Eye into the past invokes opportunity

Eye into the past invokes opportunity

In part three of Waste Management Review’s COVID-19 challenges and opportunities series, retired waste industry leader Max Spedding recalls how he overcame challenges in the past. He eyes opportunities for the future on the other side of the crisis.

While Australia and the globe as a whole are undoubtedly facing one of the worst collective economic and health crises since the Great Depression, there are always lessons we can gleam from the past.

So far the response from Australian federal, state and territory governments to the health crisis has been swift. At the time of writing, the number of confirmed COVID-19 cases in Australia was less than 7000, with more than 4000 recovered. The health crisis is very much intertwined with the economic one.

That said, there are always stories of resilience that can shed some light into how we can deal with future challenges. To that end, Waste Management Review explores how waste industry stalwarts got through challenging times in the past and their thoughts on what lies ahead for recycling.

While the International Monetary Fund expects real gross domestic product (GDP) to shrunk by 6.2 per cent this year, the 1980’s drought-related recession saw a 2.2 per cent decrease throughout 1982. Likewise, the 1990’s recession infamously referred to by former Prime Minister Paul Keating as the “recession we had to have” saw a fall of 1.7 per cent. All of these instances were linked to global pressures.

The characterisation of the current economic situation has been compared by many commentators to the Great Depression, where GDP fell by 10 per cent between 1929-31. The Great Depression of the 1930s led to a revaluation of the country’s understanding and implementation of macroeconomic policies, with Keynesian economics being developed during and after the period.

According to a speech by the Australian Treasury Macroeconomic Group in 2009, the key elements of the modern monetary policy framework has over time provided capacity for flexibility and a rapid and aggressive response to macroeconomic shocks. It cites rapid easing of Australian monetary policy in late 2008 to 2009 as an example of this flexibility. The lessons proved useful in staving off the significant impacts of the 2008 Global Financial Crisis.

The unknown territory Australia now faces itself in is how to deal with the re-build, and the three stimulus packages, valued at a collective $213.6 billion, is only one step of the way. The Federal Government has flagged that policies discussed pre-election will now be re-visited. This means tax cuts, deregulation and industrial relations reform may be a few areas looked at on the other side.

Those who have lived through multiple crises will understand that there are opportunities at the other end, and resilience is important.

Max Spedding started his career in ready mixed concrete and finished it with the National Waste and Recycling Industry Council, leading the influence of federal government policy reform on waste and resource recovery. He’s lived through multiple economic crises, including the 1973 oil crisis and 1987 stock market crash.

Spedding started his career more than 50 years ago in 1970 in the Shire of Korong north of Bendigo. After working in local government for a year, he joined Pioneer Concrete – now Hanson – in Australia and in 1971 went to the UK followed by Italy in 1973-74. He immersed himself in concrete and quarries for the next decade, focusing on managing profit and loss in his various divisions.

“In fifty years, we’ve never seen anything quite like this, but it is interesting when you reflect on problems of the past,” Spedding says.

He recalls working in Italy under 30 per cent inflation and fuel price changes. The 1973 oil crisis began after the Organization of Arab Petroleum Exporting countries proclaimed an oil embargo targeted at nations perceived as supporting Israel during the Yom Kuppur War.

While the US, UK and Canada were targeted, an article published by the Università del Salento indicates Italy was highly affected due to its lack of primary sources of oil.

Spedding says conditions were also challenging while the terrorist and guerrilla organisation Red Brigade remained active – a group responsible for kidnappings and robbing’s throughout Italy.

“You just couldn’t keep up with inflation, but the interesting thing was that although it took a year or so to get through it, but we did, we got there.

“Of course it was economic rather than medical, but you’ve just got to live by the day and wait for new opportunities arise.”

“It’s surprising how you have a period of intense inflation and it sort of clears the deck and establishes a new platform on the value of your investments and you can then go forward again. It’s a matter of being able to batten down the hatches and hold on and then look at the new reality that comes out and take advantage of the difficulties.”

Fast forward to 1984 and Spedding returns to Sydney to manage Pioneer’s concrete division. Things get tricker as the company becomes vertically integrated and begins to lose thousands each month, he says.

“What Pioneer taught me is to make sure you have all the information on the table and you remain focused on what the intent of it is. If you’re intent is to make money, you have to make money – overall as a group – not just one aspect of it.”

In 1987, he decided to put his learnings to greater use joining a company called Hooker Corporation in a newly formed resources division.

“That was all doing well but unfortunately George Herscu invested heavily in America in supermarkets and they went belly up and the holding company went into bankruptcy.

“That left our little resources division which was quite profitable with positive cash flow hanging out there.”

He says all team divisions were brought into the corporation under a negative pledge arrangement which saw him presented with a request for $340 million despite the division having a value of around $20 million.

“At the same time we had the 1987 crash and all of my options I had negotiated in taking on this new role went out the window.”

“But the net result was we sold off the resources division and only one bit of it failed, all the rest of it continued and is now in the hands of others.”

He says going through a liquidation and the 1987 crisis, amid incredibly high interest rates, was extremely difficult to manage but he emerged in 1989 with a role with Browning Ferris Industries (BFI) – now owned by SUEZ in Australia – running the development of new landfills in Australia and New Zealand. He developed the Lyndhurst Landfill in Taylor’s Road, one of the first lined landfill in Australia which is still in existence today.

In 1992, he took on  managing waste-to-energy market developments for BFI in Thailand, Indonesia and the Philippines. Two years later, he took over as Managing Director of the BFI in Australia.

“That got me into the international waste industry. The interesting thing there was we had the Asian share market economy meltdown in 1996/97. My response to our American owners at that time was our caution in developing WtE in Asia proved to be successful. Because when the crunch came although the projects/companies we were involved in failed, we virtually had no exposure.”

“That’s one crisis that was avoided because we were probably a bit too conservative, but sometimes you have to be.”

He recalls attending a larger conference in 1996 with BFI with over 500 managers from around the world. Every third person was asked to stand up.

“The CEO says just imagine you all just lost your jobs: that’s how much the industry is going to go to recycling and unless we embrace recycling, all you guys will be out of work.”

More than 20 years’ later, he says recycling is still a real challenge for the industry.

He says we need to keep it simple and the three RRRs – reduce, reuse and recycle showed what practically can be done. He says that while metals work in the global economy and fibre works locally plastics have always been a challenge.

“Throughout my life I’ve always targeted the 80 per cent solution as this gives you the highest amount of efficiency and return and sustainability. As soon as you start to focus on the top one or two per cent, you get in trouble.”

But recycling really changed around a decade ago when organisations found a reliable outlet in China. At that point, Spedding was doing some consulting work and CEO of the Australian Landfill Owners Association until 2015.

“This model was basically to do the minimum amount of sorting and produce a bulk product with five per cent contamination or less. You offloaded it to China which had very cheap labour and poor environmental condition,” he says.

“The interesting thing that most people don’t think about is that it’s not only the cheap labour. So much material is coming to Australia as a major market for the Chinese manufacturing sector. All of the containers had to be taken back to China and they all went back empty so basically you got almost free backloading in those containers of this material.

“So using China as a low labour but also as a low cost destination because of the empty container. It was a perfect marriage, if you like. The only problem was that it wasn’t sustainable.”

He officially formed the National Waste and Recycling Industry Council in early 2017 with the backing of its national members – Alex Fraser Group, Cleanaway, J. J. Richards and Sons, Solo Resource Recovery, Suez, Toxfree, Remondis, ResourceCo and Veolia.

In mid 2017, China announced to the World Trade Organization an intention to ban the import of waste products from US, Japan, Australia and other source countries, to take full effect by the end of 2017.

He says councils went from paying $40 a tonne to offload their recyclables to suddenly being paid $10 a tonne for the material.

Spedding says that while industry was concerned, the Federal Government seemed to have little understanding about the implications.

“This was the public perception that recyclables had a value. There’s no doubt they do, but where is the value positive is the issue,” he says.

“It doesn’t start positive, it’s positive somewhere along the line from sorting and processing  down into a producing a raw material again.”

He believes the value of waste doesn’t begin at a household level, it begins at stages of sorting and processing across the supply chain and back down into a raw material.

“The issue [now] is COVID-19 has disrupted the economy totally. But the biggest thing, is that I think coronavirus has spelt the end of globalisation as we previously knew it,” he says.

“Through the 90’s globalisation was a concept being pushed by everyone by countries, companies and individuals. We had the beginnings of a truly global economy.”

He adds that COVID-19 has exposed the weakness of globalisation and our dependence on supply lines and cheaply produced components overseas.

“As we come out of the coronavirus and look at all of these policies, recycling in particular, we are going to have to re-consider the world and the approach to globalisation.”

He points out that while everyone has been talking about a circular economy, that was practical up until China closed its doors on waste exports.

“While China was producing and was part of the circular economy, that was fine, but as soon as they closed the doors and wouldn’t take the waste back, the circular economy couldn’t include them.

“Therefore, it’s no good talking about circular economy in a global situation. But now we have a situation where globalisation will certainly be on the table for review and our circular economy that we’ll be talking can be geographically smaller.”

He says that as supply chains are broken by COVID-19, Australia can consider looking a more local specialised manufacturing including from recycled materials. Additionally, it can prompt a re-think of sustainable local services, whether it be closer food supplies, medicine or equipment, improving the climate in the process.

“I’m hopeful one of the positives that will come out of this is a refocus in Australia on manufacturing and product sustainability.”

“There is an opportunity for a new approach and a greater focus on a resilient, self-reliant Australia as a result.”

“There can be a lot of positives that will come out of this as long as we return to work not thinking it’s all the same and try to go back to where we were. We need to be looking at where we can be, and how it can be better.”

Close the Loop Founder Steve Morris says the company’s brands take a long-term view in its licence to operate.

“I’ve always found that resource recovery, product stewardship and circular economy…all of that seems to be growing independent of market ups and downs,” he says.

“Right now we are expecting some big decisions coming out of government like the Recycling Victoria policy, NSW EPA and incentive work on our road products.”

He says there were many scenarios in which circumstances looked uncertain over the years, including the development of its TonerPlas product.

“Our biggest challenge there is getting a government procurement professionals to actually buy the product, to specify the product.”

He says fortunately the company has received extensive support from agencies such as Sustainability Victoria. This has helped drive the product forward and the company has worked towards long-term sustainable outputs.

“It’s certainly been risky but we’ve been 100 per cent committed all the way,” he says.

Steve says Close the Loop, which has been value-adding on-shore, was reasonably insulated from National Sword, if not feeling bullish about the policy.

“National Sword to us was a risk we became aware of two or three years before it really hit. We were feeling fairly safe because of the value-add we give the polymers here before they go through brokers into other countries.”

He agrees the way forward in a post COVID-19 world is a renewed interest local manufacturing in Australia and an increase in regional supply chains. This should be supported by state, territory and national circular economy policies.

This is the second part of a four part series on challenges and opportunities during COVID-19. You can read part one by clicking here. Part two can also be read here.

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