Compared to other sectors, waste management (collection, treatment, recovery and disposal) has been considered an ’ugly duckling’ by customers, investors and even citizens. Why? Historically, waste has been perceived as a problem that must be solved using the lowest costs possible. Also, the questionable management and operational practices of certain operators have damaged the sector’s reputation.
However, the current governmental, corporate and societal focus on climate change, resilience and a circular economy is turning this ugly duckling into a beautiful swan. Environmental services (waste management falls short of adequately describing the activity in this new context) are part of the solution, and a key pillar of a more sustainable economy and society.
The first visible sign of this change of perception occurred during the most difficult times of the covid-19 pandemic. The delivery of environmental services remained fully operational and proved to be essential for community wellbeing. This in turn improved citizens’ emotional attachment to this activity.
The transition towards a circular economy is accelerating the transformation of the environmental sector, which can leverage its experience and capability to develop new business opportunities in collaboration with other stakeholders. By way of illustration, the Ellen MacArthur Foundation’s three circular economy principles (design out waste and pollution, keep products and materials in use and regenerate natural systems) include many activities that are already being performed or sponsored, fully or partially, by environmental service providers.
This new vision for the sector is starting to drive significant transactions and partnerships. Two good examples of this are the combination of Veolia and Suez to become “the benchmark company for ecological transformation” and Platinum Equity’s acquisition of Urbaser, “both a vital service provider and an important caretaker of the environment”.
Sizable environmental companies indeed enjoy a favorable position for addressing this new context. They manage the primary resource, waste, through stable commercial agreements with public and private customers. They also have extensive know-how in deploying the most effective technical solutions in waste collection and treatment. Finally, their scale and footprint enable efficient logistic and operating costs and innovation investment.
Nevertheless, these companies cannot afford to be complacent if they do not want to be positioned as mere logistic operators. New competitors from other sectors are also growing in the circular economy sphere. Energy utilities, materials manufacturers, consumer goods companies and cutting-edge startups are implementing projects and technologies to produce, for example, biodegradable plastics from food waste.
Forward-thinking environmental players are aware of the strategic implications of this transformational stage and are shaping their business and operational models to become sustainability champions by:
- Optimizing their target business portfolio, taking an active role in reusage, recycling and valorization to maintain a leading position along the value chain.
- Building innovation capabilities to address disruptive business opportunities in collaboration with a circular economy ecosystem.
- Partnering with public and private customers to support them in achieving their sustainability targets.
- Capturing attractive financing opportunities linked to environmentally- and sustainability-friendly initiatives.
- Enhancing their internal and external stakeholders’ engagement, embedding the new scenario into the company’s purpose and sustainability framework.
Sustainability is transforming many sectors, and environmental services is not an exception. Linear strategies are no longer effective and instead adaptative business models that anticipate future challenges will be the ones to make the difference. The competitive landscape is no longer stable and there will be winners and losers. Very few ducklings will become swans.