By Alistair Hall and Katie Ellman
What is garbage? It’s a question that Tom Szaky, founder and CEO of TerraCycle, has been working to solve. Tom and TerraCycle start from the premise that anything can be recycled. Glass, metal, and plastic are commonly recycled because there’s a straightforward business case to do so, but how about cigarette butts, paint, or diapers?
TerraCycle’s imaginative approach has taken the company from the “coolest little start-up in America” to three seasons of a hit reality TV show, “Human Resources,” to operating in over 20 countries. Last month, Alistair Hall from Bard’s MBA in Sustainability spoke with Tom Szaky to dig into the question, “Why does garbage really exist?”
The following Q&A is an edited excerpt from the Bard MBA’s November 18th Sustainable Business Fridays podcast. Sustainable Business Fridays brings together students in Bard’s MBA in Sustainability program with leaders in business, sustainability and social entrepreneurship. Subscribe to the podcast on iTunes or Podbean.
BARD MBA: What was the inspiration for Terracycle?
I started TerraCycle out of my dorm room, and the passion was around waste. That was the critical issue we were trying to solve. We first started looking at it by making products out of waste, and we became quite successful. Over a few year period we grew into a six million dollar business, with clients like Walmart, Target, Home Depot—major retailers—selling products like worm poop fertilizer in a reused soda bottle, and it was quite exciting. What we realized early in our history was that if we focused on the finished product as the outcome, or the hero if you will, of the business concept, then we had to pick the very best waste to make the very best product. We would never deal with garbage that is not so optimal or clean, like cigarette butts, dirty diapers, chewing gum—all of which, by the way, we recycle and collect today. And so, about five years into our business we shifted our model to focus on garbage as the hero, the inbound as the hero, and the solution is sort of what can we make it into. Now we’re able to deal with hundreds and hundreds of different waste streams. We’ve invented a recycling solution for everything from chewing gum to plastic gloves and have grown quite a bit in the process. Today TerraCycle operates in twenty-four countries around the world, from China and Japan to Western Europe, Latin America, North America, and so on.
BARD MBA: How do you come up with these solutions to recycle things like chewing gum?
First and foremost, in the animal kingdom, or in the natural kingdom I should say, because it’s more than just animals, garbage doesn’t exist. And it doesn’t exist because the output of every organism is the input of another organism, so there’re no useless outputs. But to go one step deeper, it’s not like there’s one super organism that eats every other organism’s outputs. Instead, it’s specific outputs to specific organisms. So it’s one organism that eats a leaf that falls off a tree, a different organism that eats the carbon and makes it into oxygen, and so on and so forth. I mention that metaphor because in garbage today, we have superorganisms that are created to eat everything; they’re called landfills and incinerators. And the real answer is that every type of garbage is different. It has a different heartbeat. Basically it’s like a different animal.
And so, to solve the waste stream, we need to put three things together that might very well be different, waste stream by waste stream. The three things are: we have to collect it—to get it from the point of origin to us in one of our warehouses. We have to account for the collection vehicles, health and safety, cost, and then of course for whether people will actually even do it. Second, is then we have to process it in some sort of circular way, either upcycling, recycling, or reuse, and I’ll give some more color on that in a moment. And then finally, we need to weave a business model around it to make it make sense. TerraCycle focuses on only those things that are not economically profitable to recycle, and gets them recycled, which is where that business model question is very important.
There are five things you can do with garbage. Going from the worst to the best, you can landfill it, that’s the worst. Then you can burn it for energy; that’s a little better. In circular solutions we look first at reuse, at refurbishing items, which is very popular in clothing, electronics, textiles, and so on, where you basically use it for what it was intended to be used for. If reuse is not available, then we look at upcycling, like sewing juice pouches into backpacks, things like that. That has a wide range but low volume. And then the vast majority of our volume goes through our science department, where it’s technically recycled: taking apart the materials, and then reconstituting those materials into new aluminum, new plastic, or composting organics.
Finally, it’s about who pays the bills, how you make it all work. So we have five stakeholders that we work with. One is big consumer product companies—the P&Gs, Unilevers, Colgates of the world—who fund platforms that allow things to be recycled by the public for free. The second stakeholder category could be retailers. Today you can go to Office Depot and drop a binder in a TerraCycle recycling bin, or you could take your car seat back to Target, or your cosmetics to a Kiehl’s Boutique, all through our platform. The third is factories, for factory waste. The fourth is municipalities like cities. The fifth is small business. In each of these examples we have to unlock not just why it’s good for sustainability, but how this reinforces their bottom lines. A simple example is that retailers do this because it drives more foot traffic. So that’s very important when you bring up sustainability platforms—how does this really reinforce the basic function of the business you’re pitching the idea to?
BARD MBA: Does your pitch change from stakeholder to stakeholder on what inspires them to get involved?
Absolutely. Retailers are interested in foot traffic, but a city isn’t. A city’s interested in litter reduction to boost tourism, while a brand may be interested in market share increase.
BARD MBA: Is there a piece of garbage or a product that you are most proud of figuring out how to recycle or upcycle?
I love the crazy stuff because it makes the mind work. So, in March we’ll be launching the first national chewing gum recycling program in the world in Mexico. Later next year we’ll be launching the world’s first city-wide diaper recycling program in Holland. And a few years ago we launched cigarette recycling across eleven countries nationally. So, these are the ones that really get me, the sort of more gross ones, because if you can solve those you can solve just about anything.
BARD MBA: So, what can chewing gum be turned into?
Chewing gum is a plastic polymer, it’s like a rubber, and it can be made into thirty-five percent of any sort of plastic product. Think of it as 35% chewing gum and then 65% gum packaging or other plastics.
BARD MBA: What led to the creation of your TV show “human resources”?
We’ve always believed in a concept called negative-cost marketing, and in fact I’m writing a book on this topic. Why pay for advertising when you can get paid to be the content? So at TerraCycle, we do a little advertising but not a lot. Instead, we focus on generating boatloads of publicity, and if you’re unique, if you can tell your story well, you can do this easily. Today, we get twenty to twenty-five articles about us each day, so it works quite well. And once you’ve done that you can start blogging, so I write for a number of major newspapers. Some of them even pay us to put out our information, like the New York Times and others. Once you do that, you can start writing books. I’ve done three of those, and again, this all generates revenue while creating content.
But the TV show is the cherry on top of the negative-cost marketing cake. We’ve now done three seasons of ‘Human Resources,” and before we did that a season on the National Geographic channel called “Garbage Moguls.” Every episode, we get paid to bring people in to see what TerraCycle is all about. And not only does it air here in the US on Pivot, you can also get it on iTunes and Amazon, and it airs all over the world. A&E distributes it in Europe, or SBS 2 in Australia, and so on.
BARD MBA: Where will teracycle go next?
We’re opening in China next month. We just set up our office in Shanghai, and that’s a big new area for us. Japan was a big success. We opened there a few years ago and so now we’re really looking to expand more into the Asian marketplace. And so after China, South Korea. We’ll go live as well in Taiwan, Singapore, India—those are the key areas we’re focused on, and then from there who knows what will be next? Really, anywhere in the world where there’s interest in solving waste, we try to be there.
BARD MBA: When you launch into these markets, are there specific products you have in mind for certain parts of the waste stream you are looking to tackle?
It’s opportunistic. It’s where there’s interest. So in China, we’re targeting oral care recycling and cosmetic recycling, but it could be anything. It’s truly where there’s opportunity and where there’s interest to fund solutions.