Today, many people still don’t know the answer to the simple questions, “Where does my trash go?” or “Where does my recycling end up?” Either way, it’s certainly not going “away” as is so often euphemistically implied. In fact, most trash that has been generated in the U.S. lies in a landfill. Landfills are the third-largest source of methane emissions in the country, contributing to climate change and representing the final resting place for too many valuable materials.
Alternatively, when materials are recycled, they are kept in circulation and in supply chains. Recycling plays a critical part in building the circular economy, which reduces waste and avoids the consequences of the costly extraction of raw materials and the costly tipping fees for products destined for landfills at the end of their lives. That’s why it’s critical that valuable materials like paper, plastics, organics and metals, among others, are collected, recycled and reprocessed to re-enter manufacturing supply chains. It’s imperative that we close the loop on existing materials.
Moving from linear to circular
Like any industry, recycling ultimately functions according to the laws of supply and demand. The latter creates the pull through the system for recycled materials.
Currently, we’re seeing a number of factors converge to create favorable conditions for bolstering the recycling system: Large corporations are making commitments to use up to 100 percent recycled content in their products and packaging, consumers are demanding more environmentally friendly products and governments are beginning to regulate or incentivize the use of recycled materials. On top of this, China’s National Sword policy, which restricted or banned imported recyclables in 2018, has renewed attention on recycling capacity in the U.S. as we are forced to handle our own “waste.”
To meet the growing demand for recyclables, the infrastructure gap in the United States must be addressed. Too often, this “unsexy” topic is left untouched, yet it represents the fundamental mechanism by which we recapture materials after use. Material recovery facilities (MRFs) are key, forming the backbone of the recycling system.
As it stands, MRFs across the country are typically underfunded and outdated. Without modernizing and investing in them, any recycled-content goals, whether emanating from governments or corporations, will remain lofty rather than achievable. For plastics alone, it’s estimated that demand for recycled feedstock will outpace supply globally by 5 million tons in 2030.
That’s why we formed the Closed Loop Infrastructure Fund (CLIF) in 2014, bringing together the world’s largest consumer goods companies and retailers to invest in recycling and circular economy infrastructure in the United States. By offering below-market-rate or zero-interest loans to private companies and municipalities, respectively, the fund provides much-needed, flexible capital for the system. Loans vary in size from $1 million to $5 million over a three-to-10 year period, and CLIF aims to catalyze co-investment where possible.
Thus far, CLIF has deployed more than $50 million to finance more than 25 projects, spanning diverse material focuses and company typologies, including companies operating across the recycling value chain, from haulers to processors to the manufacturers using recycled feedstocks. Of course, the MRFs are an important part of the value chain. CLIF has invested in many best-in-class MRFs, supporting their development to strengthen the backbone of the recycling system and ensure materials remain in play.
CLIF has invested in a number of MRFs over the years.
Emerald Coast Utilities Authority, Florida: When a MRF in Montgomery, Alabama, abruptly shut down, the public authority charged with stewarding Escambia County’s quality of life—Emerald Coast Utilities Authority (ECUA)—was without a recycling facility within a five-hour drive. Almost all ECUA’s 22,000 tons of recyclables per year went to landfills, turning the region into a recycling desert.
With investment from CLIF, ECUA built a new single-stream MRF within 12 months to step up and fill the void. The new, state-of-the-art MRF enabled ECUA to grow its recycling stream and also to accept additional materials from neighboring municipalities and private commercial haulers. By capturing the paper, metal, glass and plastics from the area, ECUA is avoiding landfill tipping fees and instead selling recyclables as feedstock for manufacturing.
Eureka Recycling, Minnesota: Eureka is a nonprofit zero-waste organization in Minnesota with a mission to demonstrate that waste is preventable. Through its recycling collection and processing operations, it services St. Paul and Minneapolis, as well as other suburbs and haulers in the 16th largest metro area in the U.S. The nonprofit sorts 100,000 tons of single-stream recyclables yearly, and 90 percent of this material is sold to markets in the Midwest; all the material stays within North America. Eureka is known for clean bales and a long-term commitment to high-quality material through its operations and its investments in staff and continuous process improvement.
With an investment from CLIF, the nonprofit recently upgraded its MRF with a new optical sorter for polyethylene terephthalate (PET) and a second baler, addressing increased PET in the incoming material stream and growing the number of overall tons processed per hour by 30 percent. As part of this upgrade, Eureka repurposed its original optical sorter to capture polypropylene, tripling the recovery of this plastic type over hand-sorting. The return on the investment comes primarily from the increased efficiency.
Lakeshore Recycling Systems, Illinois: Lakeshore Recycling Systems is Illinois’ largest private waste company, specializing in recycling and waste diversion programs for Chicagoland businesses and homeowners. A few years ago, the company reached a bottleneck in its operations as its MRFs hit capacity, having to turn away material.
With the investment from CLIF, Lakeshore was able to renovate its antiquated Heartland MRF in Forest View, Illinois, into a high-tech, single-stream facility, upgrading processing capacity from 20 tons per day to 20 tons per hour. The company also added a new sorting line to its Northbrook, Illinois, MRF.
Overhauling the status quo
Together, CLIF has invested $8.7 million into these three MRFs, which collectively affect more than 200,000 tons of materials annually, avoiding more than 600,000 metric tons of greenhouse gases and contributing to thriving, healthy local communities. From municipalities to nonprofits to private companies, they demonstrate diverse organizations and represent just one segment of CLIF’s broader portfolio.
Working with private industry, the public sector and nonprofits is critical for bringing the necessary stakeholders to the table to advance circularity in North America and beyond.
Overhauling the status quo—our current take-make-waste economy—requires creative thinking and, critically, unique and flexible capital structures. As investors in the circular economy, Closed Loop Partners spans an arc of capital, comprised of venture capital, growth equity, private equity and project finance. The projects that CLIF has financed demonstrate how we can join together to bolster the backbone of the domestic recycling system. Investment in every node of the recycling value chain will be critical for bringing the system into the 21st century, ready to meet growing demand for recyclables.