Publication: Reverse Logistics Credits
Tuesday 18 April, BVRio published a new report about Reverse Logistics Credits, an innovative system to facilite the socially inclusive waste collection and recycling solution for urban centers. The report describes a market mechanism developed to incentivize the collection, separation and recycling of solid waste; shows the results of an initial trial in Brazil, conducted with two leading consumer goods companies; and provides suggestions to scale up its use.
The system of Reverse Logistics Credits was developed by BVRio to assist companies to meet their obligations under the Brazilian Solid Waste Legislation while rewarding informal waste pickers (catadores) for their role. In order to test the system and demonstrate a proof of concept, BVRio identified industry champions that agreed to pioneer its use and provide leadership in their respective sectors. A pilot project (April 2014 – March 2015) was conducted with two leading consumer goods companies in Brazil: O Boticário in the cosmetics industry and biscuit manufacturer Biscoitos Piraquê. The companies bought Reverse Logistics Credits through the platform over the period of one year, to ‘neutralize’ the impact of the solid waste generated by their products, predominantly different types of plastics and glass.
The Pilot Project
This initial trial involved more than 1000 catadores from 30 cooperatives in 7 Brazilian states that, voluntarily, responded to this demand for credits. Reverse Logistics Credits related to more than 1600 tonnes of solid waste were transacted during the course of a year, generating over US$ 100,000 of revenue for these cooperatives. The average price of the credits was US$ 45.00 per credit and the catadores‘ revenue increased between 18% to 26%, depending on the type and quantity of the marketed products. For companies, the costs of reverse logistics using the credits system ranged from US$ 0.00013 to US$ 0.011/per unit of packaging. These costs are very competitive compared to the costs of companies conducting reverse logistics in-house.
In 2010 was announced the National Solid Waste Legislation (PNRS) in order to create solutions to the challenge of solid waste generation and disposal in Brazil. The law creates the concept of shared responsibilities for the collection and disposal of solid waste generated by producers, importers, retailers and distributors from industrial and commercial sectors. According to PNRS, these actors need to ensure that their products are appropriately disposed of at the end of their lifetime. This requires the development of systems for the collection, recycling, re-use or environmentally appropriate disposal of such products (referred to as the ‘reverse logistics’ of the original supply chain associated with these products). While companies and the public sector try to devise ways to meet the objectives of the PNRS, Brazil currently has more than 800,000 independent waste pickers, who make a living by collecting recyclable materials in the streets, rubbish dumps and landfills of Brazil. The catadores are important actors in this waste management chain and should be a part of the solution.
Pioneer companies seeking solutions to comply with their obligations towards the Solid Waste Legislation organized reverse logistics strategies and solid waste management, with empowerment and social inclusion of waste pickers. A positive approach to the implementation of the Brazilian Solid Waste legislation has indeed the potential to bring unprecedented social and environmental benefits. And this should not be compromised by the short-term objective of generating profits for shareholders of large multinational brands.
The Reverse Logistics Credits Model
Reverse Logistics Credits are certificates which confirm that reverse logistics services were provided to ensure that a certain amount of waste was responsibly disposed of. These credits are issued and sold by cooperatives of catadores and purchased by producers and/or importers who need to comply with the solid waste legislation. Through the purchase of credits, companies effectively subcontract cooperatives of catadores to provide reverse logistics services. The system is entirely traceable and audited, mapping the flows of waste via tax documents. For the companies, the credits provide an efficient and cost-effective solution to legal compliance. For the waste pickers, the sale of credits provides an additional source of revenue, adds value to their activities and creates an important social impact. At the same time, the additional value generated by the sale of Credits would make it worthwhile to collect waste materials with lower intrinsic value, widening the range of products currently collected (today, only products that have high raw material value are collected, e.g. aluminium cans whose recycling rate is over 95% every year, only possible through the work of catadores).
Given that in the developing world these waste management activities are often performed by these low income, informal waste pickers, this system has the potential to create positive social, economic and environmental impacts in many developing countries.
Reverse Logistics Credits have the potential to become an important tool for meeting the challenges of solid waste collection, screening and recycling. This case study showed that this system provides companies an innovative, efficient and cost-effective social and environmental solution to comply with their legal obligations.The initial results from the trial demonstrated that the cost of this solution is extremely low (US$ 0.00013 – US$ 0.011/unit of packaging). For the catadores, the sale of credits provides an additional source of revenue, adds value to their activities and creates an important social impact. Environmentally, the additional value generated by the sale of credits makes it worthwhile to collect waste materials with lower intrinsic value, widening the range of products collected.
The Reverse Logistics Credit system is ready to be used, and has the potential to provide a socially, economically and environmentally positive approach to waste collection and recycling in the developing world.