A Better Way to Recycle: co-operative and community ... - Urbed

3. The recycling opportunity3.4 Economies of scaleEconomies of scale can be very important in therecycling sector. Transport and storage costs canconsume a disproportionately large part of thebudget of small recycling collection services,making them unable to compete on price withlarger recycling operators. Entry into highervalue-added recycling activities often calls forlarge investment in specialised machinery, andconsequently large-scale operations. Socialenterprises can be at a distinct disadvantage insuch markets, especially if they have poor accessto capital finance. The Bronx Community PaperCompany was a proposal to establish a recyclingpaper mill, creating jobs for local unemployedpeople in a poor district of New York. ButBanana Kelly, the community developmentagency behind the proposal failed to secure thenecessary finance (see Box 7). But some socialenterprises manage to overcome these barriers.Lintrup Biogas Co-operative in Denmarkmanaged to raise nearly £4 million to build abiogas plant that used organic waste materialscollected from its 66 co-operative farmermembers (see Box 8).However, economies of scale are not always themost important factor in determining businesssuccess. There are many areas of recycling thatare not attractive to either the private or thepublic sector, and where economies of scale donot always result in a competitive advantage.Examples of this include recycling activitieswhere -• The costs are too high and/or the profitmargins are too small to offer a reasonablereturn on investment• The logistics of collection and transportationare too problematic• The risk of failing is too high• The market for the recycled product isunstable or underdeveloped• It is too difficult to source the wastematerial.For instance, collecting and recycling food wastefrom domestic households can be extremelyproblematic. It can be difficult to persuadehouseholders to separate their waste. Foodwaste, especially cooked food, can attractBOX 7:BRONX COMMUNITYPAPER COMPANY(NEW YORK, USA)The Bronx Community Paper Company wasa proposal to establish a 400,000 tonne peryear recycled newsprint mill on abrownfield site in the Bronx district of NewYork. Although the project was not realised– it failed to achieve financing in 2000 –lessons can be learnt from the experience,particularly from the point of view of asocial enterprise attempting to establish alarge scale manufacturing project.The project was initiated by anenvironmental lobby organisation, theNational Resources Defense Council, andthe Banana Kelly Community ImprovementAssociation. The mill was to have beenowned by Banana Kelly, which wouldempower the local community to createjobs from recycling. However, the scale ofthe project was far beyond the experienceof Banana Kelly’s staff, and their morerelaxed approach created a clash of cultureswhen dealing with external investors andindustry partners. The project was alsoforced into a contractual rather thanstakeholding relationship with the cityauthority, leading ultimately to anadversarial position.Key points• Social enterprise has the potential toestablish large scale manufacturingprojects• Genuine partnerships are required inorder to overcome contractual andcultural differencesA Better Way to Recycle 25