The most recent published survey of the composting industry is woefully out-of-date. The last biannual survey conducted by the Composting Council of Canada is for 1998. At that time, the survey identified 344 facilities across Canada. Windrow composting was the most common operating method (138 facilities), aerated static piles were used by 61 facilities and there were 23 in-vessel composting operations. We hope this data will be updated soon, but in the meantime observations can be made about this important growing business.
There are two main markets in Canada for compost: the volume market and the dollar market. The volume market includes sod production, landfill cover, mine reclamation, agriculture and silviculture. The dollar market includes nurseries, retail garden centres, landscapers, and other specialty markets.
As with any 3Rs activity, the market is driven by the cost of landfilling. Any entrepreneur interested in setting up a composting operation will quickly find this out.
The tip fee for landfilling waste generally ranges from CDN $20 to $50 across the country. Despite claims to the contrary, landfilling is still a relative easy and efficient way to dispose of municipal solid waste in Canada. Currently, no other method can compete economically with landfilling.
The selling price for compost depends on the quality of the compost, location from market, cost of landfilling and demand. The bottom range fluctuates from giving it away as landfill cover to selling it for $35 per tonne to local nurseries. The top market may be in retail, where one Canadian municipality charges $5 for a 20 kg bag. (That translates into $250 per tonne.)
Keys to success
To make it in the composting industry, there is one major success factor. The science and engineering is relatively easy. The most important ingredient for success is to realize that the business cannot succeed on the sale of compost alone. Unlike other industries (e.g., automotive) revenue has to be generated on the feedstock. The market for even the best quality compost is generally not high enough (nor may it ever be high enough) to make a profit taking in organic waste at no charge. You will not be successful undercharging for organic waste.
In Ontario, the tip fee for organic waste at a composting facility is in the ball park of $100 per tonne. If you are considering charging less for waste feedstock you had better have an iron-clad contract that ensures the waste stream is free of contaminants and/or the generators pays extra for unacceptable waste. Inevitably, there will be circumstances where received waste is unacceptable and that has to be landfilled.
Another key to success is to ensure your operation is odour free. There are a few “environmentalist” entrepreneurs that entered the composting market with their eyes wide shut only to be labeled as greedy polluters after their facilities began experiencing odour problems. First, learn the composting process in a small scale because any mistakes that are made can be easily corrected with little impact to neighbours and to the environment. Grow in planned increments to maintain control and to demonstrate stability in the operation. (Learn about process upset in the Composting Matters column, page 41.)
There are many barriers to success in the composting industry and they are dependent on a number of factors. For example, composting operations in sparsely populated rural regions face increased transportation costs and the need to downscale proven technology to suit local conditions.
Another barrier is a fluctuating waste stream. What makes the composting industry fairly unique is that there are two sets of customers: suppliers of waste and purchasers of compost. A facility may have limited ability to specify waste quality, especially if the feedstock is provided by a municipality. Furniture, tires and other items should not be coming into a composting facility, but they have been known to. There has to be a mechanism and final disposal destination for inappropriate material.
Legislation with respect to compost quality in Canada is currently focused on issues related to environmental, health and safety. However, there is a definite need for established and recognized standards for product quality.
Susan Antler, executive director of the Composting Council of Canada (CCC) prefers to describe the marketing of composting as finding the right compost for the right customer.
“There isn’t such a thing as ‘good compost’ and ‘bad compost,'” she says. It’s a matter of quality matching a specific need.”
In the spring of 2005, the CCC, in junction with other stakeholders and government, will launch a Composting Quality Alliance. The Alliance will allow for grades of compost. In this way, customers can choose the right one for them and premium compost can be sold at premium rates. The establishment of product quality standards will go a long way toward supporting long-term growth for the industry. The criteria will ensure product satisfaction and maintain customer confidence.
With governments increasingly focused on waste diversion, the compost market is poised for further growth. Success will come to companies that recognize that focus on the bottom line.
John Nicholson is a management consultant with Environmental Business Consultants based in Toronto, Ontario. E-mail John at firstname.lastname@example.org