TerraCycle: the end of British Circular Economies?



The recent BBC exposé on TerraCycle surfaced the complexities of working in the sustainability space. TerraCycle was hauled over the coals for failings in its supply chain. The programme also rightly focused on the practical barriers to residential recycling using TerraCycle's infrastructure. It followed a family on their journey to try to dispose of crisp packets and bread bags at a TerraCycle drop-off. The first of which, located at what appeared to be a church, was not open.


The Panorama programme led to TerraCycle losing a trial collection service with Blackburn and Darwen Council. But was it fair? Is it all TerraCycle's fault?


Perhaps the most troubling revelation was the shipping of plastic waste to Indonesia, unbeknown to TerraCycle. Most notably a fraudulent supplier illegally shipped TerraCycle waste to Indonesia, using a different supplier connected to the first only by having the same director, but counter to TerraCycle's contract with the first. The second supplier and the common supplier's director has pleaded guilty to this charge and has been found guilty of this charge. However, as Stuart Foster, chief executive of plastics charity Recoup, explained on Linkedin, a scheme operator and its funders are “accountable and cannot lay sole blame on third party contractors and traders [they have appointed] when things go wrong”. So while their subcontractors were guilty, TerraCycle doesn't escape culpability.


We crunched the numbers following the revelations. We happen to do investigative assessments on our own models to assess and design new circularity pathways. Here are 5 things we found.


1. Emissions offsets


In order to offset the car emissions to travel to recycling drop-offs, a family must be able to recycle 40 crisp packets per mile (one way). This accounts for the transportation and energy required to bundle and process the crisp packets in a processing facility.


These facilities don't exist everywhere. So analysis must account for the transport and energy used to recycle it without shipping abroad.


In practise, a family of four is unlikely to capture enough crisp packets to make up for a two mile round trip to a recycling centre in 10 weeks. Some users mentioned that journeys to recycling drop-offs can be 2 hours away. For many, it is half an hour and stretches many miles. In offsets alone, families may not capture enough crisp packets for it to be worthwhile in 8 to 12 months. Crisp packets, bread bags and plastic bags don't weight a lot. So when things go wrong, you need a lot to remediate.


This highlights one of the risks with their model. There is a carbon breakeven between the extra vehicle miles needed to be made to drop off waste and the benefits gained from recycling the waste instead of simply incinerating it*. With very light items in very small quantities, any one mistake has a big impact on the carbon footprint. Much more than the corrective action has in the same timeframe.


*I am not suggesting it's incinerated - just that it has a lower footprint



2. Erroneous Remedial Action


This is where the climate science is often at odds with UK policy. TerraCycle's supplier claimed the Indonesian shipment was mistakenly loaded on to a container with a different shipment and sent to Indonesia. Now, while these errors are surprisingly routine, they normally do not extend to several container's worth of material.


TerraCycle stated they shipped it back to the UK. While morally, this may well be the right thing to do, the question here is was it? What should have happened once the "error" became known?


UK policy on remediation usually means "place it back in the position as if the wrongdoing/error had never occurred". The environmental impacts are not vector quantities. Shipping it halfway around the world doesn't remediate when you ship it halfway back. Just like putting a car into reverse doesn't make the number of miles reduce on your clock. The emissions of container freight are not zero. They cause a lot of harm.


When shipping crisp packets and flexible plastics, a shipping container weights much more than its contents and because of that balance, each mistake TerraCycle makes, sets their emissions targets back a huge amount. The Indonesian shipment alone meant they had to offset an extra 1.55 tonnes of CO2 sending it there, but also bringing it back. Over 75% of that is actually just the weight of the container, but that container wouldn't have been shipped if it was processed correctly in the first place and you can't ship crisp packets without bundling in a container.


Ironically, this means one of the worst things Terracycle did for the planet was to ship it all the way back to the UK, Despite being the easiest way to meet remediation requirements for UK authorities. Instead TerraCycle could have arranged for a nearer advanced economy to be buy and process it through the waste broker. Cutting transportation costs and tbh, making some of the cash back. Which they could have then placed into remediation offsets.


By Shipping it back to the UK they simply accumulated much more carbon dioxide. In total, they now have to recycle over half a million (512,664) crisp packets to offset that one mistake. A task that would require 234 families eating an entire value pack a week, per person, for an entire year or some 10% of Terracycle's throughput.


At TerraCycle’s current coverage, this is a huge ask. They recycled 15 million pieces of waste in the last 3 years. The pieces of waste recycled do not themselves have a zero footprint. They have a huge footprint associated with them. Meaning TerraCycle just add to emissions net-for-net. A mistake wiping out almost 10% of its recycling in areas which already deliver as little as a 2% benefit. This can be up to 5 times more than TerraCycle would save in that waste segment.


3. Volunteers & Charities


In sympathy with Tom and TerraCycle, their system is entirely reliant on volunteer hosts. It doesn't provide a paid model and as a result, most volunteer organisations will only do this when they have time or resources to dedicate to it. In our experience, engaging volunteer communities is very hard at the best of times, even when community funding is available. Hundreds of millions a year goes unclaimed or is given to projects of questionable value because communities cannot find the capacity or groups to make it work. It's something we've seen a surprising amount of, first hand.


TerrCycle volunteer hosts were supposed to update the list of active locations. It seems this is often missed.


Another problem that jeopardises trust that we happened across ourselves, when working with partners who engaged TerraCycle. TerraCycle drop campaigns at a moment’s notice. This was the case with the blister pack scheme which closed to all pharmacies bar SuperDrug, who took on the funding remit. This highlights a problem with the complexities of waste commissioning in the UK. It led to TerraCycle being overly reliant on marketing, not waste collection budgets. Making them fragile, short-term and crucially for the public, unreliable. As brands seek greenwashing capability, which puts the reputation of the scheme at risk.


At the same time, general awareness of circular economy in UK society is relatively low. This makes it difficult to sell in the first place and starts from a base that is not well trusted. The brands themselves knew they were doing this and arguably, share some responsibility for any greenwash charge.


Models like TerraCycle's, which rely on another party to maintain both funding, pick-ups and operational management is not likely to succeed in markets like the UK because their journey is highly sensitive to others. Both in funding and operation.


4. Too Good to be True?


Many see the very idea of it as too good to be true. Especially those calling plastic recycling fake (frankly, irrationally - After all, there's plenty of plastic in the environment. What do they suppose should happen to it when it's captured?). The TerraCycle fiasco doesn't generalise though and this innate cynicism catches both genuine and fraudulent suppliers equally, which leaves incumbents unchallenged. Making the result an oil lobby win. A self-fulfilling prophecy.


Public sector circular economies and procurement methods to buy them, are rare in the UK, but abundant in countries like Finland. So TerraCycle or any fully circular economy, being awarded a UK prime contract for municipal waste was and is unlikely, despite the stability and foundation it would give to take ownership of its supply chain.


This leaves TerraCycle with only two options.


  • Capture slices of marketing budgets, which result in effects caused by short-term thinking and brand greenwashing (which surprisingly, was not approached during the programme, even though this is equally the fault of the brands - given that customer due diligence should have been carried out)

  • Work with a supply chain and conduct its own due diligence and anonymous monitoring ("mystery shopper"). Both are not free and is impacted when TerraCycle doesn’t capture enough revenue to pay people.


5. Legal Recourse


The unfortunate truth is that the Indonesian fraud was out-with TerraCycle’s control, but TerraCycle is accountable. TerraCycle’s CEO, Tom Szaky, said nothing out of the ordinary nor was there a cause for concern in terms of process, leaving aside the important factors of Carbon impact and resolution choices that were not well handled. Tom's response was not unreasonable.


Public sector organisations go through the same process and if they find something wrong. Taking legal action and submitting insurance claims against that supplier is a legitimate course and now that the owner of the supplier has pleaded guilty, it will make a civil case easier to chase. Without that case, TerraCycle may have to go through the process of proving the supplier's culpability themselves. A harder ask. The fact criminal charges have been brought by the Environment Agency and the supplier conceded guilt, simplifies the process for TerraCycle significantly.


Epilogue


For the vast majority of people circular economies are very tough system to understand. We are conditioned to simply consume and dispose at any system where we have to reuse our waste or is reused outside our visibility, can be quite difficult to understand and as a result, often isn't trusted. in our work both in the UK and Europe clear parity in understand he's unsustainability more generally which leaves the UK with some work to do.


For many circular economy operators, this is a nerve wracking moment. They are already ahead of their time and despite the fact circular economies are an essential route out of the climate crisis and are already successfully used in countries like Finland and the Netherlands, bad public relations make many nervous. Stable funding is in residential waste contracts, as councils react to the blast radius of the Panorama investigation. If incumbents already have contracts, it seem better for them to make no claims and do nothing, than do something, however good and put themselves at risk.


The concept of circular economies are perfectly legitimate and will arrive in time. Perhaps too late to stop a 1.5 degree warming, but it will arrive. What will be set back is the deployment of them, as councils and central government wrestle with the public relations fallout. Together, this makes TerraCycle's behaviour a symptom, not a cause.


TerraCycle will survive this. But until it gets funding from outside the marketing sphere, these difficulties will continue to plague TerraCycle and its reputation for years to come.


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