Recycling innovation

Twas the night before Christmas, the stockings were hung by the chimney with care, and I’m thinking about… all the boxes and gift wrap that will need to be recycled tomorrow!

I recently saw some old friends from my EPA days, and it got me thinking about what has been one of the more innovative recycling-based business models that has emerged in recent years: RecycleBank, a recycling-based membership rewards program.

Under RecycleBank, homeowners put out their recycling in designated containers. The containers are then weighed, and the homeowner gets 2.5 “RecycleBank Points” for each pound of material recycled (max of 450 points per month). Thanks to an RFID tag on the container, the points are posted immediately to a homeowner’s online account, and the RecycleBank Points are then redeemable at over 1500 retailers, including Whole Foods, Kmart, and Rite-Aid.

In terms of business model, RecycleBank derives revenues from sponsorships and advertising on its website and containers. Wikipedia suggests that RecycleBank also draws a transaction fee based on the contract between the hauler and the municipality, while a Newsweek article indicates that RecycleBank derives monies from municipal savings from waste being diverted from the landfill to the material recycling facility. The latter seems like a risky proposition, since recycling usually costs more than landfilling in many parts of the country.

According to the RecycleBank website, over 1 million people in 20 states participate in RecycleBank.

Some of the more appealing aspects of the RecycleBank business model include:

1. Strong behavioral incentives. One of the greatest challenges in environmental issues is encouraging behavior modification. The use of a rewards program—a proven business model in other industries (e.g. airlines, hotels)—is a great way to drive environmentally-conscious behavior modification.
   
   
2. Low CapEx. RecycleBanks owns very little equipment of their own. No trucks or recycling machines. The main piece of technology is the RFID chip.
   
   
3. Great control point. As I tell many of my clients, always think about the control point that locks-in consumers and locks out competitors. RecycleBank, which operates through the municipal contract for recycling, is probably the best possible control point for recycling.
   

Current investors in RecycleBank include Kleiner Perkins, which provided $30 million in 2008, as well as Coca-Cola.

Happy holidays!