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Looking ‘Upstream,’ Waste Management bulks up on materials management

By Dennis Schaal

Every corporate board is—or should be—focused on how to minimize its environmental footprint, and waste-solutions provider Waste Management, the largest recycling outfit in North America, is in the mix when it comes to many of those discussions and consultations.

A public company with $13.3 billion in revenue last year, Waste Management is a power in waste-to-energy production, materials management, recycling and trash hauling.

Jim Cramer, the sometimes-trash-talking host of CNBC’s “Mad Money,” recently termed Waste Management CEO David Steiner, who has led the company since 2004, “the most pro-shareholder guy I know” among CEOs outside the oil and gas industry, adding that Waste Management is “a really good company” with lots of financial clout.

The Houston-based company, with about 47,400 employees and annual collections of almost 74 million tons of solid waste in the U.S., Canada and Puerto Rico, is evolving and well positioned to make good on its goal of being “a leader in promoting environmental stewardship.”

An Evolving Company

Still, the company evokes snapshots of competing symbols as it transitions to be “the waste solutions provider of choice” for companies seeking help in drilling down into environmental best practices. Waste Management owns or operates 271 solid waste and six hazardous waste landfills even as it sponsors a futuristic exhibit at Walt Disney World Resort’s Epcot in Orlando on single-stream recycling and waste-to-energy technology. The company garners the bulk of its revenue from garbage collection, transfer and landfill operations, yet its Upstream unit deploys teams into large corporations to help retool processes, reuse materials and reduce waste—a trend that could diminish the number of truckloads heading to Waste Management-operated landfills.

“In the past, and still sometimes today, people would think of us as a collection and hauling company because they’d see our trucks or hear about landfill expansion,” says David Aardsma, Waste Management’s Senior Vice President of Sales and Marketing. “As you can see from the Upstream model, we are really all about helping our customers with a solution. We’re evolving from the view that we are a waste company to a resources-management company, involving consulting, to help
our customers achieve the goals they have in place.”

Aardsma, who’s worked at the firm in various sales and operations leadership roles since 1977, says some observers may be surprised to learn of the company’s drive to assist corporate customers in shrinking their waste output to negligible levels.

“But, that is what we do for a lot of companies,” Aardsma says. “That is our role in helping them to maximize the value of the material streams that we manage.”

Venturing Upstream

For example, in carrying out the company’s environmental mantra of Reduce, Reuse, Recycle and Recover, Waste Management’s Upstream subsidiary assisted Chrysler’s St. Louis North assembly plant last year in taking 750 tons of waste-paint solids that would have ended up in landfills and converted the paint residue into a fuel supplement. Developing a process that dries the waste-paint solids within 24 hours, Waste Management transported the de-watered material to the Ameren Meramec Power Station, about 15 miles away, where the paint residue was burned alongside coal, obviating the need to scorch some 570 tons of coal in 2007.

“With a little different look at it, our thought process was to go find a market for it,” Aardsma says. “We were able to find a place to use it and displace coal.”

In another success story, Upstream supplied a full-time, on-site manager to Alcoa’s Massena, N.Y., operations as part of a “total waste management” contract that focused on waste disposal cost efficiencies and process improvements.

“Upstream really looks at the total material value chain and the supply chain and takes that approach to identify opportunities to improve customers’ business performance,” Aardsma says. “They really work specifically with a customer to create a customized solution to give the customer the quickest path to sustainability at the lowest cost.”

Alcoa states that an initiative to reuse scrap alumina from pot-room sweepings and spills at its Massena East plant cut its landfill waste nearly in half, and saved the company about $200,000. A separate process to isolate clean sources of alumina in the waste stream in the Massena West plant enabled Alcoa to reuse some 55 percent of the plant’s waste stream and funnel it back into the manufacturing process.

“That stuff used to be thrown away in the past,” Aardsma says. “Now, it’s trapped.”

The Alcoa waste-reduction program, with Waste Management as a partner, won a 2005 Alcoa EHS (Environmental Health and Safety) Achievement Award, and seemingly was a financial win for both companies as it recouped $1.1 million in cost savings over two-and-a-half years. Under the contract, Alcoa stated, it shared the initiative’s cost savings with its partner for the first year, and thereafter took the rest of the savings as its own.

$17 Billion and Growing

Tracing its roots to a private trash hauler that produced less than $1 million in revenue in 1956, Waste Management Inc., initially incorporated as USA Waste Services in 1987, has grown through hundreds of acquisitions into the largest provider of waste and environmental services in North America, with a market cap of $17 billion and almost 20 million commercial, municipal and residential customers in North America.

Even as it continues to streamline its operations through a “fix or seek exit” strategy for less-than-efficient business units, Waste Management still is gung-ho on growing through acquisition. In August, it offered a $6.7 billion hostile bid for competitor Republic Services, which spurned the flirtation and seeks to purchase Allied Waste Services instead. The Dept. of Justice is reviewing the antitrust implications of a Waste Management-Republic combo, which would control almost one-third of the trash-transport market in North America.

A Pioneer in Materials Management

Meanwhile, Waste Management is well into a process of rewriting a legacy that once was pockmarked with PCB-contaminated landfills and ample litigation, and turning it into a track record of pioneering efforts in single-stream recycling, materials management and waste-to-energy production.

For example, in customer-friendly single-stream recycling, Waste Management uses magnets, optical scanners and screens to vet and separate the materials, increasing the recovery of recyclable materials by up to 30 percent on average.

Waste Management’s fleet of some 425 heavy-duty trucks running on natural gas is among the largest such transport units in the country.

In addition to its traditional trash-hauling business, Waste Management is helping corporations and municipalities target sustainability and climate-change goals through three other business units:

• Waste Management’s Wheelabrator unit, with 16 owned or operated waste-to-energy plants and five independent facilities, takes landfill-produced methane gas and a variety of other waste, and converts them into renewable energy sources.
• The Waste Management Recycle America (WMRA) business, where revenue picked up almost 29 percent to $953 million last year, processing almost 8 million tons of paper, cardboard, plastics, metals and electronics.

Between Wheelabrator and WMRA, Waste Management calculates that the 214,000 tons of metals it processed in 2007 reduced greenhouse gas emissions equivalent to turning off the engines of 281,000 cars.

• And, as it did for Chrysler and Alcoa, Waste Management Upstream deploys employees inside large-customer facilities to identify untapped recycling opportunities, reduce waste, and fine-tune waste collection and disposal procedures.

Corporate Trends

Waste Management’s Aardsma says one of the top trends he’s seeing is corporate customers
approaching the company for its expertise in meeting sustainability goals, including waste
reduction, recycling and reuse.

“Setting sustainability goals is really the easy part,” Aardsma says. “Achieving those goals
really is the challenge for those customers, and we see our business as uniquely positioned to
really help them get there.”

So, is it a trickle of companies that are bent on reusing materials instead of discarding them?
Aardsma cites the example of Hollywood studios that are reusing materials to build new sets instead of chucking the materials, as they did in the past.

“While it used to be only the very large customers, probably starting with industrial
customers, it’s now expanded, and now we’re getting more of the smaller customers,” Aardsma says. “Our focus is creating a broad range of solutions not only for large customers, but also for small customers.”

And Waste Management’s depth of offerings, from recycling and solid-waste transporting to radioactive-materials management, fits in well with another customer trend: the desire to go to one source for sustainability expertise, Aardsma says.

“A lot of this is brand new,” Aardsma says. “And there haven’t been a lot of places for them to go to get those answers. That is what our position is: We have experts who can walk in and help them take a holistic view of what they need.”

Companies are looking to blunt their environmental impact and to extract value and efficiencies, Aardsma says.

“If we are unable to reduce it, reuse or recycle it, we still look to recover value out of that,” he says. “We do that through waste-to-energy or landfill gas-to-energy programs, where we generate enough electricity to power over 1 million homes each year.”

Europe was an early adopter of waste-to-energy programs, such as those practiced in Waste Management’s Wheelabrator business, Aardsma says.

“This is really business as usual in Europe and we are seeing here in the U.S. that people are starting to embrace that technology,” Aardsma says.

Advice to Companies

Still, some companies may miss opportunities if they single-mindedly focus on “zero landfill,” he says.

“The landfills have really changed and we as an industry probably have done a poor job in helping the public understand how they [landfills] can be a valuable part of the solution,” Aardsma says. “They are built today to protect the environment. The waste is trapped inside and is safe.”

“The waste material that can’t be reduced, reused or recycle can create energy,” he says. “As the material decomposes, it creates methane gases that we suck off and use to generate electricity.”

Waste Management, of course, has a vested interest in the efficient use of landfills. Aardsma points out that a company may burn more carbon and have a more detrimental environmental impact if it shuns optimum materials management and transports waste longer distances merely to avoid using landfills.

“A lot of time is being focused on zero landfill,” Aardsma says. “But you can pass up opportunities and it could cost the company more money and cause potentially more environmental impact by not using or not being open to using what is now the new way that landfills are managed.”

Aardsma argues, too, that corporations should strive for authenticity and tangible environmental improvements.

“I think that companies probably need to worry less about building elaborate reporting systems and focus more on how they are going to go about reducing emissions, recycling what can be used, saving energy and using the right energy from renewable sources,” Aardsma says.

Corporate boards are feeling heat over waste minimization, sustainability and climate change, and many are going on the offensive, Aardsma says.

“There is pressure on boards because there is uncertainty,” he says. “Where are regulations going to go, what is the financial impact on the business and corporate reputation. That really was never discussed before, but now businesses are being questioned on what they are doing in these three areas.”

As Aardsma discusses his company’s evolution and the materials-management business, he can’t hide his “excitement” over their prospects.

“That’s the beauty of today’s sustainability efforts,” Aardsma says. “It’s creating a win for the environment, a win for the economics, and it creates a great spot for us to help customers get there.”