A New Model of a Sustainable Business
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When it comes to green business practices there’s a long held notion that in order to adopt sustainable business practices you needed to make sacrifices, pay higher prices or receive lower profits.
A few years ago I had the pleasure of interviewing Tom Szaky, CEO and founder of TerraCycle, a company now considered by many to be one of the leaders in the production of recycled, sustainable, and green products. TerraCycle builds all of its products using a practice they call “upcycling” and has a lot of people rethinking this idea compromise.
Szaky states often that people won’t pay more for green, so don’t ask them to. “It seems fairly clear to me that everyone wants to buy organic, eco-friendly products, but it’s equally clear to me that they don’t want to pay more for them,” Szaky writes in his book Revolution in a Bottle: How TerraCycle Is Redefining Green Business.
A key tenet of eco-capitalism is that you don’t charge more for your products, and you don’t have to because they are made from waste (cheaper than virgin materials). This is one of the most important aspects of TerraCycle’s success.
“Waste has historically had a negative value,” Szaky told me. “We pay others to take it away. TerraCycle has flipped that notion on its head—we’ve found a way to turn waste into a valuable asset and a raw material.” Today TerraCycle produces dozens of products and generates millions of dollars in revenue from its “upcycling” practices. Szaky is featured as a speaker on business management, innovation, and recycling issues.
Most would say that TerraCycle is far more than just an eco-conscious company; Szaky has created an entire business model around producing products with zero or even negative production cost. That’s right: They produce all of their products from someone else’s waste stream, and in some cases make a profit even before they sell the product.
A glimpse back at the company’s beginnings might give some insight into how they got to where they are today.
At age nineteen, Szaky and his Princeton college friends created a fertilizer formulated from worm castings—yes, worm poop.
They entered their business idea in a business plan contest and won a cash prize sufficient to get the operation rolling. They continued to enter and win business plan contests as a form of financing. Meanwhile their very unique product (worm poop fertilizer) started to get noticed by the likes of the New York Times and Inc. magazine before they actually had a product ready to sell to retailers.
In an effort to save money, Szaky decided to bottle their first batches of liquid plant fertilizer in empty plastic soda bottles, partly because they fit standard-size spray tops and partly because they could go grab them right out of people’s recycling bins.
Eventually they turned to area schools with a “bottle brigade” program in which schools would collect recyclable bottles and give them to TerraCycle and in return TerraCycle would pay the school or organization for collecting the bottles. This built-in community component would later become a key word-of-mouth strategy as they expanded nationally and could tap schools in other communities while gently promoting their consumer products to the school parents.
The decision to rely on recycled waste for production material transformed TerraCycle. Instead of simply producing environmentally friendly, affordable, and effective plant food, they became a company that produced a variety of products made entirely from waste streams. TerraCycle now produces holiday bows from Clif bar wrappers, trash cans from plastic computer cases, pencil cases and backpacks from juice pouches, and kites from Oreo wrapper kites as well as their line of plant foods.
Has Szaky’s model worked? Here are some facts about the company:
- 2009 revenue: $7.5 million.
- 63,347 collection locations worldwide.
- 8,866,368 people collecting waste.
- $607,295.84 money contributed to charity.
- 1,263,589,839 units of waste diverted.
Some of the retailers carrying TerraCycle products include: The Home Depot, Wal*Mart, Target, Whole Foods Market, Kroger, CVS, Office Max, and Petco