Podcast: Scott Donachie and Daniel Robin on the Evolution of Zero Waste

Highlights from the Conversation

Scott, I’d love to hear a little bit about yourself and about how you got into Companies for Zero Waste.

Scott Donachie:

• I launched Companies for Zero Waste two years ago. I have a background working on Wall Street, running hedge funds meetings for raising capital, and I’ve worked in banking for 10 years. But I got pretty burned out on it, and I’ve always had a really big passion for the environment.
• I saw the struggles a friend of mine had with his door-to-door compost collection business in New Jersey. There are a lot of regulations really prohibiting him from expanding his business. I did a lot of research and found out that in New Jersey alone there are over 400 dormant landfills, and there’s a huge issue with waste.
• While doing that due diligence I saw the opportunity: why can’t we do something that would really accelerate the whole movement towards zero waste? We’d connect the right people, (the investors, the policy makers, the regulators, supply chain directors), so that we can start understanding that waste needs to be redefined as resource optimization. It’s been a great journey for the last two years and I’m super excited about next year and the things that are on the horizon.

Let’s talk about your timing in starting Companies for Zero Waste. If you started ten years ago or fifteen years ago, would you have had the same reception?

Scott Donachie:

• When I started two years ago, we were either branded as a special interest group or we were put into that bucket with the zero waste certification people that are out there with 90% landfill diversion.
• What’s happened is that the market has changed in the last two years. And I really feel that zero waste is going mainstream.
• Companies like McDonald’s have a zero waste program and they’re getting excited about working with companies that are out there like TerraCycle, or they’re starting to look at packaging differently.
• Now companies are embracing it and saying, alright, what can we learn from our peers and our supply chains? Maybe we don’t want to keep it so it’s just us looking at our supply chain, maybe we can learn and collaborate with other supply chain directors, CEOs, people in operations and material engineers to find out how we can start doing business differently.
• I’m excited about it, because people are now answering the emails and taking the calls and they want to find out how they can get involved.

Daniel, I’d love to hear about you and your background in sustainable investment, and how you got involved with Scott and Companies for Zero Waste.

Daniel Robin:

• We’ve been involved in the sustainability aspects for business since the late 1990s.
  At that time there were some pretty significant gaps in the continuum in the funding for new ventures, and in particular new kinds of clean technologies.
• For example, it wasn’t called “cleantech” back in those days, we coined the term “sustainable tech” because it just wasn’t profitable yet, or understood very well. Later, starting around 2002, with some of the first Cleantech Venture Forums in Toronto, a small group of us investors realized it had become viable… the “new, new thing”.
• The fact was then, and it’s still true today, that extracting inefficiency and waste is often really profitable. It can make more money than just incremental improvements.
• What is waste but just resources that are in the wrong place? When you can take a resource that is currently a liability, and capture those and return those to the supply chain, and create a value out of a liability.
• I’ve called myself a “venture catalyst”, because we were trying to help younger companies that had good cleantech ideas get commercial-ready.
• It has evolved to the point now where we’ve got solutions everywhere for the problems facing us, and there are more innovations on the way.
• There are even lots of innovations now in business models rather than the fundamental tech. But still technology innovations are going to have their place, and so we’ve scaled that up to where we’re seeing mid-market project finance that makes a lot of sense, and the capital is available for this to scale and solve the critical problems of this world.
• It’s kinda shocking to say, “well if we’ve got the money then what else do we need?”. Well the things we need are understanding, collaboration, political will, and business people mobilized to solve these problems.

Daniel, I’d like to ask you the same question I asked of Scott: what’s happened in the last few years to change sustainability and circularity from a “nice to have” to a profit and margin improvement opportunity?

Daniel Robin:

• There’s an interesting parallel in the electric vehicle (EV) market. EVs have been around for a long time: golf carts and whatnot. Well what’s causing them to start finally to take off and gain mainstream acceptance?
• A lot of things just take a long time to commercialize. I think the big limitation on EVs remains the power storage. But if you look at the market penetration right now for electric vehicles, battery electrics in particular, it’s not there. And it needs to get there and it’s going to gradually reach the scale that’s necessary to actually make a difference to decarbonize the whole transportation scene.
• Electric and hybrid are happening more on buses, and soon you’ll see more air travel, trucks, long distance haul trucks. It just depends on the sectors and economic drivers and inhibitors.
• I don’t know the exact causes, but there is much more consumer sentiment now for sustainability and cleaning things up. I think it has something to do with health, and something to do with the fact that we are living in an ecosystem, and we’re in a symbiotic embrace with that ecosystem, and if the environment isn’t clean we can’t be either.
• Hurricane Katrina was an interesting moment—that had a lot of folks interested in sustainability, and more concerned about our long term viability as a species.
• People talk about this a lot: during the COVID pandemic we’ve seen fewer commuters, and there’s less air pollution: cause and effect. So you’ve got to wonder who is having this effect, what’s the carrying capacity of the planet, and so on.
• There’s been an incredible increase in interest in doing the right thing—being responsible—mixed with the business side: creating good jobs, finding profitable models, and converting products into services.
• That’s another good business model innovation. For example, you don’t really need a car, you need the services of a car: mobility and transportation. Sometimes it’s called leasing but there are other innovations on top of that.
• This is true in my world, and I’m sure in yours and Scott’s too: we all are much more interested in health and sustainability and wellness. And taking care of ourselves and taking care of the planet goes right along with that.

Scott, looking at your conversations within Companies for Zero Waste, what is your cohort talking about in the context of supply chain and more specifically, their asset disposition life cycle management?

Scott Donachie:

• A year ago we had a big meeting in Newark with about 350 sustainability experts. Everyone—supply chain directors, CEOs—were still just focused on what’s in their own wheelhouse. If a supply chain director was in energy, they wouldn’t want to necessarily find out what was happening in, say, the textile industry.
• What’s really wonderful is that now people are starting to work outside of their supply chain and are finding out about other companies, and the issues they’re running into.
• For instance in the fashion industry, everyone knows each other. Or if I go into e-waste they all know each other. It’s a very small market, much smaller than I thought. If I look at e-waste, there’s this massive problem and I see that there are three or four real thought leaders in the United States leading this space.
• But what’s happening now with this whole evolution of zero waste, is that now companies are recognizing that they can learn from other experts that are in supply chain or sustainability or investing, and they’re running into the same type of issues with water or energy consumption and are looking at things holistically.
• People over the last ten months are taking a step back and looking at other industries. They’re not just vilifying any one industry, for example, just throwing out the oil and gas industry. They’re thinking, “let’s find out what are the gaps they have today, and how can we work together to accelerate everything towards a more circular economy or supply chain”.
• People don’t have to look at the lens of, “OK, we need to switch our whole linear supply chain over to circular, and it’s going to cost too much money, so let’s just punt and not do it now”. Instead, now it’s, “OK, let’s try this and see if it works”, “let’s see if we can scale it up”, “let’s look at zero waste design”. I think people in the United States are starting to take that type of view, and Europe is helping to accelerate that.

How do you help people understand that the “feel good” is great, but this is actually going to help your business be more profitable?

Scott Donachie:

• I’ll give you an example. I worked with Stephanie Banedetto from Queen of Raw, and she captures a lot of textile materials that would normally be sitting in a warehouse for two or three years, and they repurpose them to make clothes.
• I was completely shocked from working in hedge funds and in software technology and innovation. Why is it that the innovation isn’t there? Companies that go to tier 14 or 15 in terms of vendors, and they’re doing things on spreadsheets or using paperwork. I was really surprised by that.
• But what I’m finding now is that through companies sharing stories, things are changing.
• The e-waste industry is fascinating to me because you’ve got billions of dollars of precious metals going into landfills every year. You see these videos of young children burning motherboards, getting paid a dollar a day, and you just sit there thinking, “I just don’t understand why there’s billions of dollars of precious metals going into the landfill.”
• There’s an opportunity to make a lot more money doing good for the environment and also solving social problems. Those 3 things are really going to move forward in 2021.

Daniel, are you helping to fund projects that enterprises take on in the migration toward circularity and sustainability, and are you also funding innovations in the sector like you might do in a traditional venture kind of role?

Daniel Robin:

• The main thing we do is what’s called mid-market impact investing. You may have heard the phrase. A lot of folks are new to it, but it’s amazing to me how long that term has been around and still folks go, “what impact, what do you mean?”.
• Impact investing means the triple bottom line: social, environmental and profit. It came from the more philanthropic NGO not-for-profit purpose-driven kind of investments.
• The global impact investment network (GIIN) has a great annual report that explains what’s going on in that space. It’s quite profitable to be centred on environmental and social benefit. Usually it’s one or the other, or in maybe some cases all three. But the triple bottom line is kind of a parallel to the environmental, social, and governance (ESG) side of the equation. Mid-market projects with existing tech are really quite scalable and profitable and have been taking off.
• I suppose we’ve been at a tipping point for quite a while and now we’ve tipped.
• The demand, the interest, and the number of projects and developers have gone way through the roof—in a good way and to a next level of activity. People are coming online with teams and project proposals that make a lot of sense.
• There’s still and there always will be room for fundamental innovation working out issues and inefficiencies capturing waste.
• For example, any time there’s a change in a resource that can be used more efficiently. If you don’t truly make the most efficient use of the materials, then somebody is going to come along and figure out a way to do that—they’ll be more profitable and they’ll be the new leader. That’s the way it works. These are the kinds of fundamental innovations and I see that across every sector.
  • A good example of that would be the rubber from car tires. The manufacturers of tires are now sourcing recovered carbon black, because the old way of making it from petroleum is dirty and getting more and more expensive. Recovered carbon black now meets all the same specs and actually performs just as well and in some cases just a little bit better. It can come from the tires that were used and then disposed of so that’s the circular economy in action.
• But mostly the capital markets and public equities right now are still pretty frothy right now (and over valued in some areas) with negative interest rates for banks who are just sitting on money, and private wealth just sitting there.
• The mid-market project finance side has really been going and growing steadily with consistent results, proving just how much money is to be made doing the right thing. And that’s across the board for renewable energy, certainly agriculture, food systems, water.

Have ROIs changed, and have break-even points changed? Because now I’m sure you’ve got 30 years of data. I would suspect that in your modeling you can show people when they can make their money back.

Daniel Robin:

• There are more modest returns in certain sectors. For instance, solar now has thankfully become quite popular, at least in the US and developed countries. Often if you’re looking to set up a utilities-scale solar farm you might have more modest returns—ours are below about 10%.
• The price of electricity for the offtake for that electricity is lower, because it’s competitive—and so it should be. But in other markets, where there’s no better option because they don’t have cheap grid power, and the cleaner the power there’s the assumption that it should cost more.
• We have quite an entrenched infrastructure here in the US, and in California for a while there was an oversupply. You’ve heard these stories where they had to pay to get rid of electricity—well those are the exceptions. For the most part our renewable energy is derived from solar, wind, and small hydro. Even now we’re starting to see examples of where waves can be captured, tidal power; all of these things are quite profitable, with typical internal rates of return (IRRs).
• I don’t know if this means anything to the non-financial folks, but the internal rate of return, the profit measure that matters most, can certainly be above 10% and into the mid teens: 12%, 13%, 14%—that’s good money for any measure; that’s pretty significantly profitable.
• Mostly it’s quite profitable to extract these wastes for corporates that want to add utility-scale, greener, cleaner energy. It makes a lot of sense these days. It’s cheaper than coal, so in fact the whole idea of renewable energy as a commodity, the profit is there, and it’s quite compelling.
• At the zero waste side, however, you still have to decide what you do with solar panels or wind turbines after 25 or 30 years. You’re going to have to recycle just like you would with any e-waste.
• There’s also a lot of new jobs, good jobs being created around that industry and half a dozen others I could rattle off, it’s quite a compelling time.

Consumers take for granted that we recycle our garbage, and we expect to see the recycled plastics and cardboard. But enterprises always want to buy brand new from the OEM, and it feels like a risk to them to buy something that is pre-owned. How can we improve the way these assets move through the continuum of the supply chain from company to company?

Scott Donachie:

• This is what gets me excited about zero waste: companies working together.
• At one of our supply chain meetings, a company was speaking about how they’ve up-cycled over a million pounds of medical waste into infrastructure that’s going to last 80 to a 100 years. It’s a collaboration between two big OEMs, and it’s really exciting to see.
• The plastic that’s being used is less expensive than virgin plastic, which is amazing because it’s post-industrial waste, so it’s doing good for the environment. They’re driving more efficiency in their supply chain and they’re creating something that is going to last for 80 to 100 years.
• We’re seeing more and more of these partnerships taking place between companies and the government to find out how to collaborate together to capture some of these waste materials and repurpose them.

I was talking to a copper recycler who told me that he was having trouble selling his copper even though it was cheaper and still meets the same metallurgic standards of newly mined copper. The problem was that even though everyone was asking for his recycled copper, he couldn’t get enough used metal, which made his output inconsistent, and therefore he couldn’t get contracts because his customers needed reliable output. How do we solve problems like this?

Daniel Robin:

• Let me jump in on this one because there are examples across the board of recycled materials in many different industries now.
• Tires are a great example. In the example I gave you before with the recycled carbon black, they can now access these materials at the same or better prices that are coming from recovered materials.
• But from a corporate point of view it really depends on waste intensity. What are the main things being used by that company, what are the drivers? If they’re using a lot of energy then their energy footprint is most important, if they’re using other materials to run the company then that’s where they need to focus.
• I mentioned solar and wind energy because those are the most familiar examples. Scott was giving you an example of the medical waste—it’s mostly plastics. There are so many calories locked up in that stuff, and that could be used for energy. There’s lots of different processes that make sense, but my preferred one is thermochemical decomposition.
• There’s also thermochemical de-polymerization, pyrolysis, gasification—all these kinds of pathways are quite clean.
• Pyrolysis has no air emissions per se, and even though California got off on the wrong foot on that, those are examples where you can take a plastic or mixed municipal solid waste— whatever’s got calories in it—get the calories out, and that reduces the mass of the thing significantly. You end up with a charr that hardly takes up any space.
• If you start off with a dry biomass, this is a celebrated pathway to biochar, which is something we have way too much of here in California, and you end with quite a profitable path and the energy that is produced from that makes a lot of sense, if you can secure the feedstock for it.
• If you’ve got the raw material in then you solve this scale problem on the output for a consistent supply of energy. Often there’s three factors: there’s a solid, a liquid, and a gas component. The gas is really the energy, the solid is often a product unto itself (and that’s the case with recovered carbon black, carbon black is actually more valuable than the energy that comes from that pathway).
• Anyway, these are the pathways that are now well proven. Some of these solutions have been on the market for longer than a decade, commercial operations at scale, so it’s no longer a question.
• Maybe 15, 16 years ago it was seen as a wild new frontier. But it’s now established and there’s no doubt about it. Michelin North America is committed to using recovered carbon black, they’re going to phase out the furnace stuff and a lot of others are doing the same thing.

Sometimes I’m giddy just being in supply chain doing what we do, because circularity and sustainability are a really cool spot to be in right now. What do you see looking forward as we move into the new year?

Scott Donachie:

• I think we have all these buzzwords out there: circularity, green, sustainable, zero waste, climate change—and everyone is tackling these, but I feel the days of just looking at corporate sustainability reports and looking in the rearview mirror are over.
• I’m confident now that companies are coming out and they’re looking at ways to cut costs, looking at their assets, look at their overall balance sheets, and taking proactive approaches to waste and really redefining it.
• What excites me about this too is that the younger generation really gets it. Six months ago my son, who is a material engineer RPI, wrote a cover letter about changing mass consumerism. I nearly spit out my coffee because I don’t talk to him about what I do for a living. But his friends who are all 18 years old, they get it, they get zero waste and they have a different lens than us.
• So like anything else when you see the youth embracing it you get really excited because these kids are younger, they’re very technologically advanced, they think differently than us, and I’ve always noticed with trends that when the younger generation is in there it’s definitely going to change and it’s going to change quickly.
• Companies are starting to come out and share their stories. They’re saying, “you know what, we have this issue. We’re a big auto manufacturer, we’re not perfect, but this is what we’re doing to move towards zero waste. How can other people help us, even our competitors, and what can we learn from some of the mistakes that have gone on for the last ten years?”.
• That’s where I see things moving forward for next year: more transparency, more trust. I’m realizing too that some of these issues can seem really daunting, especially when I speak to Daniel, and we talk about regulators, policy, geography and getting all of the right stakeholders to the table. But at times it’s not—it’s just about getting those people together to understand things that are outside of their wheelhouse.
• If you put a banker in the room with a sustainability director or with someone who has a PhD in chemistry, though, it can be really hard. They don’t understand what the other person is talking about.
• But I’m noticing over the last six months, especially during the COVID that people are starting to go outside of their wheelhouse and go, “what can I learn from the banking sector, where are they investing, why is this important?” “What can I learn from a sustainability director even though I work on Wall Street?”
• People are starting to open up their minds that way so that’s what’s really exciting about next year.

Daniel, considering that you represent 30 years of experience, and you’re advising Scott’s consultancy and networking group, how do you want a group like this to be effective? And how does that affect your own personal business and what you guys are funding and going after?

Daniel Robin:

• My big bold prediction for 2021 is that we’re going to survive all this somehow.
• But to key off what you were saying, it’s about the measurement, transparency, and trust aspects.
• I think a better definition of trust is predictability, being able to predict what the other party is going to do, even if you don’t like it exactly. Being able to predict and understand  them is essential, because the more important task is the collaboration that must unfold.
• It’s about working with others that you share differences with. These aren’t words that you don’t hear much: co-opetition with frienemies.
• What’s co-opetition? It’s collaboration and competition at the same time. But you have to watch the boundaries, and not disclose stuff you’re going to regret later.
• But taking a leadership role to “co-opetate” with frenemies, with companies you might not normally work with, means that you get out of the silos and go and cross disciplines and learn from everybody and everything that could possibly happen.
• I’ve never bumped into anybody else that’s doing similar kind of access to funds. We make funds available that break some of the common sense rules of banking. We’re using banks but we’re not approaching it at all in a conventional way.
• Most folks that know banking and finance are very confused at first when they talk to us. The teaching and learning piece of this, the ability to actually listen to one another, being able to understand what somebody else is saying, that’s still the gold in the current economy. It’s a little trickier through Zoom perhaps, but it needs to happen and it is happening, so the drivers of waste to value are really less the bottom line, and more the need to survive.
• There’s economic upside on doing the right thing, there’s economic upside to being more efficient, waste always pays, there’s a dividend to being more efficient. I remember a couple of decades ago, most folks didn’t want to put recycled paper in their inkjet laser printer, they didn’t trust it, and it’s still a little more expensive.

If I say to upper management, “Let’s be honest, I’m going to speak to your capitalist heart. It just so happens that if you embrace the circularity concept, your business becomes more healthy and profitable and you’re inevitably falling into environmental patterns that are great for everybody.” How do you feel that conversations like that might change the pace and the practices of what people are adopting?

Scott Donachie:

• Well that’s a really good point. I feel like from our lens, when we’re talking to somebody we need to be like a chameleon sometimes. So if I’m talking to someone who is a director for sustainability programs and they’re running reports that’s different than talking to a CFO, that’s different than talking to a supply chain director.
• So I know that we need to change our language. I think a really wonderful phrase I read about a year ago was “word pollution”. We have a lot of that in this industry which is really interesting, because if you go to finance and start talking about circularity and saving the planet they’re going to hang up on you.
• It’s not that they don’t care but it’s what’s in front of you, what’s the shiny object, what’s preserving your job, what’s driving your company, is what matters. So when you go in and you speak to someone, a decision maker that’s a bean counter, you say, let’s talk about assets, let’s talk about profitability. Because there’s so much we can sink our teeth into with inventory and with depreciating assets and all these different things that happen at a corporation that are not efficient.
• I’ve worked in Fortune 500 companies, and the fact is that the left hand doesn’t know what the right is doing many times, and that’s okay. Many companies don’t know where to start and they’re intimidated so they walk away.
• There’s a big misperception that they are going to be vilified. But  if we jump in, roll up our sleeves, and have a roundtable discussion with other experts, their lens in going to change, just like it does with my 18-year old son. It’s very hard to teach like a 55-year old CEO about changing their linear supply chain. But when you start talking the same language with them, all of a sudden they open up and start listening. So I think there’s a really big opportunity for this especially for the C-suite next year.

Daniel Robin:

• It is about profitability, it always was and it always will be unless you’re a non profit, in which case it’s still about profitability—you just don’t get to keep the profits.
• I agree with you, I think the real question and the challenge in all of this is the time horizon for profit. Is it going to continue to be about the quarterly earnings and nothing else? Are you going to milk the cash cow until it falls over? Draining the last bit of a familiar profit stream, because it seems like the fiduciary responsible thing to do, is one thing. Leading in a new direction, for the longer term, sustaining profits, and more of them, that’s the real goal.
• The quarterly, it’s a big problem in capitalism. The holding to the near term, the popularity contest as they call it in the public equities, the popularity of a stock, and the frothiness that can come from the perception of limited supply and demand.
• But it isn’t a weighing machine, it’s a voting machine. The weighing of the value of the thing is what’s told over time. And the sustainability of that is a reflection of what’s really going on the entire supply chain, including the consumer and the end-of-life of that product. How does that story get told? And what are the longer term future revenue streams, and ultimately the margin contribution, that companies need to be looking for right now? Those are the real questions.

Any last minute thoughts on what’s coming up for zero waste, or just for closing out the year?

Scott Donachie:

• Well, this sounds like a selfish plug, but I would like people to check out our website, and what we’re doing.
• I think a big part of the movement moving forward is for people to get out of their comfort zone. If people want to learn they can come to our meetings and hear what is going on.
  Things are going to move really quickly in 2021. I’m feeling a huge pent-up demand for this.
• Companies are going to start working much more efficiently, and are seeing that we can learn so much from our peers instead of working in silos.

Daniel Robin:

• I think the thing to look for from all sides is complete transparency in the supply chain.
• Measure everything and be as transparent as possible—now that’s earned trust.
• Be transparent about the progress that was made, as well as distance yet to go. To quote Tom of Tom’s of Maine: “it’s not about perfection, it’s about progress”.
• The rate of progress, and sincere efforts to do the right thing also matter. Accelerate that. Get on with it, really focus, honker down. Invest heavily in getting to the right results. And then talk about it, that’s what we want to know, what everybody wants to know.

More About Scott Donachie

Scott began his career as a top producing equity trader with Knight Securities, a Wall Street stock trading company that went public in 2000. He has served as the head of commercial lending at the Bank of America, and has lead impact investing at several major firms.
Follow Scott Donachie on LinkedIn >

More About Daniel Robin

Daniel is an impact investor, renewables and cleantech finance advisor, speaker and educator. He has taught for many years as an adjunct professor at the Monterey Institute of International Studies. He is an accredited financial analyst with an Emerging Markets Credit.
Follow Daniel Robin on LinkedIn >