One of the most visible signs of the recession is the drop in construction activity across the nation. Unfortunately, this dynamic has a direct impact on the solid waste industry, as a significant portion of many firms' business comes from collecting construction and demolition (C&D) debris and disposing of it in landfills.
After the housing market's woes became apparent in late 2007, the construction slump spread quickly across the country. A recent study by Goldman Sachs concludes that C&D tonnage delivered to landfills will decline by as much as 14.1 percent this year.
Furthermore, a growing push toward more environmentally friendly construction processes could make a permanent dent in the amount of C&D material headed to landfills.
In addition to throwing people out of work, slowing consumer spending, depressing real estate values and reducing the amount of trash thrown away, recessions also influence the development of cost-saving changes. “Green” construction is viewed as a long-term cost-saver for building owners. For example, green designs employ more energy efficient heating, air-conditioning, lighting and other building systems.
Governmental and societal trends also are pressing facility owners and developers to go beyond building techniques that cut operating expenses and find ways to extend green benefits to the community. Additional benefits include buying local materials to reduce the use of fossil fuels in transporting goods and choosing locations near mass transit stops. The benefit important to the waste industry is C&D recycling, which aims to make more efficient use of leftover materials and save landfill space.
First things first, though: What is the recession doing to the construction business?
The recession started almost a year-and-a-half ago when the housing bubble burst. Sometime during 2008, the commercial construction industry followed housing into decline.
As everyone knows, the tumble has been dramatic. In mid-March, Ken Simonson, chief economist with the Associated General Contractors (AGC) of America, found that “the value of new construction starts in February slumped 8 percent. … Nonresidential [commercial and institutional] building and non-building construction [projects such as roads and dams] each tumbled 13 percent.”
On the other hand, the Census Bureau reported encouraging news about residential construction. Housing units begun in February 2009 rose 22 percent compared to January, including a 1 percent hike in single-family house-building and a large bump — 82 percent — for multifamily projects.
Encouraging, yes, but there is always a downside these days, notes Simonson. While February 2009 was better than January 2009 for both single-family and multifamily work, that's not saying much. The numbers for February 2009 showed huge declines when compared to those from February 2008: single family starts plummeted 51 percent, and multifamily starts fell 41 percent.
The Waste Effect
When construction activity declines, so, obviously, does the amount of C&D debris. Most mid-sized and larger waste companies handle diversified portfolios of business and limit C&D to 5 to 15 percent of total revenues. By and large, then, the damage done to waste companies by declining C&D tonnage will be limited.
Phoenix-based Republic Services reports that C&D accounts for 15 percent of its business in good times. “As the recession has deepened, we've seen that percentage drop off,” says Todd Holmes, chief financial officer of Republic. “Today, it is probably between 7 and 10 percent of our business.”
C&D accounts for a smaller percentage of revenues at Cincinnati-based Rumpke Consolidated Cos. “Less than five percent of Rumpke's business is C&D waste,” says Amanda Pratt, the company's corporate communication manager. “Still, we have also seen a decrease in C&D business.”
While these numbers don't sound too serious, the impact on local hauling divisions of large companies and on small companies can be devastating. At Republic Services' Chicago branch office, the C&D roll-off fleet has been decimated. A year ago, the branch was running about 90 roll-off trucks. “Today, there are 46 trucks on the street,” says Bob Kalebich, general manager of post collection services at the branch office.
Planning for Recovery
After the recession, the recovery very well may see the development of a new environmentally friendly C&D collection and recycling industry that will continue to reduce C&D tonnages going to landfills.
Programs like Leadership in Energy and Environmental Design (LEED) are fueling the trend. Developed by the Washington-based U.S. Green Building Council, LEED certifies building projects based on four categories (from least to most sustainable): certified, silver, gold and platinum.
Attaining each level of certification requires earning points for incorporating sustainable features into the project. Point categories include sites, water, energy and atmosphere, materials and resources, indoor environmental quality, innovation and design process.
Each category offers a number of points. In the materials and resources category, a project can achieve up to two points for C&D recycling. A project that recycles 50 percent of its construction waste will earn one point. Should a project recycle 75 percent, LEED will award it a second point.
Architects and contractors say that LEED has become a benchmark for quality, environmentally friendly construction in the commercial and institutional sectors. LEED offers a homebuilding program, too. Other programs certify commercial and institutional buildings as well as green homes. All involve C&D recycling.
LEED and its counterpart programs are driving the emergence of a new business model that recycles C&D debris. “Construction recycling is a swiftly growing service,” says Rumpke's Pratt. “In Cincinnati alone, we are working on nearly 40 green building or construction recycling projects.”
To facilitate recycling and recordkeeping on a LEED project, for example, Rumpke sets out roll-off containers for each type of recyclable material at the jobsite. When a container is full, Rumpke delivers it to the appropriate recycling vendor, making note of the weight. At the end of the project, Rumpke totals the weight of the recycled materials and computes the percentages of material recycled and landfilled.
According to the U.S. Green Building Council, C&D recycling opportunities vary with geography. In dense urban areas, waste companies can choose between site-separated and commingled recycling paths.
“Some [construction] firms separate C&D on site,” says Robert Reed, a spokesperson for Sunset Scavenger and Golden Gate Disposal & Recycling in San Francisco. “Because of space constraints, most construction and remodeling projects here put different materials together in the same debris boxes.”
Golden Gate then separates and processes the materials, totaling the tonnages and volumes, in a dedicated C&D recycling plant.
LEED didn't drive the development of C&D recycling in Chicago — city government did. A Chicago ordinance requires all construction and demolition sites in the Windy City to recycle at least 50 percent of their C&D debris.
Like Sunset Scavenger, Republic Services in Chicago saves space on the jobsite by arranging for its customers to commingle C&D materials in roll-off containers. Trucks deliver full containers to the firm's new 1,500-ton-per-day C&D recycling facility. After workers have separated and sorted the materials suitable for recycling, what's left over goes to a landfill.
Not the Same
A significant C&D recycling movement could affect different waste companies differently. For example, a hauler with no landfill might benefit from lower landfill tipping fees. A landfill owner could conserve airspace, but lose fees. A hauler with C&D recycling will generate additional revenues and, when commodity prices are high, profit from the sales of recyclables.
Whatever kind of waste company you have, it's likely your C&D business will never be the same again.
Michael Fickes is a Westminster, Md.-based contributing writer.