As a 19-year-old freshman at Princeton University in 2001, TerraCycle founder Tom Szaky entered a business plan contest.

Inspiration came in part from a friend of his who had discovered that worm poop helped a plant to grow faster. It also came from realizing that using organic waste as a raw material could make a good business model. It could be both profitable and responsible.

He managed to raise $20,000 to create a worm gin and persuaded the university food service to give him their food waste. Then, within four months, he dropped out of school to spend full time developing his business.

Just imagine a teenager trying to persuade investors that selling liquefied worm poop in a used soda bottle would be a good idea! Yet he couldn’t make a living trying to build his business one garden center at a time. So he went directly to Walmart and Home Depot, even though everyone thought it was a crazy tactic.

It worked.

Declaring war on the idea of waste

Before most Americans realized the extent of our waste crisis, Szaky was devoting every waking hour thinking about how to abolish the whole concept of waste.

In principle, everything is recyclable. In practice very little is. On the consumer side, municipal recycling programs can take some kinds of paper, plastic, metals, and glass, but not others. You can probably take plastic bags back to grocery stores for recycling. These recycling options are not available to everyone.

Many products and packages have such a mixture of different materials that most recycling operations can’t make a profit from separating them. Szaky decided to create a business model so he could profit. It entailed finding stakeholders willing to cover the cost of collecting and processing whatever standard recycling operations can’t handle.

The original product, TerraCycle Plant Food, was sold in soda bottles. If customers just dumped the bottles, it would defeat the purpose of waste reduction. The company needed to control the entire lifecycle of its product, including disposal. So in 2005, it launched the “Bottle Brigade.” In two years, more than 5,000 locations helped it collect bottles.

Szaky realized that if he wanted to make a real environmental impact, he’d have to look beyond fertilizer. He decided to figure out how to recycle everything that standard recycling programs can’t handle. Including such gross wastes as cigarette butts and dirty diapers.

Building on the Bottle Brigade’s success, TerraCycle started other brigades to collect drink pouches, yogurt cups, energy bar wrappers, and more. It worked with a different corporate partner to develop each one. Unlike collecting bottles that it could use as packaging, these other brigades only brought in nothing useful. TerraCycle and its partners had to figure out how to recycle all of it.

Persuading companies to pay for recycling

In 2007, Szaky made his first partnerships with brands. Honest Tea, Stonyfield Farm, and ClifBar started to pay TerraCycle to set up collection centers where consumers could take or send the packaging.

TerraCycle’s international expansion began in 2011, with offices in several European countries and Brazil. It now operates in 20 countries and generated more than $50 million in revenue in 2020.

Larger brands began to partner with TerraCycle in 2015. Bausch + Lomb created a program for recycling contact lenses and their cases. Target created one for baby car seats.

These companies bear the costs for consumers to send worn-out products to TerraCycle, perhaps by offering pre-paid shipping labels.

It’s an expensive service that hit the companies’ profit margins. But more and more consumers care about a brand’s commitment to sustainability. Companies benefit from eating the cost of providing TerraCycle with raw materials. It attracts those customers’ business and creates marketing opportunities.

Right Guard and L’Oreal tout playgrounds and gyms made from their wastes. In partnership with Procter & Gamble, TerraCycle receives plastic collected from beaches and waterways. It ultimately becomes shampoo bottles. Procter & Gamble can brag

Nestlé describes its partnership with TerraCycle as follows: It wants to make 100% of its packaging either recyclable or reusable and reduce its use of virgin plastic by a third by 2025.  To that end, it became part of TerraCycle’s Loop project (described in the next section). It is one of at least 250 companies to announce a similar goal in 2020 alone.

At first, TerraCycle reached out to brands. Now, some brands take the initiative. Each partnership means that TerraCycle has to develop systems to collect and clean products and separate them into their component parts. Then, TerraCycle processes them like any other recycling company.

TerraCycle and consumers

Most of TerraCycle’s revenue now comes through these partnerships, but it hasn’t neglected the recycling needs of consumers.

The Zero Waste Box™ concept debuted in 2012. Consumers purchase a box, fill it with a variety of stuff, and ship it back to the nearest TerraCycle location. They can put almost anything in the “All-in-One Zero Waste Box.” TerraCycle also offers boxes specifically for plastic packaging, coffee capsules, and safety and protective gear.

The Loop project, launched in 2019, reinvents the old system of home delivery of milk. Customers receive home delivery of various products, such as Häagen-Dasz ice cream, Tidy Cats litter, or Tide laundry detergent. Products in the initial phase also include orange juice, mayonnaise, hand soap, and even toothbrushes and stick deodorant.

So far, the Loop program is available to Americans only in New York, New Jersey, and Pennsylvania. It also launched in Paris. Customers buy the products online. The price includes a refundable deposit. They come to the consumers’ homes in a reusable tote bag. Consumers put the empties back in the tote and arrange for a pick-up.

In principle, at least, it is just as convenient as putting empties in the trash, and maybe more convenient than putting them out for recycling. They don’t have to take responsibility for washing them.

The pilot project will test the feasibility of the project. For one thing, that means finding out if enough consumers are willing to pay the deposit. And in some cases, products cost 10-15% more than the usual price. Szaky hopes that they’ll prefer the reusable. For example, the stainless steel Häagen-Dazs container keeps ice cream frozen much longer than the old coated paper containers.

TerraCycle and the circular economy

A truly circular economy doesn’t take, say a baby carrier, and make it into playground equipment. It enables the baby carrier company to recover raw materials and use them instead of virgin materials to make new baby carriers.

It hasn’t happened yet.

For one thing, brands will have to integrate recycled materials into their global supply chains. And that will entail analysis of such issues as whether the emissions from shipping will outweigh the benefits of using recycled material.

But when Szaky first conceived the idea of TerraCycle, hardly anyone understood his mission. Now, 20 years later, more people understand the burden waste places on the environment and the economy.

More and more companies willingly take responsibility for recycling their wastes without waiting for government extended producer responsibility mandates. That greater understanding and sense of corporate responsibility should help develop a circular economy.

How all of us can help TerraCycle succeed

TerraCycle has grown from a project operated out of a dorm room to an international company that operates in 22 countries. It has had to develop a corporate culture that is relaxed and fun, but at the same time professional and well-structured.

In constantly breaking new ground, its success depends on imagination and creativity as well as understanding the possibilities and limits of its financial models.

In a sense, TerraCycle’s success is its biggest internal threat. It has had to expand without stretching its resources too thin. In a 2011 interview, Szaky said that TerraCycle’s greatest external threat was the possibility that society would lose interest in sustainability. Ten years later, that seems increasingly unlikely.

TerraCycle is doing its best to do its part to eliminate the whole idea of waste. It can’t achieve that goal alone or with any number of corporate partners.

The rest of society must cooperate. And it doesn’t want to. For example, people could send their COVID masks, etc. to TerraCycle. And too many can’t be bothered to take them to the nearest trash can.

Sources:

A brief history of TerraCycle / Colleen Hilbert, TerraCycle. August 2, 2017
The containers for your most basic household products are about to look a lot different, thanks to this company / Kevin J. Ryan, Inc. March 27, 2019
The incredible story of how TerraCycle CEO Tom Szaky became a garbage mogul / Kim Bhasin, Business Insider. August 29, 2011
TerraCycle’s history / TerraCycle. 2020
This man is on a mission to recycle everything in your life / Elizabeth Segran, Fast Company. April 12, 2021