Future of waste series
The Future of Waste publication outlines effective waste reduction solutions that can increase businesses’ financial returns. In the first part of the series, we analyze the main sources of waste and its impact. In part two, summarized below, we highlight mainstream and innovative companies that have cut fuel costs by billions of dollars, slashed landfill waste by up to 90%, or reduced food spoilage to less than 1%. And in the final part, we present best practices to address waste that can prove profitable for businesses and investors. We also use data from UBS Evidence Lab to highlight regional, country and sector insights on waste.
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At a glance
The Future of Waste Part 2 explores how mainstream and innovator companies are tackling solid and energy waste, with a look at the top three waste contributing sectors for each category. It also examines how dedicated waste management companies are dealing with waste, as they can provide examples for others.
Reducing solid waste
Waste management companies operate across a three-part value chain: upstream, midstream, and downstream. The upstream business involves transport and collection—competition is fiercest and margins lowest. The midstream part includes waste treatment, sorting, and recycling, with potentially attractive margins depending on the region. However, certain parts (such as industrial waste) can be volatile given high gearing to the economic cycle. Last, downstream businesses include landfills and incineration facilities.
Waste treatment has historically followed a waste hierarchy first mentioned in the 1970s, the so-called four R’s: recover, recycle, reuse, and reduce. The hierarchy encourages minimizing greenhouse gas (GHG) emissions. The most sustainable form of “treatment” is outright waste reduction, although other methods, including recycling, also mitigate environmental damage.
Food waste reduction examples
Food and green waste account for 44% of the world’s solid waste. While food waste and its impacts present major environmental, economic, and social challenges, reducing food waste also offers numerous potential opportunities for mainstream and innovator companies.
The company works by measuring food waste data from commercial kitchens and using analytics to understand how food is planned, prepared, and served. It captures data from cameras pointed at the bin in a commercial kitchen, then uses artificial intelligence technologies and algorithms to identify what’s being thrown away, put a value on that waste, calculate why it was wasted, and suggest how to optimize production practices such that less food is leftover at the end of service.
Winnow estimates reducing food waste by half can typically save between 3% and 8% of food costs. Today the company is working in 1,300 kitchens across 40 countries, saving its clients around USD 33m in food costs and saving 42,000 tons of CO2 emissions according to company's data. Winnow's ambition is to help its clients save USD 1bn by 2025.
The Danish company Too Good To Go, has created the world’s largest food waste app with 18 million users and covering more than 37,000 restaurants, bakeries, hotels, and supermarkets. The company uses technology to connect users across 2,000 cities and 12 countries with a bag of surplus food that would otherwise have been wasted. Users pay a small fee, but are guaranteed produce worth three times the amount they pay for it. Since inception in 2016, the app is estimated to have saved more than 29 million meals each year, and avoided the equivalent of 73 million kilograms of CO2 emissions.
Crop One Holdings, the world’s largest vertical farming operation, is another example of an innovator company. Vertical farming redistributes agricultural infrastructure so that it sits closer to the consumer, cutting waste along several parts of the food value chain. Due to production techniques that minimize exposure to bacteria, the company’s salad product lasts 60 days in the fridge according to the company’s CEO Sonia Lo, as opposed to others with far shorter shelf lives. Ms. Lo also noted that the company's salads typically have 1/600th of the bacteria of field-grown washed product, thanks to no contact with human hands and a delivery time from “field” to consumer of 24 hours. Compared to general food waste figures globally of 30%—and 37% for the US based on USDA data—Crop One Holdings’s techniques have reduced spoilage rates on their products to less than 1%. Post-consumer food waste in developed countries accounts for approximately 25% of the carbon emissions of those countries, based on USDA data.
Paper reduction examples
Paper and cardboard account for 17% of the world’s solid waste. We noted in Part 1 that there remained considerable scope to reduce wastage, especially in the fine paper segment. A number of companies are embracing new technologies (such as a shift to e-documents) to limit paper and cardboard waste. Newer more cardboard intensive industries (such as e-commerce) are also finding innovative ways to design less wasteful products, delivering measurable commercial and environmental benefits.
UBS has made significant strides in reducing paper waste. We have reduced paper consumption by more than 60% over the last ten years. This is thanks to a combination of shifting to e-documents instead of printed ones for clients, and using a secure printing system (whereby employees can only collect printouts by swiping their security card on a device). This second initiative has not only meaningfully reduced paper waste, but also enhanced security and confidentiality.
A second mainstream example comes from Amazon, whose position in the e-commerce market means it’s a big consumer of paper and especially cardboard. The company uses a number of strategies to optimize its paper and cardboard production and to reduce waste and costs. It also applies machine learning to monitor feedback that comes in from customers via call centers and social media on damage during transit, balancing customer satisfaction against design specification and material reduction priorities.
Amazon has also collaborated with companies in the glue and tape industries to create new designs that can be scaled up. These include fully recyclable plastic-free padded envelopes to replace bubble wrap and paper. Amazon claims that, combined, these methods have reduced packaging material by 19% in volume versus a 2016 baseline.
Plastic reduction examples
In Future of Waste Part 1 we noted that plastic and plastic packaging accounts for 12% of the world’s solid waste and highlighted that the societal costs of plastic may exceed the industry’s total profit pool. So corporate examples of how to reduce plastic waste or how to find new circular-economy uses for it could generate commercial and positive societal returns.
In response to rising restrictions on exporting plastic waste to Asia (where historically it was incinerated or dumped), Pennon is building a new dedicated plastic recycling facility in Avonmouth, UK.
The facility aims to process around 80,000 metric tons of input plastic and generate around 60,000 metric tons of plastic output to be reused in other applications. The facility will save around 12,000 metric tons of CO2 through co-location with an energy recycling facility and around 1 metric tonnes of CO2 compared to “virgin” polymer production. The project has an estimated internal rate of return of 15% and a four-year payback period, while supporting the UK government’s targets for 30% recycled plastic content by 2030 and for 70% of all plastic packaging to be recycled by 2025.
One innovative example of how to reduce plastic waste comes from Mondi. The company specializes in craft paper and paper bags, but is exploring new solutions to reduce both paper and plastic waste. Several of its new flexible plastic solutions reduce the amount of plastic required by 70%.
The company is also looking to produce two new flexible plastic packaging products: a recyclable plastic for flexible packaging made using a proportion of post-consumer waste, and a form fill and seal (FFS) pouch for food applications. By reducing the use of multilayer laminates in food packaging, it hopes to increase recyclability rates and bring circular economy principles such as reusing waste into the mainstream. The group’s EcoSolutions division also advises customers on how to design and produce more sustainable packaging using paper in place of plastic where possible.
Industrial energy waste reduction examples
One way mainstream companies can reduce energy waste is by increasing their adoption of cloud computing. IT infrastructure-related investments are typically about 20% of total business capital expenditure. Studies by companies such as Amazon and IBM highlight that enterprises can reduce their carbon emissions by more than 50% if they migrate their data storage operations to the cloud from in-house data centers—25% of whose costs typically come from electricity and 20% from renting physical premises which may waste heat and lighting energy.
CLEAResult is a third-party energy efficiency program administrator and solution provider for the utilities sector in North America. The company works with a variety of utility firms to optimize their energy generation programs. Working with one of the world’s largest private impact funds, the company aims to reduce carbon emissions from electricity and heating while also advocating for energy-saving measures with businesses, utilities, and their residential consumers. The impact fund that has invested in CLEAResult has underwritten it to reduce CO2 emissions by 22 million metric tons.
The company was able to reduce its overall energy usage by 18% and save USD 6bn in costs between 1990 and 2010, while growing production by 40%. Its specific actions were either in the line of ordinary business or required little spending, and the return on its energy-saving investments is estimated at 65%. Examples of measures it took include repairing and improving steam traps to reduce leakage; rectifying metering problems around its purchased energy; upgrading boilers and equipment design to raise efficiency; building efficient heat and power cogeneration plants; and fostering a waste-focused culture across the company.
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Construction and buildings energy waste examples
There are general opportunities to reduce waste and emissions from the steel, plastic, aluminum, and cement used in buildings at the design and construction stages. By one estimate, emissions could fall by up to 1.2 billion metric tons of CO2 per year by 2050. If the world also used circular economy techniques like sharing, reusing, and recycling (especially cement recycling), annual emissions could fall by around 40% (2 billion metric tons of CO2 per year) from a 2050 baseline estimate of the Ellen MacArthur Foundation.
One example of energy waste reduction in construction and building comes from Microsoft. The company has employed a variety of strategies to keep as much as 90% of its waste out of landfills. It was the first of the major technology firms to receive a Zero Waste certification from the US Green Building Council. Microsoft also focuses on reducing energy waste by, for example, using a dedicated power management system to control 160,000 of its computers (reducing power usage by 27%).
More broadly innovative companies are introducing technologies to reduce energy waste in “smart” buildings. They use building management systems (hardware and software) to centralize control of lighting, heating, climate control, and ventilation systems. Relying on a variety of technologies (including increased use of sensors, the Internet of Things, and big data processing), smart systems can help to reduce energy waste, save costs, and limit greenhouse gas emissions from wasteful energy use.
“Smart” electricity grids can also help cut energy consumption, wastage, and CO2 emissions by enabling a move from traditional (and inefficient) transmission and distribution networks to a decentralized model.
Transport energy waste examples
Increased use of video conferencing and telecommuting could help reduce transport energy waste and emissions, as well as cut down on the time previously spent commuting. A US federal study found the average American spends 264 hours every year commuting to work.
The ubiquitous use of smartphones, equipped with Global Positioning System (GPS) technology and other apps, provides mainstream companies (and consumers) greater opportunities to optimize routes, significantly reduce travel times, and cut fuel consumption. Emerging markets may offer the greatest potential given lower penetration rates.
By avoiding left turns whenever possible on the US’s right-hand drive roads, UPS was saving an estimated 10 million gallons of fuel per year by 2017, with drivers covering 6–8 fewer miles per route. UPS has achieved this waste reduction by applying routing software to each of the 18 million deliveries it makes in the US every day (as of 2017), analyzing 250 million address points a day, and performing 30,000 route optimizations per minute. This optimization has also saved the company USD 300–400m a year in fuel, wages, and vehicle running costs.
One example of more innovative ways to tackle transport waste comes from Valeo. The company is a major supplier of automotive parts in Europe. It fits one in every three vehicles worldwide with electrical systems for reducing CO2 emissions. The company invented the stop-start system, which now equips millions of vehicles across the world and significantly reduces emissions by optimizing engine running. It is also driving car hybridization, producing around 25 million 12 Volt systems per year.