In this month’s edition of Business Insights, we summarize some of the highlights from the Environmental Business Journal’s (EBJ) annual overview and forecast for the $388 billion U.S. environmental industry, with a particular focus on the solid waste segment, which includes solid waste management, resource recovery and waste management equipment. We also touch on recent promotions in the industry.

Overall Market Size, Forecasts and Brief Outlook—The Sword and the Boomerang

EBJ estimated the total U.S. environmental industry at $388 billion in 2017, with growth of almost 5 percent expected in 2018 to $407 billion and forecast a further rise to roughly $440 billion in 2020, with annual growth between 2015 and 2020 averaging 4.3 percent. Within that, EBJ put the solid waste management segment at $63.4 billion in 2017, rising 3.8 percent to $65.8 billion in 2018 and reaching $70.5 billion in 2020, with an estimated average five-year growth rate of 3.6 percent. The waste management equipment market was estimated at $15.6 billion in 2017, $16.1 billion in 2018 and forecast to rise to $17.3 billion in 2020, representing an average annual growth rate of 3.4 percent. EBJ also listed (and forecasted) 10 key environmental industry forecast elements that underpin its segment forecasts, including GDP (U.S. and global), energy prices (oil and natural gas), U.S. construction put in place, housing starts, water/wastewater rates and the U.S. Environmental Protection Agency (EPA) budget. The report also talked about the Trump administration as a double-edged sword—“good” as in business conditions were deemed good in virtually all environmental industry segments covered by EBJ, but ultimately the Trump administration is “bad” on environmental policy, which eventually trickles down to bad for the environment and bad for the environmental industry, which EBJ dubbed the boomerang. The report noted that while the federal EPA hasn’t been dismantled as threatened by certain members of the administration’s team and has sustained only modest budget cuts so far (and further reductions are expected to be in the 5 percent to 10 percent range at most in the next two federal years), EBJ also noted that any new policies or programs are off the table and any momentum or morale in the environmental enforcement apparatus of existing statutes has eroded at the federal level. Thus, although the deregulatory climate has given business a boost, it could have a considerable long-term negative impact on the overall environmental business, though probably relatively less on the solid waste segment in particular.

Trade Wars

The report also discussed the cost and price impacts of China’s National Sword and the potential for further damage to the resource recovery sector from possible trade wars. Previous issues of Business Insights have discussed recent Chinese policy impacts on the recycling business ad nauseam, but the report contains charts showing that scrap plastics and scrap paper exports to China had already begun to decline from peak levels reached in 2011 (for both paper and plastic), prior to the Chinese proclamations. However, the falloff was most dramatic in 2017 and particularly by the end of 2017, as National Sword was announced and formally came into effect on January 1, 2018. Monthly U.S. scrap plastic exports to China fell by 92 percent between January and December of 2017, while scrap paper exports fell by 25 percent in the same period. That said, the report also noted that the solid waste leaders will likely avoid the worst of the impacts because of changes to recycling contracts, and overall for recyclers in the U.S. a silver lining could be to re-shore processing, bringing the manufacturing part of the recycling equation back home. But obviously, this will take time, and in the meantime, recyclers are being forced to stockpile, landfill and seek contract adjustments. Yet, waste management sustainability goals remain (primarily) a state-driven effort. Forty-three states have set targets for material recovery, recycling or waste reduction. Interestingly, 73 percent of the U.S. has access to curbside recycling programs, but these programs only account for 20 percent of the material recycled, the rest being commercial.

Industry Sector Breakdowns

The municipal solid waste business was generally characterized as about 70 percent private industry and 30 percent public sector, which was not envisioned to change dramatically. It was estimated that the U.S. solid waste industry revenue breakdown by service activity is 32 percent residential collection, 30 percent commercial/industrial collection, 22 percent landfill operations, 7 percent MRF/recycling operations, 4 percent transfer, 4 percent incineration/waste-to-energy and 1 percent composting.

Company Size and Rankings

Only five companies within the industry have revenues over $1 billion annually, and these represent the majority of the publicly-traded companies. The top five represent 48 percent of the market based on 2017 revenues. Twenty-two large companies ($100 million to $999 million in revenues) constitute 10 percent of the market, while 50 mid-size ($20 million to $100 million) and 6,490 small companies ($20 million and below) make up 3 percent and 11 percent of the market, respectively. Municipalities constitute the remaining 27 percent. Based on 2016 revenues, the top 15 largest solid waste companies in the U.S. are Waste Management, Republic Services, Waste Connections, Covanta Energy, Advanced Disposal Services, Recology, Waste Industries USA, Waste Pro, Casella Waste Systems, Rumpke Waste and Recycling, WCA Waste Corporation, Action Environmental Group, Tunnel Hill Partners, Tomra North America and J.P. Mascaro and Sons. Prominent acquisitions in the U.S. solid waste industry in 2017 included: Waste Connections acquired Groot Industries in January; Republic Services acquired ReCommunity in August; Advanced Disposal acquired CGS Services in February; and HPS Investment Partners, Equity Group Investment and the Poole family and management acquired Waste Industries in August, replacing Macquarie Infrastructure Partners as the primary shareholder.

Other Assorted Facts

In 2018, it is estimated that the environmental industry will account for roughly 3 percent of GDP. The entire industry accounted for 1,725,700 jobs in 2016, with solid waste management accounting for 295,200, waste management equipment 93,900 and resource recovery 81,900.

Women in Waste

With the promotion of Mary Anne Whitney to chief financial officer (CFO) at Waste Connections in mid-May, the solid waste industry now boasts three women CFOs at top companies in the industry. Mary Anne Whitney joins Devina Rankin at Waste Management and Dianna Cervantes at WCA Waste Corporation. Given that the solid waste industry is often regarded as very “traditional,” that’s pretty remarkable! 

Leone Young is the principal of LTY ERC, LLC, providing consulting and research services to, and conducting special projects for, the environmental services industry, primarily the solid waste sector.