Trash to Cash
Creating value out of rubbish
The pattern
The Trash to Cash pattern builds on the idea of recycling and reusing old materials. Used products are collected and either sold in other parts of the world or transformed into new products. The profit scheme is based on a low or zero purchase price, so that resource costs for a company adopting this model are usually eliminated (HOW?). Customers receive refined products that leave a lasting impression and that can be bought with a good conscience (WHAT?). With all this, Trash to Cash results in a win–win situation for both the supplier and the manufacturer: the former’s waste disposal services are catered for at reduced or zero cost (HOW?), and the latter gets cheap resources or materials with which to make his products (VALUE?).
The Trash to Cash principle can also work without reprocessing the ‘rubbish’ raw materials. One option is to sell unprocessed resources in other markets or geographic regions, which has been a commonplace concept in the used-car market for decades and is now being applied to many other used goods as well.
An added benefit of selling processed rubbish and by-products is an image of being environmentally friendly (WHAT?). The Trash to Cash model addresses issues of environmental responsibility, enabling companies to operate green policies. Responsible behaviour is becoming increasingly important for companies as our society faces ever-more environmental and societal challenges. Thus, the idea of recycling, inherent in the Trash to Cash business model, can constitute a real competitive advantage.
The origins
In principle, Trash to Cash is not a new concept since it borrows heavily from traditional raw material and scrap metal merchants. Indeed, the origins of this business model have been traced all the way back to ancient Greece, for archaeological excavations reveal that people reused materials to avoid shortages even back then. The modern, commercial reuse of waste and by-products gained increased attention around 1970 with rising energy prices. These developments continue today, as society becomes more environmentally conscious and is taking measures to grapple with climate change.
Trash to Cash: the example of BASF
Professional recycling company Duales System Deutschland was an early bird in this area. This German company is concerned with taking care of waste and packaging materials. It introduced the Green Dot logo (‘Der Grüne Punkt’) as a symbol for recycled packaging materials, which manufacturers can use under licence on their labelling. The whole waste disposal programme integrates packaging and product manufacturing companies and is therefore able to utilise a constant stream of free waste materials. This wide range of materials is recycled efficiently via a dual system operating in conjunction with municipal waste collection systems. Companies subscribing to the scheme benefit from efficient waste disposal and recycling. For its part, Duales System Deutschland also earns revenue from companies that purchase a licence for the Green Dot logo. These companies benefit from an enhanced environmental image (and potentially more customers and revenue), access to cheap materials from the recycling process and reduced waste-disposal costs.
An alternative example for the business model pattern Trash to Cash is the case of the chemical company BASF. Active in the markets of bulk chemicals, specialty chemicals, oil and gas processing as well as agricultural solutions, the company creates both high-tech and raw materials for many industries. Often stemming from interrelated and complex production processes, the company applies the so-called ‘Verbund integration’ to maximise their resource utilisation. Here, they connect their production plants and apply technologies to efficiently use their production outputs to integrate them into other processes. Applied throughout their massive production sites around the globe, the company interconnects different activities to reduce their consumption of production residuals, heat and steam – or, in economic terms, costs.
The innovators
Global sports apparel company Adidas is applying the Trash to Cash principle to its ‘Parley for the Oceans’ products. A founding member of the Parley for the Oceans network, Adidas is using recycled plastic that is collected in coastal areas around the globe and transformed, with the help of supply-chain partners, into high-performance polyester, to be finally used in sport products such as shoes or shorts. Exceeding its 2018 target to produce 5 million pairs of its premium running shoe, Ultraboost, this product alone shows the increasing demand from the customer for innovative concepts that incorporate a sustainable handling of resources. As claimed on the Adidas website, it turns plastic’s ‘threat into a thread’.
British company Greenwire, which specialises in recycling old mobile phones and laptops for reconditioning and resale, pursues a similar strategy. The company organises pick-ups, quality checks, refurbishment and repair processes, so that these products can be resold to customers at low prices, especially in developing countries. Corporate clients are attracted to the convenience and eco-friendly methods of disposal or sale of their old electronic goods, and so provide low-cost (or even cost-free) resources for Greenwire (companies have the option of receiving a payment or having the amount donated to a charity of their choice). Greenwire fulfils an extremely valuable environmental service: the battery of just one single device contains enough cadmium to pollute 600,000 litres of water, but, sadly, only about a quarter of all mobile phones are currently recycled.
US-based furniture manufacturer Emeco was founded in 1944 and uses readily recyclable materials such as aluminium, wood, PET (polyethylene terephthalate from plastic bottles etc.) and WPP (wood polypropylene, from wood-substitute fencing etc.) to manufacture a variety of designer furniture products. In a unique example, it entered into partnership with Coca-Cola to better exploit the Trash to Cash business model. A plastic version of Emeco’s Navy Chair is made from some 111 recycled Coca-Cola bottles. Thus, the company conveys a strong environmental image through its production techniques and marketing. By using the Trash to Cash business model, Emeco attracts ecologically aware customers within the furniture market. In addition, its products are functional, fashionable and affordable, generating high demand and revenue for Emeco.
When and how to apply Trash to Cash
This pattern taps into the concept of sustainability. The ‘trash’ in the business model refers to resources that are regarded as waste in one value chain but can be reused in another. If you are a manufacturing company that produces trash, then you could utilise this business model pattern.