Recycling the Unrecyclable

In his first year at Princeton University, Tom Szaky started a small business using worm poo for fertiliser. It became the model for TerraCycle, which is now an international, multi-million dollar operation, writes Ellie Cooper in this week’s Spotlight on Social Enterprise.

TerraCycle office

Like many business ideas, TerraCycle had humble beginnings. Tom Szaky’s friend discovered that worm refuse was great for plants, which led Szaky, then 19, to create a sustainable fertiliser business with used plastic bottles in 2001. He even managed to get Coca-cola’s permission to use its patented bottle.

“I was in first year uni and I was really thinking about the purpose of business and is it just about profit or can it be something else more purposeful than that, and then sort of fell upon this issue of garbage as a key topic,” Szaky said.

“TerraCycle started by trying to create a purposeful business that addresses the issue of waste, really focussing on how to recycle those things that can’t be recycled today.”

He raised just enough money to house the worms and convinced his university’s cafeteria to give him their food scraps. Several months later he dropped out of Princeton to focus on his business full time.

With a business model developed, Szaky said the earliest struggle was securing start-up capital, especially as a young person with a quirky idea.  

“At the very beginning, obviously we just began, you know to start creating prototype systems, but from a finance and paying the bills point of view it was very difficult to raise capital,” he said.

“So we entered in one business plan contest and then that became our start-up funding. We won about $100,000 after winning about seven contests.

“And then from there, once we got going even more, [we were] able to start raising money from social investors and other folks who believed in what we were all about.”

His fertiliser product took off, and was stocked in major retailers in the US.

Then he began to see the possibilities for recycling, reusing and “upcycling” – transforming waste into a product better than the original – as limitless.

Wanting to have a bigger impact, Szaky expanded TerraCycle, working with brands to collect their waste, as well as providing a service for individuals, recycling everything from food packaging to cigarette butts.  

“What makes something non-recyclable is it’s uneconomic to collect and process it, so we get funding from… stakeholders and then we set up a wide array of national free collection systems where consumers can send us their packaging at no cost or drop it off at no cost, and then we’ll recycle what we collect,” he said.

Knowing his operation was scalable, Szaky took his recycling model overseas, including to Australia in 2013, and TerraCycle grew to a multi-million dollar business.  

“One of the things we found is that garbage is exceptionally standardised. It’s the same issue everywhere in the world and once we were able to start making it work in the US we started asking, can we bring this model to other countries,” he said.

“The first foreign country was Brazil, then Canada, and once you start doing it once or twice we got into a mode and it actually became relatively straightforward to expand into a new market and in fact in October this year we’re launching China which is our 21st market.”

He said partnerships were key to TerraCycle’s success.

“It’s vital, we rely on having our stakeholders fund our programs because that’s what makes something that’s not recyclable recyclable,” he said.

“To give you a sense… in Australia and New Zealand, companies from big ones like Nestle, Fonterra, all the way to social ones like the Collective and others.

“So we really rely on that, it could be funding from consumer product companies, it could be retailers, it could be factories, it could be municipalities or councils, or even small business and individuals.”

Over the past 15 years, TerraCycle has recycled more than 3 billion pieces of waste. But Szaky said there are a number of ways to measure impact.

“The first is our primary purpose… to collect and recycle the non-recyclable, and we do a million kilos a week, things that would never be recycled unless it came to us, things like cigarette butts, food packaging. So one million kilos a week is our primary impact of getting stuff out of landfill and having it recycled,” he said.

“The second impact though is how many people do we engage. We have 60 million people collecting in our platform – in Australia and New Zealand half a million people locally collecting, and I’d say about 100,000 in New Zealand and 400,000 in Australia.

“Our platforms have donated to social causes over A$20 million to date, that’s a cool point of impact, we employ a few hundred employees directly, and then indirectly a few thousand, those are probably some of the key impact points.”

These day, Szaky said his challenge is keeping people engaged.

“The biggest challenge is making it relevant to people, as long as the issue of waste is relevant that’s how we get funding, and so you’ve got to keep it top of mind,” he said.

“If people stopped caring about waste then we would not exist.”

While Szaky advises and invests in other social enterprises, he said he remained focussed on growing TerraCycle.

“We’re looking to potentially go public on the stock exchange in two or three years, give or take, maybe four,” he said.

“And we’re launching now China, then Taiwan, both those will be live this year. South Korea, India next year. So just bigger better, you know, and keep growing, keep trying to increase our positive impact as much as we can.”

And his advice for other start ups was simple: “Just begin. Actually two things, just begin. People think this shit to death and it’s way better just to start, and then the market will tell you what’s working and what isn’t. That’s the first really important piece of advice.

“The second one is focus on one very specific vertical, for us it’s garbage, it could be women’s rights, it could be air quality.

“Focus on one thing and then do everything else normally, but really focus on being an expert in one area, don’t try to go too broad. Many times social businesses try to do everything perfectly, and then it’s very challenging for them to grow and succeed.”