leadership capabilities companywide, says, “The training, teaching and learning in good organizations happens on a lot of different levels.” At Casella, the company focuses on creating a culture where its employees are free to solve problems at a high level and that also emphasizes collaboration.

“The culture of problem solving is very important to us,” Fusco says.

Casella invests to provide coaching and classroom experiences for its staff that help to build these skills, he says, adding that training is provided in-house. “It’s too important a job to outsource to anybody.”

Cappadona, who has been with Casella for 20 years, adds that the coaching he has received while at the company helped him attain his current position. “I would not be in this role right now if I did not follow those leadership programs internally.”

Recycling by the numbers

Casella introduced single-stream recycling, which it has branded as “Zero-Sort Recycling,” to the Northeast in 2003 at a MRF in Burlington, Vermont, that it operated through a contract with the municipality of Chittenden County. The company then opened its first merchant single-stream MRF in 2006 in New England. Single-stream MRFs process the bulk of recyclables Casella handles.

Cappadona says 70 percent of the recycling tonnage the company processes is from residential programs, while 20 percent is from commercial operations and 10 percent is from industrial generators. Roughly 35 percent of this incoming material is delivered to the company’s MRFs via Casella’s hauling operations.

Regarding inbound contamination, Cappadona says, “Abnormal levels concern us not only with regard to the new quality specs initiated by National Sword (See sidebar, page 38.) but also increased processing costs due to system downtime. And most importantly, there are now safety issues with regard to fires from lithium batteries [and] hypodermic needles disposed of incorrectly, etc. Making sure our folks go home safely to their families is always our No. 1 priority.”

However, he adds that he does not believe contamination is inherently worse in single-stream programs, though he adds that the fiber stream is generally cleaner in the dual-stream MRF the company operates. For Casella’s single-stream recycling operations, he says residue ranges from as low as 4 percent to as much as 15 percent. Cappadona attributes that range to differences in community education.

Casella produces bales of old newspapers (ONP), mixed paper, old corrugated containers (OCC), polyethylene terephthalate (PET), natural and colored high-density polyethylene (HDPE) and polypropylene (PP) tubs and lids.

Cappadona says, “We stay away from traditional Nos. 3-7 mixed rigids,” which are more difficult to sell in today’s market.

Casella sells its metals and plastics domestically, with Cappadona describing markets as being “pretty consistent over the last couple of years.”

The company has had to be more flexible in marketing some of its recovered fiber grades, however. “With regard to the fiber grades,” particularly ONP, mixed paper and OCC, he says, “it’s not much of secret—the National Sword initiative in China has had a tremendous impact within the industry and our business, forcing us to divert these finished products to domestic outlets or other export markets, such as India, Vietnam, Indonesia, etc.”

Cappadona says Casella has been able to do so seamlessly because it has its own materials marketing department that has established relationships with buyers in the export and domestic markets.

In addition to traditional residential recyclables, Casella handles an expanded range of recovered fiber from commercial generators, including coated book stock, white ledger and sorted office paper. The company also deals in rigid plastics, shrink wrap and higher-value metals, which he says “address the specific needs of our industrial customer segment.”

Cappadona adds, “A fast-growing part of our business is helping these industrial customers reach their sustainability goals and improve efficiency.”

Casella Waste System’s Resource Solutions group is working with its commercial and industrial clients to further their efforts in this area. Cappadona says, “Our Resource Solutions group is leading the way in bringing resource management solutions and perspectives to larger customers, from manufacturers to multisite retailers to colleges and universities looking to address the larger challenges of recycling and resource sustainability.”

While China’s changing policies toward imported recyclables have led to challenges for the U.S. recycling industry, Cappadona says he and Casella are optimistic about recycling’s future, in part because of the interest they see from commercial and industrial generators.

“Even with the hurdles of the National Sword, we believe there is no better time for recycling,” Cappadona says. “More and more material once thought of as waste will become renewable and recoverable in some form. If we are going to meet our society’s sustainability goals, innovation in recycling will be crucial.”

The author is managing editor of Recycling Today and can be emailed at dtoto@gie.net.