This Issue

Opening Doors to Recycling Innovation

green-economy
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By Alexandra DeLuca

The invention of former New York City recycling head Ron Gonen, the Closed Loop Fund tackles how to reuse products and packages as part of the supply chain of the manufacturing process.

In his office near New York City’s Union Square, Ron Gonen takes to a whiteboard for a quick geography lesson. His sketch of the United States, pinpointing major cities, is soon overwhelmed as he draws route after route showing how trash is trucked around the country looking for landfill space.

“NYC garbage goes to landfills in South Carolina, Pennsylvania, and Ohio,” Gonen, a former deputy commissioner of recycling and sustainability for New York City’s department of sanitation, says. “Toronto pays to send its garbage to Michigan. Sacramento sends its garbage to Utah.”

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Co-founders Ron Gonen and Rob Kaplan. Photo: Neil Landino

These are just a few examples, he says, of an unfortunate ecosystem that not only trucks tons of recyclable waste to landfills across North America but one that eliminates local jobs as well. “The great thing about recycling is that when you recycle, local industry has to process it as opposed to when you send to a landfill.”

It is an evolving—emphasis on the gerund—time in the recycling industry, which has expanded in recent years with multiple players entering the market, from massive multinational and national billion dollar companies to small, family-owned businesses. The last decade has also seen significant innovation enter the field—such as optical sorters, which recognize and sort different materials, Radio Frequency Identification (RFID) tags to identify products, and trucks using fully automated arms. But there is room for improvement. A 2015 report by the Natural Resources Defense Council and As You Sow found that the United States recycles only half of discarded packaging and 34.5 percent of municipal waste.

Enter the Closed Loop Fund, founded in 2013, which describes itself as a “social impact fund investing $100 million to increase the recycling of products and packaging,” with goals of creating more than 20,000 jobs locally, diverting more than 20 million tons of waste from landfills, and eliminating 50 million tons of greenhouse gas by 2025.

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Created by some of the United States’ most well-known consumer brands, the Closed Loop Fund is providing zero and low-interest loans to cities and recycling companies to improve recycling infrastructure. Photo: Brent Lewin/Bloomberg via Getty Images

“I had been thinking for a while about how to organize the largest consumer goods companies in the world to collate their capital in one place that could then be used to solve systemwide obstacles [in recycling], which they would benefit from if they were eliminated,” says Gonen, the fund’s CEO and co-founder. “The issue I had was the amount of capital required from each of these companies was going to be challenging to access because it would require CEO or top executive sign-off. To get that from the top consumer goods companies—some of whom are rivals or in different industries—was going to take years.”

That is where Rob Kaplan came in. Now a managing director at the fund, Kaplan was, at the time, leading product sustainability at Walmart, “which was seeing a lot of bottom-line benefits from recycling but saw limitations in the infrastructure that existed. They wanted to know what needed to be done to build out that infrastructure since they saw such a bottom-line benefit to recycling,” Gonen says.

Together, Gonen and Kaplan worked to build out the fund in two years, amassing 10 backers from some of the largest retail consumer goods companies in the world, such as PepsiCo, Coca-Cola, Unilever, 3M, and Colgate-Palmolive, each with a $5 million minimum investment. Gonen says the 10 investors saw the “tremendous promise in the financial product, and in most cases our argument was compelling enough to sign off on a large investment.”

Thus far, Closed Loop Fund has made seven investments in the recycling industry. It has invested in recycling equipment for a facility in Chicago; recycling carts for Portage County, Ohio; and trucks and carts for a facility in the Quad Cities region of Iowa. QRS Plastics, a facility in Maryland that processes hard-to-recycle plastics—numbers 3 to 7—from recycling companies on the East Coast, also received backing from the fund.

From public companies to municipalities, the investments vary in location as well—with a focus on increasing the recycling infrastructure in previously underserved regions. “In the Northeast and Mid-Atlantic there is good infrastructure. On the West Coast and Pacific Northwest, there is fairly good infrastructure,” says Gonen. “The infrastructure is generally not as good in the middle and in the south of the country.” When evaluating potential investments—the fund has received more than 160 applications—Gonen says they ask themselves a few integral questions: Can this project scale? How many tons will it divert? Can it provide the needed reporting? Can it pay back?

“We are representing capital from some of the world’s largest consumer goods corporations that want this material back in their supply chain, so we need to invest in projects that will provide significant amounts of material back in the supply chain,” he says.

Closed Loop Fund is also looking to invest in a solution for the building industry that could use recycled glass as a replacement for fly ash, which goes into cement. It also could help solve a big obstacle in the recycling industry: Currently there is no market for recycled glass, which is hurting profits at recycling companies. “This is an opportunity for the building industry to become much more sustainable. Rather than using a byproduct of coal, you are using recycled glass,” Gonen says. “So we are working on [an] investment in the two companies that have that technology, and Google is looking at potentially being the first to use it in their buildings.”

It is Gonen’s hope that as things improve on the technology side of recycling, they will also improve where recycling begins—at the individual level. “The macro issue is that business and citizen don’t recognize the cost of not recycling,” Gonen says. “The cost of not recycling is not, unfortunately, ‘I didn’t do the right thing.’ You pay to send it to the landfill.”

“People say, ‘I know it’s the right thing to do—I should do it,’” he says. “What we need them to say is, ‘Of course I recycle. I don’t want my tax dollars being used to send things to a landfill.’ If we can overcome that obstacle, then behavioral change happens in a major way.”