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Monday, May 11, 2015

Strategic CSR - Recycling

For those who advocate a market-based solution for recycling, the recent drop in the price of oil has had serious consequences for the viability of the growing industry:
"A former World War II bomber hangar houses a monument to the recent plunge in oil prices: hundreds of bags of shredded plastic. The hangar is used by CK Group, a recycler of bottles, pipes and sundry bits of plastic. Plastic is often derived from oil, and there used to be money in recycled scrap. Not anymore. The fall in oil prices has dragged down the price of virgin plastic, erasing the recyclers' advantage."
The consequences for the business model underlying the plastics recycling industry is potentially dramatic:
"In the U.S., many cities and towns pick up detergent bottles, milk jugs and other bits of household plastic and sell them to recyclers who sort, process and resell the scrap. These municipalities typically earned cash—as much as $10 a ton in parts of New Jersey—for selling recyclable materials under contracts that tie the sales price to commodities prices, with a minimum. In recent months, some expiring contracts have been replaced with new contracts that set no such floor. That raises the possibility for some municipalities that a moneymaker could turn into a loser."
The drop in price of new plastic has been particularly dramatic since the start of this year:
"At the start of this year, new polyethylene terephthalate, a type of plastic widely known as PET and used to make soft-drink and water bottles, cost 83 cents a pound, according to data compiled by industry publication Plastics News. That was 15% higher than the cost of recycled PET. As of late March, the cost of new PET had fallen to 67 cents a pound, or 7% less than the recycled form, which costs 72 cents a pound."
The article in the second url below contains a similar story about glass, although the threats to the business model are slightly different. The problem with glass highlights the costs associated with the relatively recent shift to single-source recycling (i.e., putting all recyclables in the same disposal unit):
"Curt Bucey, an executive vice president at [Strategic Materials Inc., the country's largest glass-recycling company], said that when used glass arrived at its plants 20 years ago, it was 98% glass and 2% other castoffs, such as paper labels and bottle caps. These days, some truckloads can include up to 50% garbage, he said. 'Now what comes with the glass are rocks, shredded paper, chicken bones people left in their takeout containers, and hypodermic needles,' Mr. Bucey said. The company has had to invest in expensive machinery to separate the glass from the trash, then has to dispose of the garbage, making recycling a much costlier equation."
The result in both cases is that, while paper continues to be recycled at ever-increasing rates, there have been only incremental increases in the amounts of plastic and glass recycled in recent years:
Take care
David Chandler & Bill Werther
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The library of CSR Newsletters are archived at:
Recycling Becomes a Tougher Sell as Prices Drop
By Georgi Kantched and Serena Ng
April 5, 2015
The Wall Street Journal
High Costs Put Cracks in Glass-Recycling Program
By Serena Ng
April 23, 2015
The Wall Street Journal
Late Edition – Final