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Awareness around environmental impact and prevention of climate change has really gathered pace over the past 40 years, shaping the recycling industry as it stands today. It was only after the mass consumerism of the 1950s to 1980s and the realization of the environmental repercussions that had, before consumers and businesses really started thinking about changing habits.
The industry has evolved from a once niche market to a significant and growing sector with global relevance. Recycling has become increasingly important due to environmental concerns, resource conservation and recognition of the enhanced economic and social benefits associated with it. With the industry moving mainstream, it’s opened several avenues for entrepreneurs and aspiring business owners to enter a growing and diversified market.
The recycling industry intersects multiple sectors, including waste management, manufacturing, materials processing, environmental and consultative services. It also encompasses a wide range of materials and products including paper, plastics, glass, metals, e-waste, organics and more. While specific segments within the industry may be more specialized, overall it’s a broad sector with widespread participation and economic impact.
The global recycling market has experienced substantial growth in recent years. According to the 2022 annual report by the Global Recycling Foundation, the recycling industry was projected to increase from $376 million USD in 2020 to almost $392 million USD globally by 2026.
Furthermore, governments and organizations worldwide are implementing policies and initiatives to promote recycling and create a circular economy. In Ontario, progress towards a circular economy is a key component of achieving goals set out in the 2016 ‘Climate Change Action Plan’ and to do this, the province recognizes the need to keep more recyclable materials out of landfill. A circular economy is also one of the five key policies for the current Biden administration, noting that new innovations in waste management will be crucial for sustainable economic growth and job creation.
The increased emphasis on sustainability and environmental responsibility has resulted in greater demand for recycling services and products that are made from recycled materials. This led to the emergence of various businesses and innovative investments into recycling infrastructure, further solidifying the industry’s significance for investors and entrepreneurs.
The main drivers for the uptick in recycling include…
In recent times, there has been a significant increase in awareness and understanding of the importance of recycling among businesses. In the past couple of years, it seems that businesses have had to address their waste policies head on and communicate the way in which they manufacture products to consumers that now demand products that benefit the environment. Increased demand for recycled products have led to increased economic incentives for businesses to invest in sustainable waste practices and infrastructure.
The commercial recycling industry has witnessed various technological advancements aimed at improving efficiency and effectiveness. These include advanced sorting and separation techniques, automated and AI driven sorting systems, optical sensors and robotics. These technologies enable faster, more accurate sorting of materials, reducing contamination and improving overall recycling rates.
Decades ago, recycling focused primarily on a few traditional materials such as glass, paper and metal. However, the industry has evolved to encompass a wider range of materials, some of which can be complex. Plastics, electronic waste, construction debris, organic waste and many other waste types can now be successfully recycled and even reused, opening up new opportunities for recycling businesses.
The development of better recycling infrastructure has been vital in facilitating the growth of the recycling industry. This includes the expansion of recycling centers, material recovery facilities (MRFs) and specialized processing facilities for different recycling types. Improved infrastructure results in increased collection and processing capacities and higher volumes being diverted from landfill.
The commercial recycling industry has increasingly embraced the concept of a circular economy, which aims to minimize waste and maximize the reuse of products. Companies are adopting strategies such as redesign, remanufacturing and extended producer responsibility programs (EPR), which require manufacturers, wholesalers and retailers to take responsibility for the full life cycle of the products they sell. This is a sea-change from the approach of a decade ago as it shifts responsibility for waste away from governments and back to producers.
There is a growing trend of collaboration between businesses, government agencies and recycling organizations to drive advancements in the sector. Partnerships between public and private stakeholders are helping to improve systems, develop innovation technologies and create sustainable supply chains.
The traditional aspects of the recycling industry include varied businesses that are involved in different stages of the recycling process. These established companies may include;
Recycling collection services, material recovery facilities (MRFs), material processors, brokers and traders, manufacturers using recycled materials, waste management companies, e-waste recyclers, organic waste management companies and recycling equipment manufacturers and suppliers.
Environmental and climate regulations on businesses have gathered pace, recycling companies have felt the impact of rising prices and supply chain constraints like any other and consumers continue to seek out sustainable products that do zero harm to the environment. All these things mean the industry landscape has changed and will continue to change as the market demands. The recycling industry now invites startups utilizing modern, emerging technologies that address gaps in the market, improve operational efficiencies and advance the industry as a whole. Whilst some might regard the industry as traditional, it may be a surprise to hear that the Internet of Things (IoT) is the top trend in recycling this year according to StartUs Insights. Commercial waste management is already advancing with this technology, incorporating ideas such as smart bins and fill-level sensors to reduce inefficiencies. Green waste management is also piquing the interest of entrepreneurs; startups are trying to reduce the amount of food waste that contributes to greenhouse gas emissions, with one for example, collecting and composting organic waste and then distributing it back to local farmers, promoting local agriculture and supporting the shop local movement.
Some of the recycling tech and innovation disrupting the industry in 2023…
Some of the other businesses that are emerging include environmental consulting firms who help businesses to navigate ever-changing compliance law and organizations that provide advisory services to businesses looking to improve their recycling practices; others may offer expertise in waste audit and management. Another key sector is sustainable packaging. Although much progress has been made in reducing plastic and other waste from the products we buy, there is still a way to go and businesses continue to emerge that specialize in eco-friendly packaging solutions made from recycled and biodegradable materials.
Recycling and getting a foothold on the circular economy is an exciting prospect for entrepreneurs, however it doesn’t come without its challenges. There are many unique financial hurdles for recycling business owners to navigate, some apply to all, some more relevant to the startup space.
The industry can be capital-intensive and establishing requires significant upfront investment in infrastructure, equipment and operational costs. In a traditional scenario, expenses can include acquiring vehicles, storage facilities and processing machinery. Access to sufficient capital or securing funding can be a barrier, particularly for startups or small businesses.
Competition can also be high in these established markets unless you have a unique proposition or niche and profitability may be a concern. In addition, regulatory compliance is often complex and adds additional unforeseen costs to the business, putting a strain on cash flow.
Smaller businesses and startups selling into bigger enterprises may experience the challenge of delayed payments from customers, sometimes 90 days after invoicing which puts further pressure on liquidity and inhibits room for growth.
Market volatility and price fluctuations also play their part in access to finance. Changing costs and unpredictability in terms of the market and new regulations can make it very unpredictable to predict cash flows and obtain financing based on future revenue streams. For these reasons and potential liabilities associated with waste management, banks and traditional lenders often view recycling businesses as high risk. This can make it difficult to secure the necessary funding for expansion, equipment upgrades or ongoing working capital needs.
Businesses bringing new or improved ideas to the market and established businesses looking to diversify and grow can certainly succeed with the right strategy and support. We understand that much of the business’ assets could be tied up in facilities, equipment, inventory or receivables, and whilst the bank may not look at these things, they’re valuable assets that should help and not hinder access to finance.
Many businesses in the recycling industry will be looking to alternative finance providers to provide the working capital needed to support growth, meet increased demand and take advantage of new business opportunities. The need for alternative finance companies to bridge a gap will become more and more vital as bank lending standards tighten during the recession.
Not only can accounts receivable finance provide liquidity, providers such as Sallyport can mitigate risk for clients by offering credit management services which helps recycling businesses to assess creditworthiness of their customers, monitor payment patterns and provide insights on credit risk. Other administrative tasks can also be outsourced to the finance company, allowing business owners to focus on their core operations and build customer relationships.
Sallyport are working closely with many aspiring business owners and established companies in the recycling industry to support their business growth when banks can’t. Reach out today to find out how our tailored financial solutions can help support your ambitions.
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