The entrepreneurial role of waste companies in transforming waste streams to value streams: Lessons from a Danish Municipal waste company

Waste as value

Research into waste as value is sharpened on two key points by a number of research projects at Cambridge University (Yang et al., 2014, 2017a, 2017b), which aim to develop the understanding of waste value as part of the development of sustainable business models and methods to support this.

The first contribution is a methodology developed to identify the untapped potentials throughout the life cycle by examining which value is captured and which is not, and therefore constitutes a value-adding potential for business models.

The purpose of the method is to capture the potential that a product or material creates throughout its life cycle. Value capture depends on the dominant culture of production, use and waste management. A distinction is made between four types of uncaptured value: value surplus, value absence, value missed, and value destroyed.

The second contribution lies in the concept of value, seen in the light of sustainability (Yang et al., 2014, 2017a, 2017b), which incorporates the value potential of waste through direct and indirect social and environmental effects, for example, the creation of local employment and social enterprises. A new and broader understanding of the value potential of waste is opened up, which is important not only for companies’ and industries’ business models, but also for the development of value and business models in the waste sector.

Zacho et al. (2018) use the concept of uncaptured value to build a more detailed knowledge and understanding of the potential values that can be captured in the waste sector. The article provides an important insight into the particular challenges associated with exploiting the value potentials of waste companies’ different waste strategies: reuse, remanufacturing, recycling, and incineration. The research from Zacho et al. (2018) helps us to understand the problems associated with the location of waste in the life cycle, the challenges associated with waste companies’ opportunities to create value and earnings through various waste strategies, and the potentials and limitations of social inclusion and environmental aspects.

Figure 1 visualizes the challenges by creating value flows through waste management in waste companies. The model depicts that household waste has a negative waste value, because of the way household waste is collected, which follows the tradition of linear waste management. The waste has been through extraction, production and use processes, which are both materially and socially embedded in the waste and actors’ understanding of its value. A great deal of value has been lost in the process, but how can value be regained?

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Figure 1.

Value levels in the flow of materials. The choice of recovery route made by the waste management company creates different potentials for extracting value. Reprinted from Zacho et al. (2018). Copyright [2018] Elsevier B.V.

Zacho et al. (2018) focus on the specific challenges of waste companies in revaluing household waste through processes such as sorting, testing, cleaning, transporting and networking. For most waste streams, the opportunities for creating financial value for the waste company are limited, while it can, to some extent, succeed in creating social and environmental value. Zacho et al. (2018) point to the need to create regulatory and market mechanisms to increase the possibility of capturing value for the company, as well as to exploit the potential that lies in uniting the various forms of value (business, social and environmental), as well as creating local value.

Waste as valorization processes: From waste stream to value streams

We now apply a valorization perspective and shift focus from ‘what’ to ‘how’ value streams can be created from waste streams through entrepreneurial activities, combining different forms of value, providing knowledge and documentation, and building networks.

The valorization perspective focuses on value in making and understands waste as value not as something ‘that is’ but something ‘as becoming’. The theoretical background is actor network theory (Callon 1986; Latour, 2005,1987; Law and Hassard, 1998; Michael, 2017), action net (Corvellec and Czarniawska, 2015; Czarniawska, 2004, 2015) and valorization (Callon et al., 2002; Doganova and Karnøe, 2012, 2015a, 2015b).

The valorization approach focuses on the processes through which actors co-create technology and networks. Within the environmental area, Doganova and Karnøe (2012, 2015a, 2015b) explain how value-creating processes create the basis for transforming waste streams into value streams. Valuation is understood as concerning how actors develop solutions in networks. Solutions are constantly created and recreated through activity and interaction, and framing, development of knowledge, information, and documentation temporarily stabilize value and value flows.

The central starting point is to see the transformation process as an entrepreneurial process, where the entrepreneur, in this case the waste company, creates opportunities rather than discovering them. That is

This means that there is not a pre-given environment ‘out there’ visible to the entrepreneur; the environment becomes visible ‘in the company/for the entrepreneur’ through the work of representation. The work of representation creates the business opportunity and makes it visible in the business case through a process of construction, whereby the entrepreneur enacts, collects, and arranges data (e.g., regulations, assumptions about user problems), and makes calculations (e.g., estimated price/cost structures) to form a view of the world. (Doganova and Karnøe, 2012, p. 5).

This entrepreneurial approach means that value potentials are not seen as pre-existing, but as created and assembled. It is therefore important to understand how to waste company and stakeholders may

co-evolve and become assembled as a new network supporting the new product. When it comes to innovation of new products, both stakes and their holders are emergent; hence, assembling the stakes and holders is a critical job for the innovator. (Doganova and Karnøe, 2012, p. 6).

Framing, in the form of knowledge information and documentation work, plays a central role in transforming waste and waste streams into value and value streams. It is thus important that waste is framed as value and that this value concept is seen as a link between economic, environmental and social values, where ‘externalities’ are internalized and give the product extra value and create distinct products.

Our conceptual journey has provided an opportunity to develop a framework for investigating the processes through which public waste companies can create entrepreneurial activities that enable potential waste flows to transform into value and value streams. The framework is used to map and assess the processes and activities through which the waste company transforms waste streams into value streams. To visualize the complex journey of converting waste into more valuable products, we use the term ‘black box’ as a metaphor for the unknown or hidden processes involved when ‘unlocking’ potentials (Figure 2).

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Figure 2.

A black box metaphor for waste valorization processes (Based on Doganova and Karnøe, 2012; Kabongo, 2013).

Case study

To collect empirical evidence on waste valorization practice, this paper adopts a case study approach. This approach enables us to obtain a better understanding of fundamental elements and issues characterizing the waste valorization process, networks and the reframing of waste as an asset. Interviews, desk study research and site visits complimented the study. Case studies are especially useful in addressing ‘how’ and ‘why’ type questions, and when there is a need to perform an in-depth analysis of a complex phenomenon in its real-life context (Yin, 2003). A case study is rooted in the individual’s experiences and practice and can help to uncover complexity. Since case studies are rooted in actual practice, they can be further linked to action and thus help to change practice.

Case study research is a ‘linear, but iterative process, consisting different steps; planning, designing, preparing, collecting, analyzing, and sharing, in which each step requires the researcher to review and re-examine former decisions’ (Yin, 2003). In the context of this article, this includes planning and designing case study design and methods and preparing the collection of data by identifying niche waste valorization projects within the waste sector in Denmark. Data collection and analysis is examined through the lens of niche projects, outside the traditional split of public or private, with a focus on the key issues in delivering new value propositions within the context of the waste sector: how value is created and the type of value.

The case study is an embedded case study of two strategic entrepreneurial business developments in a public waste management company. The aim was to learn from a front-runner in experimentation with and implementation of CE-inspired solutions. For this purpose, the municipal waste management company AVV was selected as an extreme case (Flyvbjerg, 2001; Neergaard, 2007). AVV is famous in the Danish waste sector for its reuse shop and for experimentation with CE-inspired solutions and perceived a front-runner within public waste companies (Moalem et al., 2022). An extreme case exposes ideas not seen in average cases and thus provides the opportunity for us to gain new knowledge about entrepreneurial business development in waste companies (Flyvbjerg, 2006).

The selected cases provide an opportunity to follow the innovation journey of the transformation from waste to value. This journey cannot be understood in isolation from the individual company (AVV) but must be seen as a result of a longer journey over time and between actors. The first case concerns how value can be created by reprocessing brick waste from demolition and recycling stations by cleaning, sorting, and selling waste bricks for new building. By transforming waste into a product and creating a market for it in a collaboration between actors who are already active in this field, AVV was able to start up its new business. The second case concerns how value can be created based on refurbishment of white-good waste (WEEE) by collecting, sorting, refurbishing and selling prepared-for-reuse appliances, and whether it is possible to build stakeholder acceptance of this business method based on local and social value. The refurbished appliances stem from white goods disposed of at municipal reuse sites or as bulky waste (Section 4vv).

Data

The data collection aims to follow the transformation process by tracing the transformative activities over time and between actors as they are deposited in the form of stories, narratives, documents and in the form of physical traces in the form of activities and artefacts.

Waste valorization of old bricks

Waste valorization of post-consumer white goods

Summing up results for bricks and WEEE

Results revealed that converting waste bricks and WEEE into more valuable products is a complex process consisting of several entrepreneurial activities, beyond supply/demand mechanisms and price formation. Second, creating value out of waste requires collaboration between actors. Third, new competencies are needed, including knowledge and business competencies. A visualization of key elements in the waste valorization process of the waste streams of bricks and WEEE, in the case of Denmark, is illustrated in Figure 4 and Figures B1 and B2.

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Figure 4.

The waste valorization processes for solid waste bricks and WEEE, in the case of Denmark.

From waste streams to resource streams: Innovation processes transforming waste into value

The analysis shows how converting waste into a product/service differs from the technical material process of recycling waste, that is, making it into a resource by optimizing its technical material properties.

On the contrary, transforming waste into a product/service is an innovative, creative process. The idea of product/service forms the basis for activities and processes that enable the idea to transform into value.

This process is not so much about restoring the original value of the ‘waste’ product, for example, to achieve purity and quality that is comparable to its original value as a product or material, but rather to create a distinct value for the product.

To succeed, it requires actors to create a basis that makes the product’s life cycle an integral part of the valorization process. That includes valorizing parts of the life cycle process that have been excluded from the traditional way of assessing value in the form of externalities. For example, the transformation of ‘waste’ bricks to ‘value’ illustrates how actors succeed in co-creating a valorization process. The old bricks’ positive environmental and energy effect creates value for end-users and its ‘use history’ creates additional value. Furthermore, the unique physical properties linked to the non-standardized ‘look’ are transformed into a value that can be utilized in the way the bricks are included in buildings and thus create added value. This added value is crucial for the transformation to succeed under the given conditions as there are significant investments associated with establishing the different processes for collecting and cleaning the old bricks. In addition, work is being done to create extra value by increasingly embedding old bricks in a product-service system, where advice and training can be purchased.

In the case of white goods, the valorization process occurs primarily through the externalities associated with the social dimension of sustainability. The inclusion of people on the fringe of the labour market, creating social and local jobs, plays an essential role for the actor in negotiating acceptance for recirculating the white goods as Danish legislation is rigid concerning what products and services public companies may provide in the market. For end-users, the value is primarily related to functional products at a low price, and to a lesser extent, the circulation of products and materials as a value proposition. For AVV, however, the latter is the decisive force.

The transformation of the value concept is crucial for the waste actors to create a productive activity that transforms waste streams into value streams in both cases. Either by creating a value proposition that provides extra value for the end-users as in the case of old bricks or extra value for stakeholders, which is decisive in enabling the activity to be established.

Valuation of waste as co-creation processes

Results further reveal that the transformation of waste into value cannot be isolated to a single actor or process. Instead, it is a dynamic co-creation process where co-creation occurs throughout the journey from idea to product of value. Development paths consist of experimental processes where different possibilities are tested through the involvement of different actors during the development process. Actors who are getting involved have different ideas and interests in opportunities. Interests and ideas, however, change along the way according to who and where they are involved.

The co-creation processes in the development process of ‘old bricks’ aimed to establish value in the existing market for bricks through the engagement and involvement of stakeholders who ensure that waste bricks can be attributed a value in the market. Transactions in the market require that the buyer and seller, respectively, can mutually guarantee that the bricks have a value that makes them attractive sales and purchase objects, that have the character of a commodity and live up to the requirements of the consulting engineering companies.

Therefore, it was crucial for AVV to enter cooperation with actors who could (1) provide knowledge and documentation of techniques and processes for cleaning the bricks and (2) guarantee that the bricks had a quality and physical durability that lived up to the requirements of the Danish Building Code and processes, and thereby could be marketed. The latter was provided through development and documentation cooperation funded by the Ministry of the Environment and the EU. The main challenge was however that no harmonized standards for reused bricks existed, as do for new bricks (EN 771-1: 2010). Therefore, several activities were needed to transition from waste to the reuse of products. That included ensuring that the old bricks could comply with the Danish Building Code (BR18), of which Old Bricks had done a great deal of preparation. See Table B1. Therefore, AVV’s collaboration with Old Bricks Nord means that AVV gains access to competences and knowledge, where Old Bricks had undertaken essential preparation.

For the waste company, collaboration with the private entity Gamle Mursten meant that it was possible to gain knowledge and competencies about technology and markets, documented and tested both in production and on the market. That provided AVV access to rapid exploitation of the start-up potentials that were important in the company’s attempts to position themselves in the rapidly growing area created by the demands for circularity in the construction sector. To provide scientific knowledge and document the old bricks’ environmental and climatic effects, it was necessary to complement the collaboration with more scientifically based collaboration, as Gamle Mursten could not provide the necessary knowledge for LCA documentation. This co-creation process is vital for the waste company’s role in regional waste streams. AVV has the environment and the climate as their strategic value proposition in a changing market. The collaboration with Gamle Mursten was an integral part of the initial start-up process to ensure rapid skills building.

However, the exploitation of entrepreneurial potential has been a complex process, and to be able to provide the necessary entrepreneurial competencies, the company has had to focus more on internal capacity-building than first assumed. That demonstrates the importance of co-creation processes in transforming waste streams into value streams, which in most cases are far from the notion that waste is gold simply waiting to be collected.

In the case of white goods, co-creation processes also played an essential role concerning building the necessary capabilities to transform waste into products that have value on the market. A collaboration with a private entity (De Grønne Hvidevarer) was crucial to ensure productive and distributive capabilities that could turn waste into goods. In addition, there was a challenge in ensuring the quality of the white goods, partly solved by reorganizing the transport to ‘gentle collection’ and by guaranteeing the necessary quality and right of return. Finally, there is the importance of collaborations in ensuring that production could occur despite national regulation on return schemes. That illustrates the importance of engaging with legitimizing stakeholders as emphasized by Mitchell et al. (1997). In the co-creation process, it was important for AVV to navigate the local political landscape and to have the skills to negotiate and design a collaboration that was accepted locally.

Navigation and negotiation as key transformative capabilities

Case results reveal some of the challenges that underlie the ongoing transformation process and the extraordinary demands on the individual public waste actors and their ability to innovate and navigate the changing landscape. First, the transformation processes are more comprehensive and transformative than current analyses describe. The transformation from waste to value is perceived as a straightforward socio-material process that can be achieved with relatively simple means such as marketing in the form of privatizations, pricing and competition, or through changes in the mode of collection (Messmann et al., 2019).

Second, most analyses have focused on the cycling of waste types in the productive parts of the production cycle rather than on the waste sector’s challenges to handle end-of-life products where the value has been degraded through activities such as waste management and disposal. In regard to the latter, only a few real-life examples exist (Messmann et al., 2019; Milios & Dalhammer, 2020; Zacho et al., 2018).

For public waste companies, systemic and regulatory embedding means that the actors’ options for action are limited partly due to the regulatory framework and partly due to the lack of relevant competencies and knowledge development as those have been built for the linear system.

The analysis reveals how even entrepreneurial public waste companies such as the case company AVV have limited capabilities to navigate under the new conditions, which hamper opportunities for actors to develop experiments and practical solutions to the challenges that CE poses to the waste system.