After getting its start in 2001 with organic fertilizers made from worm castings, TerraCycle, Inc. has become one of the fastest growing eco-friendly companies in the world. Today the New Jersey-based company runs free nationwide collection programs for non-recyclable waste materials in 26 different countries, with more than 350,000 collection locations.
The company’s founder and CEO of TerraCycle, Tom Szaky, sat down for an interview while filming a real-life docu-series for Pivot TV(Pivot.tv), a new channel launched by Hollywood producer Participant Media. His answers have been edited.
Question: How do you explain TerraCycle Inc. to those unfamiliar with your business?
Answer: Everything, one day, becomes garbage; the question is really a matter of when. Some things can be recycled, such as glass, polyethylene terephthalate (PET) (pop bottle), hydroxy-terminated polyether (HTPE), aluminum and paper. These are the things we put in our blue box systems.
The reason those things are recyclable is because the value of aluminum in a pop can, for example, is so high that it covers the cost of the logistics, like transportation, and the cost of melting it down and processing it. You can still make money, because the material just so valuable.
For example: If we made all of our objects out of solid gold, there wouldn’t be the idea of garbage, because gold is so valuable. But for something like a pen, gum and cigarette butts (which can all technically be recycled) it costs more to collect and process these items and that’s why they’re not recyclable.
Our job at TerraCycle is to recycle things that aren’t currently recyclable.
Q: So it’s more about profit margin and less about what can and cannot be recycled?
A: Yes. Some people think that recycling is this technical wonder. Like, some things can be recycled and some things can’t be. But the fact is that it has to do with money. Whether there’s money in recycling it.
So TerraCycle’s focus is: how do we make the non-recyclable recyclable? So far we’ve diverted 49,665,326 of waste units here in Canada by partnering with stakeholders like Kool-Aid, Schneiders Lunchmate, Mr. Christie’s, etc. that may care about those certain waste streams.
Q: Where did the idea for TerraCycle come from?
A: During my fifth year of high school, my friends and I started growing pot in our basement. It was very difficult to make these plants work. In fact, we didn’t get them working all that well. The next year, my friends went to McGill in Montreal and I went to Princeton in New Jersey. They called one night and said “these plants are growing incredibly well – you’ve got to come up.”
I drove up to Montreal and we had an ‘inspiring’ night and it turned out that the reason these plants worked so well was because my friend was feeding them worm poop – basically organic waste fed to worms.
We were in a very enlightened state, so we started talking about garbage and the philosophy and that’s how TerraCycle began – as a company trying to solve waste by making products out of waste.
Q: Where did the idea for TerraCycle come from?
I’ve always loved entrepreneurship. I was born in Hungary, which was still communist at the time, which is the opposite of entrepreneurship. There was just no possibility. Then we moved from Budapest to Eastern Germany, which was still under the Iron Curtain, and then Holland, which is a little more social and then came to Canada and lived here for 15 years. And Canada embraces capitalism very much.
I always loved the idea that if you had an idea, and were willing to put it out there, you could build your dream. Literally. And you can see the type of spaces we’re in: it’s like a manifestation of what we dream.
Canada really cares deeply about the environment. It’s just innate, and that really started having me think: could business be more than just a way to make money and could it be a vehicle to create environmental and social change?
Q: Were you always a passionate environmentalist? Or did your social entrepreneurial spirit come from a business opportunity?
A: I think it’s exactly that. I’d love to say that I was a hard-core environmentalist and figured out a business way to manifest my goals – but honestly, I started TerraCycle because I thought it would be a neat way to make money.
Garbage has a unique economic paradigm to it: people pay you to get rid of it. We pay a waste management company every week to haul away our trash, and isn’t it neat to be able start with negative material costs and then make a product that we can also get paid for? It was entirely business motivated.
But then I realized that there’s a lot of value in purposeful business. I think it’s a newer trend especially with younger people. If you ask our parents: ‘what’s the purpose of business?’ they’d say money to shareholders and profits. The real purpose of business is to stay alive and grow, which is a function of profit, but the purpose is what we produce, what service we provide. If we only have business for the sake of profit, then we create really bad choices. I’ve seen companies make horrible decisions that are justified by profit when it’s really not the right thing to do for their product or service.
And what I realized in this overall philosophical question was that there’s a lot of power in social business. A lot of doors open when you have really core purpose in your business. You get to interact with much more senior people than a normal company of our scale would be able to interact with. People are much more interested in getting the word out about us.
We get a lot of people who are really passionate who come here and it’s not about the paycheque. It’s about what can they can do to create change. In most jobs, it’s what can you can do to make money, but that gets boring after a certain point.
Q: Your company shares many of the attributes associated with the GenY generation...
A: People are getting more and more anti-consumerism, especially the younger generations. What’s cool now is having less, the sharing economy and DIY culture. I think it’s really just the thing, emerging layer -- because ours is still fundamentally a consumerist culture -- but maybe the generation that’s now coming up may get even more into that and then we could really change the problems. Because I think if you distilled every social and environmental problem, most of them tie to people buying too much stuff, at least ever environmental issue I can think of relates to over-consumption.
We wouldn’t have to worry as much about how things were made if we bought way less; it’s just the impacts are all magnified right now like crazy.
Q: Over the past decade, you’ve grown your business to an impressive level. But your real breakthrough came in 2004 when you landed some major clients: Home Depot and Wal-Mart. How did that change your business?
It started as a worm poop company. The hero was the product and the ‘‘what type of garbage can we make that product out of’ was secondary.
People advised us to start small, get a few local stores, then build up the brand then a decade later, call up Wal-Mart (the crusher of small businesses) but life’s short, and I’ve always been a fan of going for the very biggest and then working our way down from there, versus going to the smallest and maybe one year, later, going to the biggest.
So the first calls we ever made were Wal-Mart and Home Depot. We were really annoying to them and they finally gave us the meeting and they ended up listing our fertilizer products not only because they were incredibly green, but also because they were cheaper and more effective. We got listed and the business grew over time.
Q: So slow and steady wasn’t exactly your style?
A: We’ve always had this philosophy: how do we talk to the very biggest fish and then second and third? Because if you can change them, you can create really huge impact really really quickly. Working now with P&G (Febreze) allows us to have a huge impact because they’re one of the biggest companies in the world.
Q: What was a turning point for your business?
We had this huge turning point in 2007. We had grown the fertilizer business was like $3.5-million business and we asked ourselves: what’s the point of all this? Is the point that we’re a fertilizer company who happens to make their product out of garbage, or is it that we’re trying to re-imagine waste? And that’s a much bigger idea, so we said: of course, that’s the purpose. So we changed our focus and instead of making the product the hero, we made the garbage the hero.
We moved the question to: let’s look at every non-recyclable material and figure out what we make from it. What we make is almost secondary; in fact, it’s like our by-product – as long as we can make anything, we’re good to go.
That equation changed and we started really thinking well beyond ‘worm poop in a soda bottle’ into every single type of non-recyclable waste and how can we start a collection and recycling program for it. That’s what allowed us to grow now to 26 countries, because garbage is a global issue. It’s also nice because these large companies operate in all these companies so it’s easy to replicate these partnerships and it’s just continued to grow for 11 years now.
Q: What’s one of the biggest challenges or mistakes you’ve made?
There’s not one big mistake I can point to. The trick is not to not make mistakes; you should obviously not encourage them, but be open to accepting them as an organization. Learning from mistakes is the best way to grow. It’s not about trying to avoid touching it the first time because you’ll learn the lesson a lot faster if you burn yourself.
We’re a company that isn’t focused on profit. We actually limit our profit to 1 per cent of our revenue. Instead we focus on impact, but that of course makes financing much more challenging. So how do we raise capital when needed? That was a huge challenge to overcome.
We’re asking companies and people and now municipalities to fund the recycling of non-recyclables. It sounds great, but they’ve never needed to pay for this so how do we convince people that there’s a need to pay – that it’s worthwhile – and then how do they gain benefit? In the newspaper industry, if I said here’s a better form of paper to print the Globe and Mail on, that’s a relatively linear conversation; whereas ‘here’s something you’ve never done before...now let me convince you why it’s important and how you should pay and how you should leverage it.’ That’s a whole different question. That’s one of our biggest obstacles: convincing others and getting them to look at garbage in an entirely new way.
Q: What’s the vision for your company in the next five years and will it change?
A: I think we have a good answer to our future today, but as a business we rely on being highly innovative. I think the answer to garbage is a whole range of answers: people have to buy less, then there have to be many different systems, but it’s not like one answer solves every issue. There’s no silver bullet.
We’ve built a $20-million business having consumer product companies fund the recycling of non-recyclable waste, but I don’t want to see you in five years and be a $50-million. That’d be nice, but how do we get more aggressive than that?
I think the way to do that that is get major waste management companies in those countries in which we operate to buy into TerraCycle. For example, in Germany, the third largest waste management bought 25 per cent of my German, Austrian and Swiss business in the past year; the third biggest Brazilian waste management system owns a third; and recently, Progressive Waste Solutions, a public company in Canada just bought 20 per cent of our business in Canada. Now the benefit of that, beyond the money (which is a side point), is that we can use their infrastructure to create even more robust solutions.
How do we develop as many unique ways to get people to care and fund the recycling of non-recyclables – and how do we grow that and expand it as quickly around the world as possible? We need to keep going after more countries and more platforms and never being satisfied.
So hopefully, when we see each other five years from now, that we’re not a $20-million business but a $100-million. For us, it’s not the millions – it’s that that represents net total impact. It represents scale. How do we collect and recycle as much stuff that no one is recycling today?
Q: What’s the best part of running TerraCycle?
A: The thing that I get the most jazzed about in my job isn’t the economics. I was recently on a flight leaving Mexico and we had a three-four day business trip with our team there and I was exhausted. The stewardess comes up and gives me a drink and a bag of chips and, as I’m watching my movie, I turn over my bag of chips and there’s a TerraCycle logo on it that read: collect, send and recycle now in Mexico. I was like “that is what gets me going” because that’s real impact: that’s a billion chip bags! You can recycle it and how many are now being collected.
I just hope that one day, no matter where I am -- not just on an airplane leaving a country – but anywhere – you look and suddenly see that all these things that would end up in a landfill now have an answer. Because if we don’t do something, we’re going to one day wake up like in that movie Wall-E, where everything is covered because that’s the inevitable outcome.
Follow Katherine Scarrow on Twitter: