Issue 3: Waste Industry Operations Compositional - Competition
The UKWaste Sector The Shake Out Continues
Thesolid and liquid waste management industry in the UK continues to shake outwith sizeable companies now emerging as front runners. Unlike many industries these initiatives aredriven primarily by the pressure originating from EC and UK Governmentlegislation and regulations. Apart fromtheir direct impact on the industry the ripple effect percolates into themarket place and changes the expectations of major plcs regarding their demandfor products and services. This in turnis producing a loop back of innovative investment programmes not only intechnologies but logistics and information systems which is changing the faceof UK resource management as never before.
If the 1980s forthe waste industry was the decade when the industry had to respond to a need tocontrol pollution. Those earlyinitiatives restricted to solid waste have now also expanded into areas ofaquatic and gaseous pollution on a scale never seen before. The solid waste management industry is thusnow part of a far greater whole.
Government legislative and regulatory activity remainsthe single biggest driver in this process.Even in the period since 1990 turnover growth has risen from around2.5bn to 4bn in terms of pure collection and treatment services. Those Government measures may be consideredin terms of fiscal and budgetary instruments targeting the consumption ofvirgin inputs (aggregates taxes), taxing outputs which are sent tounsustainable facilities (landfill and discharge consents) coupled to increasedtaxation of the interim production process (regulatory costs and operatinglicences).
Regulation and Landfill Taxes probably cost the industryaround 0.5bn per annum 15% of total sector value.
It is the parallel impact of these wider initiatives inthe customer base of the waste sector that is driving a far more significantcustomer requirement improved reporting and the acceptance of or mitigationof environmental risk. Waste costsstill represent less than 0.3% of GDP and probably around 1% of turnover formost major companies. In consequencethe market place in the industrial and commercial sector has reacted stronglyto the consolidation process driven by large plcs. The demand for national one stop shops has encouraged the majorplayers to identify national coverage as an essential pre-requisite toaccessing this market. Initially suchmeasures were driven by the Environment Agency but certain sectors now forcethe pace in response to specific organisations which demand integration betweentheir waste contracting services and their needs to report their ownenvironmental impact in sustainability reports.
Nevertheless it is likely that demand side pressureswill, in the long run, take over as the major driver. In the public sector demand side drivers will also assume fargreater significance, in part driven by consolidation and reportingrequirements. The political pressuresto establish unitaries in the mid/late 90s were not heeded on any substantivescale thus the industry still has much inbuilt inefficiency associated with thesegregation of Waste Collection Authorities and Waste Disposal Authorities(WCAs and WDAs). PFI, Governmentdemands for best value and the emergence of comparative league tables betweenlike authorities including parameters for service efficiency and value formoney are now driving growing consolidation in the municipal sectoralso.
On the supply side the demandsfor higher investment in fixed and moving plant has resulted in many smalleroperators deciding to capitalise on their success as local or regional playersto subsume themselves within those who have the capacity to operate nationallyand across all treatment options.
Fixed plant is expensive not only in terms of theequipment proper but also because processing facilities absorb years of timeand effort in the planning and regulatory approval process running intomillions in the case of landfills and energy from waste plants to tens ofthousands of pounds for local composting facilities. For small local operators this represents a genuine dilemma. A doubling of disposal costs coupled to atendency for waste to travel greater distances at a time when widerenvironmental pressures are raising the cost of transport fuel, easily trapsthe unwary in a pincer movement of inefficiency.
So where to in the future? The two key strands of Government strategy are likely to focus onresource efficiency and (in its wake) greater sophistication with regard to thedevelopment of industry sectoral environmental strategies. For waste companies this points to the needfor yet more focus in catering for highly variable sectoral demands against abackground of Integrated Pollution Prevention & Control (IPPC) targeted atindividual supply chains and their ecological footprint.
Scale economies and geographiccoverage combine in a way never seen before in the sector. It can now operate on a platform which candeliver the Governments Waste Strategy within the context of the freemarket. The waste industry will play akey role in developing the pace and cost of that process. In this latter process it is no differentfrom the development pattern found in many other supply chains whether it wasthe car industry in the 30s, British retailing in the 70s or the logisticsindustry in the 90s. As in those othersectors, for those caught up in the process life will be tough and willprobably get tougher but at least they own a sector that is undergoing thechallenge of change with all the opportunities that go with it.
Response by Biffa Waste Services Limited to LimitingLandfill
(i) Whist acknowledging the relatively narrow focus; on municipal and a fewselected industrial wastes, we welcome the thrust of the Landfill Directive.
(ii) End of piperegulatory or fiscal instruments in the form of taxes, bans or targetedreductions should be developed in the context of an integrated framework of policiesappropriate to materials and products.
(iii) We agree that carefulthought is needed on percentage composition analysis.
(iv) Data collection is ofcentral importance to this issue. Yetagain effective policy formulation isbeing thwarted by a failure on the part of the Environment Agency to develop anational infrastructure for waste flow reporting involving landfill operators andLocal Authorities.
(v) An outright banon all organics into landfill at whatever date is impracticable in current circumstancesand would bring legislation into disrepute.We prefer the phased introduction of progressive reductions of 25%, 50%and 65% by the extended dates specified.
(vi) At levels of 15 per tonne (by 2004) the Landfill Taxalone will not achieve this objective.It needs to operate at levels at least double that to provide effectiveincentives for material diversion.
(vii) We support the introduction of a Tradeable Permit regime between LocalAuthorities based on targeted reductions by specified dates against starttargets based on population and per capita average arisings.
(viii) Consultationdwells obsessively on municipal refuse.Government should not underestimate the volume of organic materialarising in commercial sources and should take note of the probability thatcosts of organic collection from the municipal stream can be reduced ifmunicipal and commercial strategies are integrated.
(ix) The keyoperational factors we perceive are:
planning strategy for new processing operations,
composting standards,
health & safety issues in organics processing,
process technology investment relief,
interaction with other organic sectors (sewage,brewing, packaging, etc),
home composting monitoring and standards/measurement,
data collection and management,
information technology protocols,
financial/pricing drivers,
additional Landfill Tax classifications,
Tradeable Permit regimes,
process equipment investment write-off,
tax treatment of landfill derived compost/soilconditioners.
(x) Implementation ofthe Landfill Directive should form a keystone focus for the wider integrationof budgetary, fiscal and regulatory policies involving more joined upthinking between EA, DETR, DTI and the Treasury.
(xi) We believe poormanagement of CA sites is a key contributory factor in reported increases in(so called) domestic waste tonnages. Itis ludicrous that these - largely unmonitored - flows from commercial sectorsmight possibly underpin a strategy which justifies knee-jerk investment inlarge scale EfW schemes without deeper study and analysis.
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