Recyclebank is on a roll.
The New York-based company that rewards people for recycling their household garbage last week announced a $20 million strategic investment from Waste Management, the nation's largest trash hauler.
As part of the investment, Waste Management said it expects to provide access to Recyclebank's green rewards program to its nearly 20 million customers in North America.
Currently, Recyclebank has about three million members, so this is a big deal.
But there's more to the story, as I learned last week when I interviewed Jonathan Hsu, Recyclebank's CEO, at the GreenBiz Innovation Forum in San Francisco.
Recyclebank has bigger ambitions than turning trash to cash. It's seeking to become an Internet marketing platform that will reward people for engaging in more environmentally friendly behavior. Its members will be able to earn rewards points by using energy more efficiently at home, reducing water usage, by buying greener products, even by walking to work instead of driving.
This makes Recyclebank a very interesting company to watch, because it is betting big on the green consumer -- a risky but promising strategy.
"We want to reward people for taking everyday green actions," Hsu said last week. He described Recyclebank not as a recyling company but as "the largest consumer-facing engagement platform for all things sustainability." That explains why he was chosen as CEO a year ago -- before joining, he spent 11 years at 24/7 Real Media, a digital media and marketing firm. He also put in a couple of years at J.P. Morgan after earning degrees from Harvard and Wharton.
Formed in 2004, Recyclebank has two distinct revenue streams. First, it makes money by forming partnerships with cities, counties and towns -- about 300 in total -- that are designed to drive up recycling rates. Homeowners receive credits based on the amount of recycling they do; their recycling bin has a chip attached that measures its weight. Governments then save money, by generating income from recycling and cutting down on their landfill costs. They share those savings with Recyclebank. (See my 2007 Fortune.com story, Turning Trash to Cash.) According to Jonathan, cities see their recycling rates improve by 15 to 100 percent after bringing in Recyclebank, and a big city can save $1 million or more a year.
That's a nice business which will get a boost from the Waste Management deal, but it's limited. Many cities don't have recycling infrastructure. Signing them up is labor intensive.
Incentive programs are proven
Incentive programs are proven to raise recycling rates. Think of the container deposit laws in states such as California, New York and Massachusetts, which have boosted recovery rates for used glass and plastic bottles: http://www.bottlebill.org/about/benefits/waste.htm
A Chicago-area manufacturer of recycled publication paper recently launched a similar cash-for-trash buyback program for old magazines, newspapers and books: http://www.futuremarkpaper.com/news_details.html?id=NTE=&fromTab=3
Thus far, residents in Chicago's south suburbs -- the communities closest to the recycled paper mill -- have brought in 3.5 million pounds of paper, earning more than $140,000. The recycled paper mill, FutureMark Paper Company, remanufactures the waste paper into 90% recycled coated mechanical paper, the type used in magazines, catalogs, pictorial books and some ad circulars.
FutureMark launched the buyback program to help protect its supply of post-consumer waste paper. In recent years, many recycled paper producers have had a hard time getting the waste paper needed to sustain their operations at affordable prices.
Waste paper exports have resulted in a domestic scarcity of waste paper. In fact, about 40% of America's waste paper is exported to other countries. The waste paper remaining for sale in the U.S. has become extraordinarily expensive. For example, the price of old magazine paper has risen more than threefold per ton since the end of 2008. As a result of the domestic scarcity and high prices, recycled paper mills are being forced out of business. (This year's closures include Gray's Harbor Paper, Blue Heron Paper Company and Manistique Paper -- three producers of high-quality recycled printing papers.) The jobs at these recycled mills have gone away, and paper production is being diverted to mills making “virgin” paper from trees – a process that uses far more water, energy, chemicals and (of course) trees than making paper from recycled fiber.
Companies and individuals can support domestic recycled paper production by supporting waste paper buyback programs such as FutureMark's. If you're in the south Chicago area, please consider it for your next school or civic group fundraiser: http://www.futuremarkpaper.com/community-recycling-partners.html