IF11: Recyclebank is Not Just Trash to Cash

IF11: Recyclebank is Not Just Trash to Cash

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.

The company sees more growth potential coming from advertising and marketing -- essentially, connecting brands to environmentally minded consumers, including those who don't or can't recycle. You can go to Recyclebank's website now and earn rewards points just for taking quizzes or watching educational videos -- all of them sponsored, of course -- or by buying "greener" products, like Kashi Cereal or Suave.

See the possibilities? Consumers show up to earn points which can be redeemed with hundreds of retail partners or brands. The brands pay for the opportunity to display their green cred, induce people to sample their products and drive sales.

Jonathan told me that the rewards aren't actually the primary thing driving consumers, although they are the gateway to Recyclebank. Consumers, he said, want to take actions to show they care for their family, and to be part of a like-minded community.

"The social context, the sense of constant achievement the understanding the full context of one's action -- that actually is the motivating factor," he said. "Day to day, I think all of us want to feel we're part of something bigger."

Soon to come from Recyclebank is a new application that will reward people for making "greener" transportation choices. Any day now, the company will announce a partnership with a big city to encouraging biking and the use of public transportation. Jonathan explained: "People will be able to log on when they start their journey, and they'll be able not only see the points they earn along the way but all the requisite health benefits and green benefits that come along with that."

And, just as frequent-flyer programs started by airlines have expanded into rental cars, hotels and restaurants, Recyclebank will make its rewards program available to other business on the Internet. So, for example, you may be able to earn points by renting a car from Zipcar or using Evite instead of an invitation printed on paper.

"We're sprinting. We're a mission driven company," Jonathan said. "We can do good and do well simultaneously -- at scale."

Investors in Recyclebank include Generation Investment Management (the investment fund started by Al Gore and Goldman Sachs alum David Blood), Kleiner Perkins, Caufield & Byers (where Gore also plays a role), Paul Capital Investments, Physic Ventures, RRE Ventures, Sigma Partners, and The Westly Group.