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In the Loop

Tom Szaky: Beware the ‘triangle of stagnation’

The TerraCycle and Loop founder advises how to escape this danger zone and get your sustainability work moving again.

Tom Szaky, founder of TerraCycle and Loop.

Tom Szaky, founder of TerraCycle and Loop. Source: TerraCycle

Those of us steeped in the circular economy might assume that circularity is increasing. Unfortunately, the data shows otherwise. The 2023 Circular Economy Gap report found that global circularity has dropped from 9.1 percent in 2018 to 7.2 percent in 2023. 

I recently came across the "triangle of stagnation" framework that Tom Szaky, founder and CEO of TerraCycle and Loop, shared to explain the limited momentum in corporate sustainability. The three points of this triangle are multi-stakeholder dialogues, small pilots and future commitments. According to Szaky, the obsession with these activities obfuscates progress. "Some actors are benefiting from the triangle, some are facilitating it, and some are given false hope because of it," Szaky says.

Honestly, I felt called out by this analysis. But that’s not the intention, says Szaky. "The outside world could see this as, ‘Good people who are trying to make a difference are getting lost without realizing it.'"

How do we step outside the triangle? Having collaborated with Szaky on several projects before I joined GreenBiz, I knew he’d have a thoughtful response, so I sat down with him last week to learn more.

Kori Goldberg: You’ve been in the sustainability space for 20 years. Can you start  by sharing brief thoughts on corporate sustainability?

Tom Szaky: The function of the organization is to make money for the shareholders. So what's the job of the sustainability department? It’s to deal with sustainability issues while spending the least amount of money possible….This setup creates a very big problem, because most of these sustainability issues can only be solved at scale with investment. 

Goldberg: So the sustainability department is under all sorts of pressure to meet their goals for the lowest possible cost. How does this lead them towards the "triangle of stagnation"?

Szaky: The only form of sustainability that's commercially supported is eco-efficiency measures. Make the businesses leaner, make it faster. For example, stacking a truck more efficiently or running more efficient routes saves cost and reduces impact. If you do have pre-consumer waste, you're inefficient. So, of course you should focus efforts on eliminating it. That’s great, but what about everything that leaves the factory and becomes waste right after the consumer enjoys it?

The sustainability department has to find some way to deal with all this pressure, and they end up floating in the "triangle of stagnation," which has three clear points. 

Goldberg: Let’s tackle future commitments first.

Szaky: So companies start by making future commitments. Companies experience very little accountability between the day the commitment is made and the day it's due. 

And by the time the commitment is due, none of the people who made it are in their chairs anymore… They tend to fail. We do mapping on these sustainability commitments; very few succeed and the ones that are kept are the ones that feel uninspired. 

Goldberg: On to multi-stakeholder dialogues.

Szaky: What's the problem with pre-competitive solutions? Why do they tend to fail even if they have an ambitious goal? Money flows downhill towards revenue; it doesn't flow uphill towards pre-competitive solutions, which is why they sound damn good and create cover but they don’t work. 

Goldberg: We’ll get the last one out of the way before we move onto what you think does work. What’s with the pilots?

Szaky: So the multi-stakeholder dialogues show everyone talking internally with all the competitors. That's seen as progress. And then what comes out of these things are small-scale initiatives or pilots. And this is a five-year cycle. Corporations usually close out these pilots by saying they’ve learned a lot but still need to learn more. Then they launch more pilots, and the cycle continues.

Goldberg: So how do we start to make our way out of the triangle?

Szaky: In multi-stakeholder dialogues, be eyes wide open… When it's multi-stakeholder, you have the opposite of the desire to put money on the table, because no one's winning. 

Focus instead on how you can get your organization to win by unilaterally investing in that topic, lead the way on cruelty-free or reuse, or whatever is important as a way to take market share from your competitors. While they talk about it in multi-stakeholder dialogues, set up and spend the money to win, because if you do, they're all going to copy you to get there, too.

At Loop, for example, if the next retailer we're signing up doesn’t bring commercial people to the room, if it's driven only by sustainability, we may not sign that contract… It has to be commercially driven from day one. Then you focus on making that sustainability concept behave as much as possible.

Goldberg: Finish the sentence: Circular strategies will not succeed at scale unless they are…

Szaky: Commercially driven and convenient to execute.

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