Good Business: Karton Chernozemie
According to a recent report by the World Bank’s International Finance Corporation (IFC), more than 48 million metric tons of municipal solid waste was generated in the Russian Federation in 2010, 95% of which was sent for disposal, mostly in landfill sites. In contrast to most countries in the European Union, which typically recover around 60% of municipal waste, in Russia, most of it is just thrown away.
This situation, the IFC report states, has “negative environmental consequences”. Toxic substances accumulate in landfills, infiltrating the soil and groundwater, and polluting the air, with short-term effects (such as combustion and landfill fires) as well as long-term impacts (decreased biodiversity and soil fertility, and damage to human health). There is also the issue of resource efficiency, or rather the lack of it. The low recovery rates in Russia mean that the use of raw materials and energy is massively inefficient. Experts estimate the Russian waste market has a potential value of US$3.5bn.
The Karton Chernozemie recycling company is trying to change things, starting in the Voronezh region of Russia. The company, one of the first of its kind in the Russian Federation, collects, sorts and recycles polymer, cardboard and glass waste. It was founded by Igor Zaboev and Petr Boikov in 2008. In a short time, their success with the company received international recognition, and they were awarded the Youth Business International Environmental Entrepreneur of the Year prize in 2012. (Youth Business International is a global network of independent, non-profit initiatives helping young people to start and grow their own business and create employment.)
The two had started out in the construction industry but saw the potential for waste collection in the town of Semiluki, the administrative centre of the Semiluksky District of Voronezh Oblast. They began collecting cardboard and paper from containers and several industrial companies. Boikov recalls, “We started out with just one truck, which we purchased on credit, and one compacting machine. This wasn’t enough to make good business and we had to increase our volumes. In our case, it meant we had to get long-term contracts to supply large recycling companies.”
The young entrepreneurs soon discovered that their market was limited by the fact that large-scale recycling firms only accept raw materials in pre-packaged ‘brick’ form. To have any chance of significant growth, they needed to invest in the expensive machinery needed to produce these bricks. After being denied a loan by a large number of commercial banks, they turned to Youth Business International member, Youth Business Russia, which was able to provide them with a loan and connect them with a successful and well-established business mentor from their community.
The financial element of the support was used to purchase the equipment needed to produce the easily tradable bricks, and by 2010 the company was collecting waste and supplying it to larger recycling companies across the Voronezh region and beyond. But, even with this expansion, Karton Chernozemie had to address some bottlenecks.
Boikov says, “Everybody understands that the collection of wastepaper is important but nobody wants to meet halfway. There is a lot of wastepaper but just a few recycling companies to handle it, and they dictate their terms. If you don’t accept their terms, then you have to look further afield and this increases your transport costs.”
In the absence of a well-developed waste management system in Russia, the entrepreneurs looked to the neighbouring Ukraine, and made contact with a cardboard and paper mill in Kiev.
“Although Ukraine is a former Soviet state, it has managed to develop its waste recycling sector, and in that country about 65% of waste is collected, sorted and sent to recycling companies. The Kiev mill can recycle about 30,000 tonnes a month, compared to the local factories in Lipetsk, just 3,000 tonnes, and in Rostov, just 5,000 tonnes,” says Boikov.
A key decision that has helped the company grow still larger was the move away from dependence on the high-intensity, low-yield work of recycling paper, and a diversification into plastic recycling.
“Our business has social roots, and almost from the beginning we helped the town to remove plastic bottles and other plastic waste because these are hazardous materials that do not decompose,” recalls Boikov. “Today, we collect and compress this waste, and bring it to other enterprises which can make use of it. For example, in the production of rubber shoes, plastic crumbs can be added to make the material stronger.”
Karton Chernozemie is now dealing with the full cycle of Russian domestic waste, collecting from residents, sorting, processing and eventually distributing the various raw materials to different factories throughout Russia. Plastic waste goes mainly to the Ukraine, where it is converted into plastic pipes, shoes and garden tools and furniture.
In the future, the company plans to expand into the disposal of hazardous waste, including items like light bulbs, mercury thermometers and toxic waste. This is a reflection of a social commitment to the cause of environmental protection.
“It is not just a business issue but the matter of my personal contribution: have I done anything useful in my life?” says Igor Zaboev. “The future of my business is good because the potential for recycling is endless in Russia. I am pleased to be changing ingrained habits and getting new ideas accepted as the norm.”
Editor of UNIDO's magazine, Making It: Industry for Development. Making It is a quarterly magazine to stimulate debate about global industrial development issues. It discusses the role of industry as a driver of wealth creation and development on the one hand, and the need to ensure the environmental and social sustainability of industry on the other.
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