The Eco-Capitalist Guidebook:

Part 2: The power of the Negative Raw Material Cost

The most dramatic effect of modern eco-capitalism is to move the environmental bottom line from a negative into a positive. This relies fundamentally on the use of waste as a raw material, and changing the manufacturing process from one that is linear (starting with a raw material, converting that into a finished good that in the end ends up as waste of some form), to one that is circular (using waste as a raw material and not producing any along the way).

Chapter 4: The grandfather of negative raw material costs: Composting

The decomposition process is a true cradle-to-cradle model, and appropriately is the process that nature uses to recycle its plant and animal waste. Composting is a man made process that was invented by Sir Albert Howard almost 75 years ago in India. Composting is the art of controlled aerobic decomposition of organic matter into a soil like material: humus or compost. The application of control is what distinguishes composting from the natural rotting and other decomposition that generally occurs in nature or on a landfill.

One of the main differences that one sees in the uncontrolled decomposition on organic material on a landfill (organic material accounts for roughly 85% of America’s municipal solid waste stream) and the controlled decomposition process that occurs in a composting system is the use of oxygen.

If one were to take a banana peel and place it into a landfill it would undergo decomposition without oxygen (or anaerobic decomposition) since landfills are designed to be extremely compact, thus limiting the circulation of oxygen. "Landfill gas" is one of the by-products of anaerobic decomposition and is comprised primarily of carbon dioxide and methane. This effect is so extreme that the anaerobic decomposition of organic waste is the #1 producer of methane gas in the US. Methane not only smells like fart, but is also the most potent of all the greenhouse gases (it contributes 25 times more to climate change than carbon dioxide).

However, if we were to take the same banana peel and place it into a compost pile it would undergo decomposition with oxygen (or aerobic decomposition). In such an aerobic system the decomposition process relies on aerobic bacteria that break down the organic matter into humus, without any harmful gas emissions. More over, the end product, humus or compost, is a fantastic plant growth agent. Just listen to any expert gardener and they will tell you that the solution to any gardening problem lies with compost.

Other than the environmental benefit to composting (reduction of garbage in our landfills and in turn, the reduction of methane) there is a tremendous economic benefit, and thus, the fundamentals of a modern eco-capitalist business model.

In New Jersey, a landfill charges on average $90 to deposit one ton of garbage. On a national basis we produce roughly 12 and 14 billion tons of waste annually of which over 80% is organic. This waste is mainly in the form of food scraps, yard trimmings and paper. This means that we pay roughly one trillion dollars every year to dispose of waste that could be composted. In other words if you could compost that waste, you would start with a negative raw material cost of over one trillion dollars.

Due to the dramatic increase in the amount of waste we generate (over 122% increase from 1960 to 1990), many people have seen the potential in this model and composting has moved from a hobby that avid gardeners have conducted in their back yard to a big waste-management business.

Since the composting industry magazine, BioCycle, conducted its first "State of Garbage" survey in 1989, the number of industrial composting sites across America has increased from 651 in 1988, to 1,407 in 1990, to 2,981 in 1992. Today there are over 4,000 sites across the United States.

The reason that composting is one of the best and oldest examples of modern eco-capitalism can be seen clearly when comparing the business models and triple bottom line report card of a landfill and a composting site.

A landfill has a very simple model: it charges a tipping fee per ton of waste deposited in it. This model requires a large volume of land since once the landfill is full the owners must buy another plot of land to open the next one. As it becomes more expensive to open landfills the cost to deposit waste increases.

If we compare this with the business model of an industrial composting site we see that as with a landfill, the composting site charges a fee per ton of waste deposited in it. However, unlike a landfill, the composting site will convert this waste into compost which can then be sold to landscapers, nurseries etc. In other words, a composting site gets paid on both ends. It gets paid for its raw materials and gets paid for its finished product.

However, the most dramatic difference comes forward when we examine the triple bottom line report card of both these businesses:

While classical composting brings a higher economic return than that of a landfill, the main difference is the environmental bottom line. While a landfills stores waste on otherwise usable real estate and creates a tremendous amount of methane, a composting site reduces the waste that would go to a landfill, creates no harmful gases and instead produces a fantastic byproduct that has a strong market. It does all this while making more money — true eco-capitalism.

Disclaimer: These thoughts are pure musings on the potential of eco-capitalism in manufacturing. We must make generalizations to grasp macro thoughts. In other words, welcome to the rabbit hole.