Thomas Coskeran Wasmin Clubs

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homas Coskeran: Waste minimisationubs

3.4.2006

niversity of Oulu, Waste minimizationnd resources use optimization course 1

Waste minimization and resources use optimization, University of Oulu, 3-7 April 2006

Waste minimisationclubs

Economic analysis of wasteminimisation clubs

Thomas Coskeran, Liverpool John MooresUniversity



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Overview The waste context in the UK

Waste minimisation defined

How waste minimisation clubs (WMCs)havedeveloped in the UK since their inception Club funding

Evidence on benefits derived by clubmembers

Latest efforts to develop clubs through the UKgovernment's BREW programme


Overview

Current place of WMCs in the UK's waste

strategy

The failure to evaluate clubs fully

Economic analysis of clubs and the impact onfuture club design

The future of club design


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Waste Generated in the UK


Waste arisings in the UK Annual total around 434 million tonnes

56 million tonnes from industry and 30 milliontonnes commercial

Industrial waste arisings have reduced in theperiod 1998 -2003 by 1% while commercialhas grown

Municipal Solid Waste and Construction andDemolition Waste have increased in thesame period


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Waste Minimisation Clubs

Existed in the UK since early 1990s often

operating with support from Envirowise(formerly the Environmental Technology Best

Practice Programme)

http://www.envirowise.gov.uk

UK government-funded organisation

role to encourage the development of clubs Clubs have received funding as well from

Landfill Tax Credit Scheme (LTCS)


Envirowise

Strive to increase awareness of the true cost

of waste

Publish good practice guides and workbooks

90% of companies aware of Envirowise

Envirowise aim is to extend coverage to 20%of UK companies

As yet, only 0.14% of all businesses involved

in Waste Minimisation Clubs


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Envirowise guides


Waste MinimisationClubs in the UK

Source: Envirowise


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Waste Minimisation Clubs WMCs have been a means of encouraging a

range of organisations in a region to minimisewaste

Not just industrial and commercial

But bringing organisations together toencourage changing processes, wasteprevention and reduction can cause problems

where companies are in direct competition May be reluctance to share best practice ideas


Holistic Waste MinimisationProgrammes

Catalyst for development of WMCs has beenstrong, inclusive, local partnerships

Holistic programmes have developed toinvolve organisations other than justbusinesses

Promoted innovative approaches to wasteminimisation for all sections of the community

Training for key employees and volunteers oflocal businesses and communityorganisations in sustainability


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Types of Partners Environment Agency

Consultants

Local authorities

Government bodies

Charitable foundations

Learning Councils

Development bodies

Envirowise


The Importance ofPartnerships

Success factors in any environmentalproject have applied to WMCs in the UK

Common aims and objectives amongpartners

High degree of focus on local issues

Projects that encourage sustainability

Presence of full-time officers


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What can go wrong with

partnerships Barriers to success

No clear contractual relationships

Lack of long-term funding

Confused communication

Poorly designed information programmes

Lack of clarity on any of these can leadto club failure


Number of UK clubs

No clear information available

No requirement for clubs to report their

existence to Envirowise Have to assume for many that they had

a certain length of life most in practice have lasted between one

and two years

lack of sustainability in clubs


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Waste minimisation clubs

in the UK: 1992-2004

5222145TOTAL UK

406Northern Ireland

1125Wales

84420Scotland

4266114TOTAL England

66313East

42011London

44314South West

21515South East

37013West Midlands

15311East Midlands

11658Yorkshire & the Humber

689North East

72920North West

Reported Number of

Businesses as Members

Number of

Clubs

Region

Source: Coskeran and Phillips (2005)


Number of UK clubs

Suggested by some that may havebeen as many as 250 rather than the

145 in table Is agreement, however, on the trend

After peak in late 1990s, has been adecline in numbers

Clubs are now an endangered speciesin the UK


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Number of WMCs in

England 1992-2004: 6-monthMoving Average

0

5

10

15

20

25

30

35

40

45

50

Jan-92

May-92

Sep-92

Jan-93

May-93

Sep-93

Jan-94

May-94

Sep-94

Jan-95

May-95

Sep-95

Jan-96

May-96

Sep-96

Jan-97

May-97

Sep-97

Jan-98

May-98

Sep-98

Jan-99

May-99

Sep-99

Jan-00

May-00

Sep-00

Jan-01

May-01

Sep-01

Jan-02

May-02

Sep-02

Jan-03

May-03

Sep-03

Jan-04

May-04

Number

of Clubs

Month and

YearSource: Coskeran and Phillips (2005)


Number of WMCs inEngland 1992 to 2004 : 6-month Moving Average

0

5

10

15

20

25

30

35

40

45

50

Jan-92

May-92

Sep-92

Jan-93

May-93

Sep-93

Jan-94

May-94

Sep-94

Jan-95

May-95

Sep-95

Jan-96

May-96

Sep-96

Jan-97

May-97

Sep-97

Jan-98

May-98

Sep-98

Jan-99

May-99

Sep-99

Jan-00

May-00

Sep-00

Jan-01

May-01

Sep-01

Jan-02

May-02

Sep-02

Jan-03

May-03

Sep-03

Jan-04

May-04

Assumed Lifetime of Clubs = 12months



Number of

Clubs

Month and

YearSource: Coskeran and Phillips (2005)


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Models of WMCs A variety of different approaches have been

developed

1. Regional Cover either a whole English region or substantial

area of a devolved administration

Example: Business Environment PartnershipScotland

2. Demonstration

Highly selective High levels of funding (500,000+)

Example: Project Catalyst (1994)


Models of WMCs

3. Demonstration: ultra-high recruitment

Mostly small and micro-businesses from widerange of sectors

Based on English and Welsh counties

Designed to act as catalyst for WMC formation

External funding of between 150,000 and200,000

Example: North Wales Waste Network (2001)


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Models of WMCs4. Facilitated Self-help

Limited external funding (100,000)

Funding used for external help on suitabletechnologies to adopt

Sectoral or multisectoral

Most common model in the UK

Example: Corby Waste Not, Phillips et al(2002)


Models of WMCs5. Third Generation facilitated self-help

Limited external funding (20,000)

Funding used to bring in external advice

Example: Kettering, Clarkson et al (2002)

6. Self-help No external funding

Often run by industry sector groups

Example: CIA Responsible Care Programme,Phillips et al (2006)

7. Self-help distance learning Organised through the internet

No examples as yet


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Waste Minimisation Clubs: Sources of Funding UK 1992-2004

0

5

10

15

20

25

30

35

40

45

50

EnvAgenc

y

Local

Authority

LTCS

Member

Companie

s

European

Regeneration

Utilities

Business

Link

Regional

Governme

nt

Charities

TEC/LSC

Governme

ntal

Direct

Banks

Others

Number

of clubs


WMC Sources of Funding 1992 - 1997

LTCS

Local Authority

WMC Sources of Funding 1998-2004

Local Authority

LTCS

Env Agency

LocalAuthority

LTCS

Member Companies

European

Regeneration

Utilities

Business Link

Regional Government

Charities

TEC/LSC

GovernmentalDirect

Banks

Others

WMC Sources of Funding


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Sources of Funding

Proportion of club funding from LTCSsignificantly higher after 1998

As is the proportion obtaining fundingfrom Local Authorities

NB: Although LTCS has declined, many

other sources of funding remainavailable


The Present Position onFunding

LTCS was withdrawn as source of funding inperiod from 2002 to 2004

Has arguably hit WMCs

Replaced by Waste ImplementationProgramme (WIP)

Includes Waste Research Team advised byWastes and Resources Research AdvisoryGroup (WRAGG)

Responsible for waste minimisation but, inpractice, have been more concerned withhousehold waste prevention


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The BREW programme

New funding initiative BusinessResource Efficiency and WasteProgramme (BREW) also started forperiod 2005-2008

Clubs renamed as Resource EfficiencyClubs in the new programme

2 million for 2005-06

10 million over the three years


The BREW programme

Mainly used to fund feasibility studiesfor future WMCs (5,000 per study)

Or to enable existing WMCs to obtaindata (50,000 maximum per club)

No funding for new clubs

Funding being used to report on widerange of economic and environmentaloutcomes from clubs


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Resource EfficiencyClubs Programme

0

1

2

3

4

5

6

7

8

EastMidlands

EastofEngland

London

NorthW

est

SouthEast

SouthW

est

WestM

idland

Yorkshire

Access

Payment

Feasibility

Studies


Benefits of WMCs

Evidence has been mixed

Not many clubs have reported so hard toevaluate

At best about half of all those formed haveproduced final reports

Where they have reported, have tended togive savings to cost ratio Not a well-developed type of economic evaluation

In these terms have appeared successful


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WMC Cost to Savings Ratios

0.8308Betre

2.314Catalyst

5.2177North Wales Waste Network

5.511Humber Forum

7.125Corby Waste Not

8.411Aire and Calder

9.75Tayside Foods

10.218Kettering

13.022Wellingborough

13.4174Cut Waste Improve Competitiveness

14.122Northampton Resource Efficiency Project

14.237Hereford and Worcester

20.08Northampton

22.813Dee Catchment

51.225ResourceEfficiencyAction Programme (REAP):

Scotland

Savings per unit

cost

Number of

Companies

Club

Source: Phillips et al 2006


The Future Role of WMCsin the UK

Likely to remain important

UK Strategy Unit (Waste Not,

Want Not, 2002)

Current review of Waste Strategy 2000

being undertaken that important for WMCs

Envirowises role also being reassessed

Could mean a new framework for WMCs


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Review of Waste Strategy2000 UK government wishes to emphasise

waste strategy based on minimisation ofwastes arising from commercial andindustrial sources

Treatment of waste will be crucial in the

developing strategy Extending producer responsibility


Review of Waste Strategy2000

Helping behaviour changes by business through information, advice and awareness

raising Need for appropriate institutional frameworks

that will ensure key partnerships are formedbetween businesses, local authorities andRegional Development Agencies.

All issues raised are those to which WMCscan contribute


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The Current Positionin Summary

Hope that clubs would become self-sustaining has not been realised

Not necessarily due to changes infunding regime Although these have played a part with end

of funding from LTCS

Time now ripe for re-examining clubdesign with reviews taking place


Evaluation of WMCs

Crucial feature of re-design

Necessary for:

identifying features of successful clubs;

and

creating sustainable clubs

Its importance now recognised inBREW programme

Also part of wider concern with value formoney in government


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Evaluation of WMCs Despite its potential importance,

evaluation in the past was notcompulsory

Nor was any standard format for reportsproduced by clubs

Have studied 23 reports produced byWMCs to assess extent of evaluation

deficit A self-selecting sample of essentially

successful clubs


Identified key features of an economicevaluation Based on UK guidance to government departments

HM Treasury Green Book (http://www.hm-

treasury.gov.uk)

Analysed content of actual reports producedby clubs

Compared reports with ideal typeevaluations

Results confirmed impressions of previousclub evaluations

A Study of Final Reports


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Key Elements in a Full Economic Evaluation of WMCs

Potential Costs

1. External funding2. Set up and operating costs3. Participation fees4. Time of those involved from company5. Cost of improvements to waste management6. Forgone potential output

Potential Benefits

7. Reduced waste of member and non-members8. Reduced landscape effects and global warming9. Reduced raw material, output, staff, capital and transport costs

10. Displaced cost of fossil fuels11. Reduced scarcity value of landfill sites

B. Adjust and value costs and benefits for distributional effects and relative price

movements12. Changes introduced by a WMC may affect SMEs and larger companies differently.13. This will need to be allowed for in the estimation of costs and benefits.14. Greater weight may wish to be attached to benefits received by companies that are SMEs

or those that come from different regions.

C. Adjust for timing of the incidence of costs and benefits

15. Apply agreed discount rate to costs and benefits arising in the future in the WMCs16. Agree time period over which appraisal will take place before club is set up

D. Adjust for risk and optimism in the costs and benefits17. Take account of potential bias towards favouring clubs when appraising by adjusting key

determinants of the clubs success including, estimates of costs, benefits, number in club,and length of time the club will last.

18. Adjust for optimistic estimates of the number of companies likely to join a club.

E. Evaluate success on cost-benefit criterion. Where the impact of a club cannot beassessed in monetary terms, this criterion may need to reflect the following:

19. Quantified impacts but not expressed in monetary terms (eg cut in road traffic accidentsassociated with waste removal)

20. Qualitatively assessed impacts (environmental improvements).


Elements in a FullEconomic Evaluation

Identify potential Costs and Benefits

internal and external

Adjust for:

distributional effects and relative prices

timing

risk and optimism

Evaluate using cost-benefit criterion


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Past Evaluation of WMCs

Self-reporting emphasised own benefits

Ignored external effects of clubs

Reports were unaudited

Costs were poorly reported and often omitted

Ignored different effects on smallerbusinesses

No discounting of future costs and benefits

No emphasis on evaluating club

administration


Proposals for FutureEvaluations

Clear guidelines needed using establishedapproaches

Obligatory audited reporting Standard format for weighting the effects on

SMEs

Report on functioning and administration ofclub

All will help to address issues aboutappropriate club design


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Economic Theory and WMCs

Given failure to develop self-sustainingclubs, have turned to economic analysisto examine why this might be

Based on economic theory of teams andhow they operate

See businesses as consisting of a set ofdecision rules


Economic Theory and WMCs

Assume three decisions for a company toconsider:

Join WMC? Shirk responsibilities to club?

Monitor other members of club?

May shirk as get benefits withoutcontributing

Monitoring needed to stop othersshirking!


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An Economic Model of WMCs

Internal efficiency gain (Ej) to business jfrom own innovation given by:

Ej = bjQj

bj is the percentage reduction in cost perunit of output, Qj, for business j due to a

superior waste management technique


The total direct benefit (Bj) business j gains

from joining the club:

Bj

= bi

Qj

i = 1 n, i j

is:

the fraction of other businesses productivityimprovements passed from other members tobusiness j

assumed the same for all other members

An Economic Modelof WMCs


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Cj is the individual cost to business j of club

membership

Taken to be fixed, regardless of output

Includes monitoring costs

costs of policing and punishing other members ofthe club




Business joins a WMC provided thereare positive net benefits: benefits (Bj) >

costs (Cj) But can gain additional net benefits by

shirking in their contribution to the club sj is the proportion of business js costs due

to reduced contributions to club

Costs then equal Cj - sjCj


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Shirking itself has associated costs:

Those caught shirking face penalties

Lack of cooperation by other businesses in futureprojects outside WMCs

And other businesses shirking reducesbenefits to business j by:

sibiQji = 1 n, i j



Net gain to individual businesses (j) is now:

j = i( 1 - si)biQj - (Cj sjCj)

As dj/dQj = i(1 - si)bi > 0,

the model suggests the larger the business

the greater the gain from club membership



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Can monitor other businesses and avoid lostbenefits

Benefit to business j of monitoring business i= biQj

The larger the business, the greater the gainfrom monitoring others

But monitoring also raises costs so will need

to ensure that sufficient benefits result fromclub membership

An Economic Model

of WMCs


Need to consider interrelationship between

the different cost elements

Also impact of benefits likely to be decliningover time

Once initial innovations passed round clubmembers there is a strong incentive to shirk



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Net Benefits of WMC

membership over time

t

0

S

time

L

t*S t*L


Shifting net benefits withreduced monitoring/increased shirking

jt

0

j2

time

j 1t*2 t*1


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Businesses have an incentive to shirk their

membership of a WMC

Clubs will tend to fall apart, especially wheremonitoring other businesses does not pay

This will tend to occur where there are manysmall businesses and where clubs are large

Implications of the Model


Provides useful schematic explanation of what

has happened with WMCs in UK

At the outset, many clubs formed as it paidsome businesses to join, given initial levels of

costs and benefits associated with membership

Starting benefits were enhanced by upfrontsubsidies and information from Envirowise

Businesses joining during this period can be

thought of as Enthusiasts for WMCs

The Model asExplanatory Device


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As benefits to early-entrant businesses declined, otherbusinesses began to shirk to maintain net benefit ofmembership

Effect exacerbated by high monitoring costs in the

clubs relative to benefits monitoring would deliver

Benefits from club membership declined yet further

Once the initial relatively high benefits of membershipdisappeared, the incentive to shirk, coupled with a

disincentive to monitor the activity of other clubmembers (that further increased the incentive to shirk),led to the patterns observed

The Model as

Explanatory Device


In terms of the model must reduce monitoring

costs and raise costs of shirking

Also consider impact of proposals on clubmembership costs

Form clubs based on trade associations orsupply chains

Cuts monitoring costs and increases shirking costs

Policy Suggestions


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Base clubs around large businesses

These businesses benefit more from clubs and,therefore, have greater incentive to monitor others

Identify more carefully businesses

responsibilities to the club

Withdrawal of public funds as an incentive

Consider measures to support clubs in initialstages to encourage setting up of clubs

Policy Suggestions


Previous clubs have not reflected these policy

suggestions

Often a large number of small businesses

No surprise clubs not self-sustaining

Need to take advantage of BREW to evaluateclubs anddevelop new approaches to club

design

Conclusions fromEconomic Model


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Proposals for the Futureof WMCs Role of small businesses needs to be worked

out Role of the entrepreneur

Micro vs small vs medium businesses

They are not all homogeneous

Need to consider the importance ofinternational networks WMCs at early stages in some countries eg

Ireland

Can avoid mistakes of UKs more mature market


Industrial Symbiosisand WMCs

Importance of industrial symbiosis andindustrial ecology likely to grow

WMCs part of a three-stage process1. Waste minimisation club

Focus on the individual company

2. Industrial symbiosis

Increasing company cooperation beyondcompany boundaries

3. Industrial ecology

Mutualism dominates inter-companyrelationships


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Industrial Symbiosis Symbiosis the coming together of dissimilar

organisms in a mutually beneficial relationship.

IS aims to create resource efficiency through the

identification of synergies between differentindustries.

This can lead to unavoidable, unwanted, or low valueoutputs from one company becoming useful and

competitively priced inputs for others.

Business-led, so similar to WMCs


Industrial Symbiosisand WMCs

Greater need to foster technology transfer

process among all concerned with WMCs

Awareness (eg of new technology) Association (eg in evaluating new approaches)

Assimilation (eg through better intra-companycommunication)

Application (eg ideas being applied better)

In UK regional agencies have failed in this

area


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National IndustrialSymbiosis Programme Supported by the Business Council for

Sustainable Development UK and part-funded by DEFRAs Business ResourceEfficiency and Waste (BREW) programme 2 million over three-years 2005-08

http://www.nisp.org.uk

Independent

Aims to maintain and facilitate cross-sectornetworks of companies and generatecollaborative opportunities among them


Industrial Ecology Next logical step from Industrial Symbiosis

Concept of a closed industrial system Products and energy returned for reprocessing

and reuse Can only occur when all conditions are right

May be called Eco-Parks or Eco-IndustrialParks

Becoming widespread across Europeespecially Denmark Adopted as national policy in Netherlands


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Kalundborg 130km west of Copenhagen Example of IE started in

1970s

Power plant, gypboard plant,biotech unit, oil refinery, soilremediation company, fishingactivity, and other smallerbusinesses in the town work

together Developed a method of

sharing each other's wastes tomutual advantage.


Concluding Remarks

Still work to be done in developing thedesign of WMCs

Not on the same terms as in the past

Widening research agenda to tackle pastproblems

But also firm foundations are in place fordeveloping clubs

Experience gained across a range ofsectors and using a range of models

This can be the starting point for a greateruse of these organisations in waste strategy


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References Ackroyd J, B Coulter, P Phillips, A Read, Business excellence through resource

efficiency: an evaluation of the UK highest recruiting facilitated self-help wasteminimisation project, Resources, Conservation and Recycling, 38 (2003); 38:271-299

Clarkson P, J Adams, P Phillips, Third generation, low-cost waste minimisationclubs: a case study from the East of England, Resources, Conservation andRecycling, 36(2002); 107-135

Coskeran T, P Phillips, S Smith, (2005), An Analysis of the Contribution ofWaste Minimisation Clubs to Sustainable Waste Management in the UK usingEconomic Theory of the Firm, Proceedings of 20th International Conference onSolid Waste Technology and Management, 3-6 April 2005, Philadelphia, USA,ISSN 1091-8043

Coskeran T, S Smith, P Phillips (2006), Improving the Evaluation of the UKsWaste Minimisation Clubs, Proceedings of 21sth International Conference onSolid Waste Technology and Management, 26-29 March 2006, Philadelphia,USA, ISSN 1091-8043

Coskeran T and P Phillips (2005), Economic appraisal and evaluation of UKwaste minimisation clubs: proposals to inform the design of sustainable clubs,Resources, Conservation and Recycling 43(2005), 361-374

Envirowise Publication CH213 Waste Minimisation at the Cutting Edge

Envirowise Publication ET221 Waste Minimisation Clubs: Partnerships ProveKey to Success


References Envirowise Publication GG122 Waste Minimisation Clubs: Setting them up for

success

Envirowise Publication GG125 Waste Minimisation Pays: Five business reasonsfor reducing waste

Harris S and C Pritchard, Industrial Ecology as a learning process in thebusiness strategy, Progress in Industrial Ecology, Vol 1 Nos 1/2/3: 89-111

Mirata M and T Emtairah (2005), Industrial symbiosis networks and the

contribution to environmental innovation: the case of the Landskrona industrialsymbiosis programme, Journal of Cleaner Production, 13(2005): 993-1002

North Wales Waste Network (2001), A waste minimisation project for rural NorthWales, Wrexham, UK

Phillips P, R Barnes, M Bates and T Coskeran (2006), A critical appraisal of anUK county waste minimisation programme: The requirement for regionalfacilitated development of industrial symbiosis/ecology Resources,Conservation and Recycling, 46 (3), (March 2006): 242-264

Phillips P, K Holley, M Bates, N Freestone (2002), Corby Waste Not: anappraisal of the UKs largest holistic waste minimisation project, Resources,Conservation and Recycling, 36(2002): 1-31

Phillips P, A Read, A Green, M Bates (1999), UK waste minimisation clubs: acontribution to sustainable waste management, Resources, Conservation andRecycling, 27(1999): 217-247


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References

Pratt R and P Phillips (2000), Waste minimisation clubs in the UK: cost-benefitconsiderations, Environmental Waste Management, 3(3): 1-15

Pratt R and P Phillips (2000), The role and success of UK waste minimisationclubs in the correction of market and information failures, Resources,Conservation and Recycling, 30 (2000): 201-219

Project Catalyst (1994), Report to the Project Completion Event, Manchester,1994

Woolridge A (2006), The requirement for structured programmes and strategicdrivers to deliver sustainable waste minimisation programmes; WasteMinimisation Club to Industrial Symbiosis, Proceedings of 21sth InternationalConference on Solid Waste Technology and Management, 26-29 March 2006,Philadelphia, USA, ISSN 1091-8043

Thomas Coskeran Wasmin Clubs

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