\u2018Twas the night before Christmas, and all through the house, not a creature was stirring, not even a mouse.\u00a0 Little Johnny hears a noise and jumps awake\u2013 is it Santa in his sleigh coming to deliver presents?\u00a0 He pulls aside his curtains and peers outside.\u00a0 No, it is not Santa you see, little man, it is the big green Waste Management truck driving through your neighborhood on its weekly route, collecting recyclable materials and other waste!<\/p>\n
Despite little Johnny\u2019s disappointment, Waste Management (publicly traded on NYSE as \u201cWM\u201d) fulfills an important \u2013 and often unloved and unnoticed \u2013 function for our society.\u00a0 It is one of the two largest companies in North America managing the removal and processing of waste.\u00a0 The company competes primarily with Republic Services (publicly traded on NYSE as \u201cRSG\u201d); WM generated ~$14B in revenue in the LTM period while RSG generated ~$9.3B[1]<\/a>.\u00a0 Moreover, WM operates more than 32,000 collection and support vehicles, supporting over 21 million consumer and business customers across the US and Canada[2]<\/a>.<\/p>\n Regulations by various US government agencies over the past decade, in response to a growing awareness of how waste management contributes to Greenhouse Gas (GHG) emissions, continue to challenge WM\u2019s operating model.\u00a0 As an example, WM has traditionally deposited solid waste in one of its 244 landfills, with landfill management subject to certain requirements in the Clean Air Act of 1970[3]<\/a>.\u00a0 In the past two years, the EPA has been working to finalize new emission guidelines controlling landfill gasses (which emit methane), which will potentially impose additional capital and operating costs on WM going forward[4]<\/a>.\u00a0 The US government has also issued tighter emission and fuel economy standards on heavy-duty waste collection vehicles, which affect WM\u2019s fleet costs[5]<\/a>.<\/p>\n On balance, WM has responded admirably in revamping some of its operating practices to adapt to changing regulations, addressing cost concerns while developing new revenue streams. \u00a0Specifically, the company has developed innovative methods to incentivize more recycling by consumers, reduced the GHG footprint of its landfills, and invested heavily in building out a natural gas-fueled fleet.\u00a0 As a result, WM has received several accolades, and the stock price has doubled since 2012.\u00a0 In short, the company is a good example of how investing in sustainability can be beneficial for a community, the environment, and shareholders.<\/p>\n Over the past several years, Waste Management has committed to the motto \u201cThink Green\u201d, and has unveiled numerous operational innovations to support this branding.\u00a0 First, the company has invested in building single-stream recycling facilities, and now ~40% of its 100+ facilities operate this way[6]<\/a>.\u00a0 Essentially, single-stream recycling allows a person to deposit all recyclables in one bin, without having to separate by material type[7]<\/a>.\u00a0 This process lowers the barrier to entry for recycling, and given that recycling typically prevents the release of 2.4 tons of C02 into the atmosphere per ton of solid waste recycled, is a positive contributor to reducing emissions from waste processing[8]<\/a>.<\/p>\n WM has also worked to harness its landfills to generate renewable energy.\u00a0 At 130 disposal sites, the company produces over 550 megawatts of electricity, which is used to power nearly 500,000 homes[9]<\/a>.\u00a0 This amount of energy is enough to offset over 2.2 million tons of coal per year[10]<\/a>.\u00a0 The company has committed to a goal of generating enough electricity to power 2 million homes by 2020, and currently has the technology to power 1.2 million[11]<\/a>.\u00a0 This innovation has been another strategic move by the company to support its \u201cThink Green\u201d campaign.<\/p>\n Finally, WM has invested in converting its fleet to natural gas powered vehicles.\u00a0 Currently ~5.1K of the company\u2019s trucks are powered by natural gas, and the company has also built out 84 natural gas fueling stations, 25 of which serve the public[12]<\/a>.\u00a0 The company committed to reducing fleet C02 emissions by 15% by 2020, and achieved 18% by 2014[13]<\/a>.\u00a0 This has been an effective move by the company because it has been able to reduce the environmental footprint of its fleet, while mitigating against increasing costs imposed by the government, and also developing a way to monetize the fueling infrastructure it has had to build in order to do so.<\/p>\n To close, WM has responded to greater scrutiny on GHG emissions from the government by adapting their operating model in a way that appears to be sustainable and financially rewarding. \u00a0 Over this same period, the company’s EBITDA margins have increased as it has increased gross margin profitability while cutting costs. \u00a0That’s not to say that there aren’t additional opportunities for WM to continue focusing on – e.g., having now achieved its 2020 CO2 emissions reductions targets for its fleet, it can continue to scale its natural gas investments and chase more ambitious goals. \u00a0However, the company has demonstrated a successful commitment to “Think Green”, and hopefully will continue to do so. (796 words.)<\/p>\n <\/p>\n [1]<\/a> Financial information on publicly traded companies, Capital IQ, Inc., a division of Standard & Poor\u2019s.<\/p>\n [2]<\/a> Waste Management, \u201cJP Morgan Aviation, Transportation, and Industrials Conference Presentation\u201d (March 9th<\/sup>, 2016). http:\/\/investors.wm.com\/phoenix.zhtml?c=119743&p=irol-calendarPast<\/a>.<\/p>\n [3]<\/a> Waste Management, 2015 Annual Report, p.11, http:\/\/investors.wm.com\/phoenix.zhtml?c=119743&p=irol-reportsannual<\/a>, <\/strong>accessed November 2016.<\/p>\n [4]<\/a> Ibid.<\/p>\n [5]<\/a> Ibid, p. 12<\/p>\n [6]<\/a> Waste Management, \u201cJP Morgan Aviation, Transportation, and Industrials Conference Presentation\u201d (March 9th<\/sup>, 2016). http:\/\/investors.wm.com\/phoenix.zhtml?c=119743&p=irol-calendarPast<\/a>.<\/p>\n [7]<\/a> Katie Peek, \u201cHow It Works: Inside the Machine That Separates Your Recyclables\u201d, Popular Science<\/em>, August 28th<\/sup>, 2013, http:\/\/www.popsci.com\/technology\/article\/2013-07\/how-it-works-recycling-machines-separate-junk-type<\/a>, accessed November 2016.<\/p>\n [8]<\/a> Ibid.<\/p>\n [9]<\/a> Waste Management Website, \u201cRenewable Energy\u201d, http:\/\/www.wm.com\/sustainability\/renewable-energy.jsp<\/a>, accessed November 2016.<\/p>\n [10]<\/a> Ibid.<\/p>\n [11]<\/a> Ibid.<\/p>\n [12]<\/a> Waste Management, \u201cJP Morgan Aviation, Transportation, and Industrials Conference Presentation\u201d (March 9th<\/sup>, 2016). http:\/\/investors.wm.com\/phoenix.zhtml?c=119743&p=irol-calendarPast<\/a>.<\/p>\n [13]<\/a> Waste Management, 2015 Sustainability Report, p. 7, http:\/\/www.wm.com\/thinkgreen\/pdfs\/2015_Sustainability_Report.pdf<\/a>, accessed November 2016.<\/p>\n","protected":false},"excerpt":{"rendered":" One person's trash is another person's treasure…<\/p>\n","protected":false},"author":2398,"featured_media":11407,"comment_status":"open","ping_status":"closed","template":"","categories":[37,741,1094,29],"class_list":["post-10269","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-innovation","category-natural-gas","category-trucks","category-waste"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/climate-change-challenge-2016\/","yoast_head":"\n