Good morning, everyone, and welcome to today's webinar. I'm JD Kemper, Vice President of Marketing at Republic Services, and I'm very excited to dive into this really impactful topic of circularity. I'm joined today by two Republic Services sustainability experts, Tony Fritz, who's our Director of Sustainability. Tony's really responsible for helping us set our sustainability goals, track our progress, and also he supports our sustainability innovations, particularly around the areas of circularity and decarbonization. Fritz Steiner is our Director of Sustainability Solutions. Her major role is partnering with our customers to help them really think about how they make impact in achieving their sustainability goals and really setting their circularity strategies. We partner with the Harris Poll on this, so we're excited to have them along this journey with us.
They're a leading research and insights firm that really helped us sort of analyze all this information and then produce the Circularity Index. Before we jump in, I'll tell you a little bit about Republic Services. We're a leading environmental services company focused in the areas of recycling, waste, and environmental solutions. We serve over 13 million customers nationwide, and our vision really is to partner with our customers to create a more sustainable world. It's really through that vision and through those partnerships and conversations that the Circularity Index was born, right? We talked to a lot of customers about how to achieve their sustainability goals, how to set action plans, how to think about diversion, how to think about overall managing the materials.
Through those discussions, what we found is there really was not a tool to help them benchmark sort of what they are doing and their plans against their peers and competitors and others in their industry. We developed one. We are excited to sort of walk through some of the findings of the index with you today. Before we jump in, I would like to just say, hey, for the basis of this conversation, as also the basis of the index, we really define circularity as the concept of maintaining value and utility of materials for as long as possible in the circular economy, which obviously helps to minimize waste and resource extraction. Where can we find materials, put those materials into continual reuse, and that way we do not have to continue to pull on resources and virgin materials?
A quick look at the numbers really helps us understand there is an enormous opportunity for us to think about circularity and diversion practices. 327 million tons of waste is disposed of in the U.S. annually. In the EPA states, about 75% of that waste really either could be recycled or has a higher use. However, only 30% of that waste actually gets diverted from landfills. Much of that waste is commercial waste, right? It is waste from companies like ours and yours. As we as business leaders think about how we approach the ever-evolving environmental impact of waste, adopting circular principles and moving away from sort of a take, make, dispose model is something that we should all be thinking about, right? It should also be tied into our overall sustainability goals and strategies. With that, we'll talk a little bit about the index.
We went out and we surveyed over 1,200 business leaders across a number of industries, mostly of medium to large companies, on like 21 clear, distinct markers of circularity and sustainability. We grouped all of that information into these three categories of commitment, execution, and recovery. Commitment's really all about, do you have leadership alignment? Are there resources? Do you have a roadmap? Are you tying your goals, whether they be internal or external, to your overall business operations? You get to execution, which is, okay, now that you've made a commitment, what's the action plan? How are you changing your business operations to either reduce waste or increase your circularity strategies or lastly, divert waste from landfills? Recovery, as we like to say, is where the rubber meets the road, right?
This is really where you start to track, are the principles and action plans that you set in place really making an impact? Are you seeing your diversion rate increase? Are you actually taking materials and increasing and putting them back into the circular economy? Are you diverting waste from landfills? Are you measuring the impact that that diversion has on the overall economy? Once we did all that, we measured all the leaders and we took the survey results, we analyzed them, and we really plotted them out on this five-point maturity curve that you see here. What you see is that, hey, companies are all along this journey, right? From novice to expert, they're all in different phases. What Tony and Chris are going to walk you through here in a bit is that some of that varies by industry.
Some of this has really been just because you have consumer demand that's helping to drive that or legislation. Other industries just maybe haven't had the same sort of external factors really pressuring them to move as fast. They're all along this journey. For the majority of companies, as evidenced by the fact that 45% of us are in the novice or emerging categories, it's still pretty early stages, right? Coming out with this index, helping develop action plans, having a roadmap, this is a pivotal time for us to be thinking about circularity and how do we impact the circular economy. Now, Tony's going to walk you through the key findings and the action items from the first stage of commitment.
Thanks, JD. As JD talked about earlier, we define commitment as the extent to which leadership, resources, goals, and budgets are aligned with circularity initiatives. For a company beginning its journey, this could be as simple as building awareness and starting to engage resources to determine where circularity is possible. For a more mature company, they might have a dedicated sustainability team with the support of senior leadership and access to operational resources. This company might include a public commitment to circularity with challenging and achievable goals, as well as a clear investment plan with committed capital resources. Commitment is about engaging your team, determining where your business can use circularity to drive value, and investing to make an impact. The purpose of this commitment is to capture the market, environmental, and material and economic benefits of improving circularity for your business.
Many companies are showing this through public circularity commitments. Often, these have been in response to external drivers like increased regulation, minimum content standards, or consumer pressure on brands to demonstrate sustainability. Regardless of this driver, or regardless of the driver, 89% of companies have made public-facing sustainability goals. These goals can include anything from zero waste or designing for circularity to increasing resource efficiency and minimum content standards for recycled content. These targets offer opportunities to minimize waste, enhance circularity, and drive efficiency through the business. They need to be backed up through action plans and resources. Only 38% of these companies have goals that are certified and tied to an action plan. We'll talk about that more in the execution section. In addition to action, companies need to strengthen their commitment with investment.
We include investment within the commitment category because putting capital to work is a key sign that a company is truly committed to a strategy. Now, commitment requires investment to make an impact, and we're seeing more capital dedicated today. 87% of companies plan to invest more in circularity initiatives over the next two years. 42% of those companies plan to invest significantly more. While the index spans from novice to expert, it's clear that companies across the spectrum are increasing the amount of money they're putting behind circularity initiatives. It's important for these companies to find the right opportunities to invest in circularity based on their industry and business model. It's essential that they can demonstrate returns on investment. This is my favorite part of the entire index. Coming from across the economy, the message is clear.
This is an opportunity to drive organizational performance while improving sustainability. Here we see the percentage of companies planning to grow circularity investments by industry. It's a fantastic story. For many of these industries, nearly all of the companies are growing their investments, with nearly 30% growing it faster than 10%. One encouraging takeaway from this part of the study is that none of the industries are that far behind. Each of these industries has something different to think about in their circularity journey. The investments are as diverse as the industries listed here. Each of the industries has different value drivers and different opportunities for both economic and environmental returns. A water utility is different from a cleaning products company, which is different from logistics, and even further different from a semiconductor fab.
In an era where costs have inflated, waste minimization and material reuse means lowering your input costs while making progress towards your goals. Even so, some industries are doing better than others. We see that for some industries, it's even more of a priority. Energy, utility, and CPG companies lead the way across the economy, highlighting the importance of adding circularity to their business. Now, the survey also allowed us to group activities in terms of where organizations are focused. What are their priorities? Now, these nine priorities are all very important activities. What's interesting is that the top three priorities are the ones most likely to impact the double bottom line, both profitability and sustainability. Energy efficiency, often energy is one of the most significant input costs and clearly offers an opportunity to increase the double bottom line.
Sustainable supply chain means efficiency, security of supply, ensuring that your business can keep operating. Waste reduction and circularity means material efficiency and cost out. All of these can drive overall company performance.
I think what was most interesting about the commitment section, Tony, was that there's a lot of debate in today's culture around ESG and ESG investing and reporting. To see that 87% of companies are planning to invest more, and then 42% of those are planning to invest significantly more, really shows that business leaders and organizations see the value and really this link between economic sustainability and environmental sustainability. I think that's just evidenced by where people are investing and how they're investing. As we leave this section, there's a couple of things that we say like key action steps, right? If you're in the early stages of this journey, think about how do you engage your senior leaders? Do you have a sustainability committee, or do you need to develop one? From that, start to develop goals.
The goals should be both ambitious but actionable, right? Those should also tie to your organization. You're going to see goals from a CPG company be very different maybe from goals from a manufacturing or energy services company, just based on the types of waste that they create and the opportunities for circularity and diversion with the output of their operations and manufacturing. Lastly, develop a roadmap, right? You got to tie those investments to a roadmap and to a plan. We start to track progress on that plan, which is exactly where we're going to go next. We'd like to talk a little bit about execution and how companies are putting those commitments into action.
That's right. Once you have a goal and you've committed resources to generating value for your company through circularity, it's time to put it into action. The second strategic category is execution. This refers to how well your organization turns your goals into actions. This means creating detailed plans, implementing those plans, measuring progress, and then iterating. Execution can be hard. Programs are new and emerging, but it's still a new process. 65% of respondents agree that finding concrete steps is still challenging. Companies need help truly taking advantage of this opportunity. It's a different way of thinking. It involves new and different skills and understandings of how to analyze waste flows, measure improvement, and communicate it to the organization for continuous improvement. Companies are in the early stages of their journeys. The majority of leaders surveyed are proud of the efforts, but 83% want more support from the board.
How do you build that? In order to build support for these programs, you need to establish credibility, which means clear measurement of your goals and your progress, and then communication. Many executives believe that the lack of accurate tools drives to overstating progress. Clear measurement of progress, ROI, drives engagement and improves visibility to the board and all stakeholders. Real progress on circularity requires a look at the entire value chain. Look within your own four walls, look upstream and downstream. Most mature and innovative organizations are looking broadly within their operations to find opportunities to address the challenge of circularity from different angles. From our experience, 30%-70% of a company's total waste is supplier-related, which makes a lot of sense. Companies take inputs and transform them into products. Inevitably, there's going to be waste.
The question is how you manage that waste, minimize it, reuse it where possible, divert it into recycling streams, and finally, dispose of it. It's a complex system that offers a lot of opportunity. We'll talk through some examples of how companies are putting their plans into action and creating value in the process. When you look inside your operations with an eye towards recapturing values from waste, you're saving materials, time, and money. No matter how well you're doing, there's almost always more opportunity along the journey of continuous improvement. These actions save money and materials. First, assess your waste. What value do you find in that waste? Where can materials be used more efficiently? Reduce excess packaging. Right-sizing packaging while still ensuring that the packaging is getting where it needs to be in the right shape is really important. Try out new materials. Minimize overproduction and optimize inventory.
These directly impact your bottom line and your cash flow generation. One example is a company that decided to replace low-efficiency spray-to-waste spray guns used to paint parts with a new automated system that recaptured any wasted paint. This way, they got more paint on the part, they recaptured more of it for reuse, their efficiency went up to 98%, all while saving both materials and money. Outside of your four walls, look upstream. Engage your partners in the supply chain. Look for opportunities for win-win solutions where you can save costs and inputs for you and your partners. Where are there opportunities to use more circular materials? Can you reduce the amount of materials used while still ensuring that the product gets where it needs to be? Most of all, ensure that you have transparency in your reporting.
If you want to be partners with your supply chain, you have to have trust in both directions. Where necessary, add incentives. Ultimately, companies respond to incentives. Having measurable goals with realistic incentives can drive behavior, all while making returns higher and business more sustainable. One example would be a large retailer who looked up its supply chain and found that it could switch from single-use packaging to reusable crates. This led to a better, fresher product, reduced waste, and ultimately drove profitability. We've been talking a lot about what goes on behind the scenes from the consumer perspective. When you look downstream, you're starting to reimagine your product lifecycle. How does the consumer interact with your product? What does the end of life look like? Work with your partners downstream. Thinking distribution, sales, end-of-life management in general. Evaluate the materials involved.
Are there ways to improve the end-of-life process for the consumer? Can you make it more clear and more simple for the consumer to know what to do with the product when they're done? For the partners who are picking it up, make it a more efficient and repeatable process to recover those materials so that you can get the materials back in a way that you can reuse them. Design with circularity in mind. Make it part of your brand. Where are consumers going to pay for circularity? Where does it need to be fueled by the value of the materials that you recover? How do you drive circularity for your company, your customers, and your partners?
You know, Tony, so often when we think about improving business processes, we tend to sort of dive in, look at the organization, talk to our sort of cross-functional stakeholders. I think what's most interesting about sustainability and circularity in particular, as we learned in the report, is this can't happen all within your four walls, right? You have to think about the entire value chain of your organization. To think about the fact that 30%-70% of the waste that actually your organization produces comes in from your suppliers. One, conducting an audit of your entire process to understand where are there opportunities to identify sort of waste reduction and diversion.
Two, working with those suppliers and your downstream partners to think about how do you put a diversion management system in place to think about circularity and then designing for circularity so that way your material, after it's used, can either be repaired and reused or just brought back into the circular economy based on its recyclability. You have to execute a roadmap, right? Measurement is key. I thought one of the highlights there was like, "Hey, four out of five executives think that when we don't have the right tools to measure our progress, it really leads to us overstating what we're doing," which gets into the greenwashing era, right? A lot of that isn't intentional. It's just a lack of tools to really measure it.
As organizations build out these waste diversion and circularity strategies, having the right measurement systems in place not only helps them track their progress, but I think as Kristin's about to talk to us about is really helping tie that progress to environmental impacts. Kristin, we'd love to hear a little bit about recovery.
Sure. Okay, when we talk about recovery, we're really talking here about the degree to which those circularity programs are achieving diversion. Good indicators or KPIs for recovery, you can think of capture rate, diversion rate. Recovery, in other words, is where rubber meets the road. You've made your commitments. You put your plan into execution. Are you seeing the results? How does circularity relate to recovery? Circularity is going to—we're talking about the continual reuse. That is our ultimate goal, right? As organizations, that's bottle to bottle. A bottle becomes a new bottle. You're all familiar with the standard or the traditional waste hierarchy, right? Reduce, reuse, recycle. Recovery has a little bit of a hierarchy as well. Upcycling, you've probably heard of upcycling. That's going to be when you create an object of greater value or quality from a discarded object.
For example, plastic film, right? Turning that into composite decking. Downcycling, which you've probably heard of as well, that's creating an object of lesser quality or value. For example, textiles becoming insulation. We'll see that a little bit later. Both of those are examples of recovery, but not circularity, right? Circularity or continual use of objects is our goal. However, what I'll show in the next slide is given what we saw from the survey and what we've seen with our own data and working with customers, even putting your materials and giving them one more use is a big step forward. From the results of our survey and our work, we thought recovery efforts might need to start with a little bit of a reality check.
Over 60% of respondents in the survey felt that fell into the novice or emerging categories also rated themselves as excellent or very good at circularity. 71% stated that they have recycling implemented across all of their sites for those commonly recycled materials that you're seeing at the bottom of the page there. However, given that our breadth and reach as one of the larger recycling haulers across the country, our data shows that only about 20% of our customers have recycling services. Yeah, those numbers aren't exactly adding up. To kind of further prove that point, the EPA reports that the diversion rate is less than 30% for most organizations. I can definitely empathize with this as my previous role is corporate sustainability. We might not know the degree to which these programs are being implemented across facilities across the United States, right?
What we'd recommend is doing that assessment of your recycling programs and start with the commonly recycled materials. Do an assessment, make sure or ensure that these materials—there is a program for them at your facilities today and that there's procedures and training in place to ensure that those materials are making it into the right container. Again, we'll always start with an elimination of waste or reuse. That's going to be your best bet, both financially and environmentally. As a third step, ensure that there are recycling places in place for these core materials. Cardboard, scrap metal, these are all really great streams to start with because they're very well suited for circularity. A cardboard box can become a new cardboard box. A piece of metal can become a new can or a new container even. There is financial value in these materials, and they're highly circular.
Once you've done the core, the core materials, you might want to look at what you might have heard of as the hard-to-divert materials. I'll say three things. Ensure that when you're prioritizing your hard-to-divert materials, prioritize those that are a high volume or high weight, especially if your diversion goal is a tonnage-based goal. Find out which ones are producing the most tons. Your high volume, high weight. Maybe—or—and look at those that have a high environmental benefit from diversion. Sometimes those two things align. In the perfect world, right? Organics are a good example. They're heavy, and when placed in a landfill, they produce a lot of greenhouse gas emissions. Look for those opportunities. Also financial feasibility. Some materials might be more expensive to divert. Some do retain value in the marketplace.
Some of these examples here, like turning old tires or used tires into mulch or textiles into insulation, again, are not necessarily closing the loop. We are still avoiding end of life. As you kind of work your way down the hierarchy, this is a really great option. I'll just also emphasize the importance when you're talking about developing a hard-to-divert recycling program, the importance of aggregation, storage, and thinking through hauling costs. Because there's not a single-stream container for textiles, for example, or it's not accepted in the single-stream recycling, you might have to store some on-site until you've aggregated enough volume to justify the transportation to the recycling facility.
Think through where you're going to store it, how you're going to aggregate it, what equipment might be needed, what training and standard operating procedures might need to be in place to really effectively execute some of these hard-to-divert recycling programs. Also think through linking it back to your climate impact. I think everyone in the room is probably familiar with some of the climate legislation that's coming through the pipeline in California, both in the SEC, some requiring scope 1-3 reporting, but all of them of which are requiring climate-related risks and your measures that you're taking to reduce those risks. 87% of companies say that they're tracking diversion, but only 19% are publishing their diversion rates and the climate impact from those diversion efforts. Somebody who's doing this really good.
The shoe company on the right side was able to eliminate the outer box, right, from the shipment and just ship the shoes with the shoe box itself, producing a 51% diversion of those boxes and did a great job articulating the impact by 25% fewer carbon emissions from that. That kind of equation or calculation will help tell your story, but also probably prepare you for upcoming legislation. If you need help equating the two, please reach out. My team can help with those greenhouse gas equivalencies.
Thanks for sort of walking through that, Kristin. I think one of the things that you mentioned that is most pivotal is like, "Hey, there is infrastructure and opportunity to recycle a lot of the commonly recycled materials." Based on what we saw in the survey, also based on what we see from the EPA and our own internal numbers, there are lots of organizations that are not recycling just the common materials. The things that can go into the single-stream infrastructure and into your local recycling centers, there is a lot of opportunity just there. We recommend start there, right? Make sure you have a recycling program at all of your facilities for all those common materials.
Next, really think about like, "Hey, what else are you producing that has a lot of value?" To Kristin's point, there's a lot of weight, and you can aggregate it. We or another organization, we can help you think through opportunities to divert those materials and identify opportunities to really drive value from that and then tie that back to overall climate impact. Kristin, I know you do a lot of this. You have a lot of these conversations with our customers. We've talked to customers not only just through the index, but just on a daily basis. Can you talk to us a little bit about how Republic Services really approaches these discussions and helping customers sort of set up their plans?
Yeah. Yeah. Absolutely. We have developed a little bit of a framework to help meet our customers where they are on their journey to circularity or even waste diversion, knowing that everyone is at a different stage. These are some of the services that Republic offers to really help you achieve your goals or set up goals if you have not already. You may have heard us say this a few times, but I cannot overstate the importance of the assessment phase. Even for my customers that are at 95% diversion and they are stuck there, maybe they have plateaued and they are trying to achieve 100%, that 5%, you might want to take a step back and go back to the assessment phase. What do I mean by the assessment phase? That is going to be those proper dumpster dives, right, where we roll up our sleeves and we get dirty.
We send out a team to dump out the contents of your containers, sort through it, weigh it, and actually use data to prove out where we should prioritize our efforts. We saw that plastic film was the heaviest material. You're producing so much and throwing away so much plastic film that maybe setting up a diversion program makes sense. Maybe getting a baler for that material to efficiently haul it away makes sense. Maybe we find that it's cardboard, right? You already have a cardboard program. It's just a matter of retraining your staff. That's a waste audit or waste assessment. I'd also recommend site assessments.
Actually walking the site with us, determining how material is entering the facility, how it's being processed, generated, who's handling it, where are they sending it, where are the bins placed, is the bin placement optimal for actually getting people to do the right thing and put the recycling in the recycling containers? Are there opportunities to use reuse? For example, pallets, right? Can you work with your supplier to instead of these kind of single-use or disposable, can we use reusables? Are you producing enough organics for an organics program to make sense? Where would we put it? Just a site assessment, you could go on and on, it really does produce a lot of value. Another type of assessment that we help with are procurement assessments. There's a lot of value in procurement assessments to understand cost.
Where are we spending a lot of money on what materials? How much volume are we buying? Also on the waste side, where are we hauling the most? Are we incurring additional fees? Are we incurring contamination fees month after month, right? That is what that procurement assessment will help us determine. This assessment phase really gives us this really great understanding of our baseline, right? It is so important to get a good baseline for that jumping-off point to your strategy step. Here, we can help for customers that have not yet set up a waste-related goal, set up something that is actually achievable, but still ambitious. We have data on what other companies in their industries are setting and how they are doing on their diversion rates.
We have data on that that can help inform a goal for you that's still ambitious, but maybe you don't want to try to go from 2% diversion to 100% diversion. We don't want to set anyone up to fail, right? In stages. We'll keep progressing in stages. Also in this strategy phase that we're developing those programs for those diversion materials. Obviously, that core stuff we were talking about, cardboard, paper, some plastics, are going to be relatively simple to set up, but then those harder ones where we have to find outlets or partners maybe for some of your harder diversion materials, we'll do that here in the strategy phase and make sure that we're optimizing your service and ultimately creating the best impact for you or the greatest impact.
What I mean by that is maybe there's an opportunity to right-size your trash service while increasing your cardboard service, optimizing those service levels. In step three, we're going to implement everything that we—all the plans that we drew up in step two or in phase three, I guess I should say. That's where in the implementation phase, we're going to pilot—we like to pilot first, especially if you're a large, complex organization with facilities across the country producing different types of materials and there are different outlets in your market. Let's pilot first, run through some hauls and deliver that material to the recycler to understand if there was anything they didn't like. Oh, there's too much tape on your cardboard or just kind of run through a pilot and shake out any of the—anything that's not working.
We'll run through those adjusted service levels that I described in that second strategy phase. Are we okay? Are we finding that trash is piling up outside of the trash container? We need to—that adjustment did not work. We will implement those adjusted service levels. We will track our progress through the diversion reporting where you can see just exactly how all of your efforts are running through your reports, measuring your climate impact. Not to forget, and I think sometimes we can overlook the step of calculating ROI. If in the strategy phase, one of the recommendations was to switch from an open top to a compactor so that we really can recognize benefit and efficiency in our hauling, let's evaluate that return on that investment in the implementation phase.
I will pass it back to JD to give us a little bit more information about what is in the Circularity Index report, how to take the survey, and where you fall. If these steps here or these services here are something that you need help with, please do not hesitate to reach out to us.
Thanks, Kristin. I mean, there's a lot there, but we really look at it like these are sort of kind of some simple or seemingly simple sort of methodical steps to go through to really start to develop a plan and a strategy around diversion, and we can help our customers do that. There's also a roadmap in the report. We just scratched the surface of some of the key highlights in the three categories during the call today, and we're going to get to some questions in a second. We invite you to go to the republicservices.com/circularity. You can download the full report there, which you'll find is sort of, "Hey, we do this in-depth analysis around circular initiatives and strategies.
Hey, what are some common goals, both public and sort of tied to third-party agencies that companies are putting out? You'll also find that we've broken it down into these sub-indices by industry. Once you sort of take the assessment, you understand where you are, you can then look at sort of your industry sub-indicing and benchmark yourselves against where others are in your industry. As I mentioned, there's a roadmap there. If you find that, hey, you're in the novice or emerging categories, there's some clear action steps in the roadmap of how you progress your initiatives. On the site, you'll also be able to take an abbreviated version of the survey. It will give you some directional view of where you are.
If you are interested in taking the full survey, we invite you to either reach out to your Republic Services account manager. If you do not have one of those, feel free to send us a note at sustainabilitysolutions.com/@republicservices, and we will get you connected with Kristin and our team. We will have you take the survey. You will get your results. We can schedule a call and go through them. We can tie them back to what we see in the index. We can start to help you develop some real action plans around how you make progress on those goals and develop a plan. With that, we are going to move into really the interactive piece of this, which is Q&A.
We have some questions that were already submitted, but if you'd like to submit more questions, my colleague Charles is monitoring the chat, so feel free to chat those questions in. I'll sort of be going through them as they come up. I want to start with Kristin, the first question that kind of came through prior to the webinar is for you. Hey, we talk about in the index that there are several strategies around advancing circularity. What do you see as the biggest hurdle for companies that are really trying to make the shift from this sort of linear model to a more circular economy model? How do they overcome that?
Yeah. I think probably the most common one is kind of the commitment maybe from your senior leadership. That commitment has to be married with the financial commitment as well, right? Some of these programs have a really clear business case, right? There's value in the material or the cost to implement is really low. Some others can be a little harder from a circularity standpoint. The commitment, the financial commitment for putting in the investment to aggregate your materials, so balers, compactors, any additional costs from hauling or processing. I've seen customers do really well with this issue of financial commitment when they've shown the business case and can articulate all of the benefits, both financially and environmentally. Put those together in your business case. Plan ahead of time. Budget ahead of time.
If you find opportunities to reduce waste, that's always going to be the most beneficial, right, financially and environmentally. Also, thinking through when you're building your business case where we can right-size. I talked a little bit about that, but if we start a new diversion program, maybe we can reduce costs here to implement here. Maybe they don't completely equate. Maybe there's not a complete offset of cost there, but it will help the business case. Finally, maybe do it in stages, right? Don't try to boil the ocean. Do those assessments so that you're prioritizing circularity programs that are financially beneficial first. One other challenge, though, that I do see is working with the supply chain, right? We talked a lot about that towards the beginning of today.
Working with your suppliers to take back materials, use reusable materials, just that kind of partnership of finding the right suppliers. Recommendations there, start small, work through a pilot program. Actually, recently, I found a customer that's a global customer, right, has operations in Canada and Europe. Sometimes Europe can be a little bit further along, mostly due to regulation. Find examples of things that they're doing. Maybe they're using reusable containers or reusable straps, and then you can apply that to the U.S. and kind of prove out the concept of saying, "Hey, it is possible. It will take some work working with our suppliers to use reusable strapping, but here's an example of another facility that's doing it well.
Okay. Good. Good. Tony, actually, from the chat, there's a question that just came in for you. You talked about the fact that CPG companies and energy companies are investing more in circularity, and they're a little bit more advanced. What is unique about these two sectors, and what can the other sectors learn from?
Yeah. It's really interesting. I mean, if you look at the energy and utilities and the CPG sectors, first of all, when you look at them relative to the other sectors in our study, there's a higher portion of them that are both advanced or in either the advanced or expert categories. When you think through maybe why this could be the case, I think it's more tied to their actual business as well as the environment in which they're operating. Externally, you've got a pull, and cost, you've got a push. On the external side, you have a strong drive from the outside of the organization to drive improvement for resource efficiency. With energy and utilities, energy efficiency is huge.
You've got the regulatory push, whether it be the EPA, state-level market-based mechanisms, and energy companies can find a way to really help their customers save money as well. On the consumer side, you still have some regulation as well with potential EPR or minimum content standards, but you also have brand promise and a consumer demand for more sustainable products. I think particularly on the brand side, you have a couple of key ideas. First, don't be part of the problem. You don't want to have your chip bag show up on the beach after it's 45 years old. Secondly, be part of the solution. If you are implementing these circular processes, then not only are you getting a brand or not only are you improving your brand, but you're also helping create a marketplace that'll pay dividends for the entire economy.
In both cases, you're actually saving costs, especially on the energy efficiency side. It's a huge part of everybody's cost structure. Finding ways to be more circular and more sustainable on energy is really helpful. Where does this apply elsewhere? I think that the two key things that I would say from that is that first, change is good. These all started as strongly performing industries, but working through a circular model gave them opportunities to be even better so they can save on costs and save on their emissions. The second thing is there's a roadmap to this. I like how Kristin said, "Don't boil the ocean. Start small. Start with what you need to do." At first, it's a long-tailed opportunity, and there's low-hanging fruit that you can actually take advantage of immediately. I think of the PET, the soda bottle.
You think about where it started. I don't know, maybe 20 years ago, it was about removing the content in the bottle itself. That was the way you were reducing your waste. Today, it's actually about recovering that bottle and finding a new way to reuse it again. I think in both of these cases, there's a lot of opportunity, a lot of pressure from the outside, and then opportunity to innovate from the inside, and then hopefully help move the model in a more sustainable way.
Good. Good. Not surprising, one of the questions that came in around ROI, but I'm going to tie it to something that you mentioned in the commitment phase, which is, "Hey, this link between environmental sustainability and economic sustainability." Can you guys, and either of you, give some examples of how companies have actually been more sustainable and made a financial impact to do that?
Yeah. I'll start and then hand it over to Tony. Before I—yeah, just kind of setting it up a little bit, thinking through how maybe the Circularity Index can help you with that, help you build your business case, right? Maybe if you're trying to justify any type of investment and you need a business case for senior leadership, this Circularity Index could be a great tool, right? It could help you benchmark yourself against your industry, other industries, and help kind of justify why there might be a need to progress in where you fall on your index. I'll say this, that it's not easy. Always start with the reduction phase.
I think you're going to find the most financial impact if you just are able to reduce materials that are flowing through your facility to start with, and then prioritize those materials that have value in our market.
Yeah. I would think about when I try to think about specific opportunities where there's been a significant ROI in the investments from circularity. I mean, a couple of thoughts come to mind. One was on one of our earlier slides when we think about pallets. There is a business model where somebody builds a pallet, cuts down a tree, makes a pallet, and then sells it to a consumer products company to move on through the supply chain. There is also a circular model where the company actually capitalizes the pallet itself and effectively leases it out to the consumer products company. It goes through the retail channel and hopefully comes all the way back to then be reused.
We know that there are pallets that have been used, I mean, on average, I think it's six or seven times, but upwards of 10 or 15 times if they're treated correctly and all that. You extend the life through repair and fixing the bits that you can, while finally, hopefully, turning that pallet into a useful thing at the end. I mean, each step along the way, the pallet company is getting paid really for the rental of the pallet. To the extent they can make it more circular, their returns on that asset go up. That's one example. Another example for me, one company that I've known reasonably well, they're a consumer packaging company. They're a box manufacturer. They make a lot of the cereal boxes and cracker boxes that we know.
One of the things that they've done, first of all, whenever you make a box, you're going to be cutting off bits of the original paper. First of all, they instituted a circular model for them, right? Immediately, you're saving on material costs. As they've moved forward, they were able to build into their process both accepting new materials and creating a premium product. This company's most recent capital investment is a plant that will actually create a recycled product that is pretty much as good as any kind of virgin paper product. They are going to be able to feed it with what they're putting on the front end. I think this is really exciting. They're putting on the front end a paper cup recycling facility.
They are actually creating circularity in another part of the economy to bring it back into this recycled board. The returns on that, I mean, ultimately, the material costs are going to be lower. The product is going to be a higher value product. It is kind of an opportunity throughout. You get the sustainability benefits on top.
I think what's interesting about that example, right, is like, "Hey, they started out with one sort of project or initiative, and then it's like, 'Hey, that opened up this other opportunity for circularity that was probably sort of this downstream impact they hadn't even expected.'" As a company or organization starts to look at, especially their hard-to-recycle materials and where they want to implement circle strategies, it often opens up these other opportunities downstream for you to do some additional things. There are two more questions, and I know we're running short on time that have come through that I'd like to get to. The first one is around technology. What role do you think technology and innovation will play as we start to accelerate progress around circularity?
Yeah. I think that.
Go ahead, Tony. Sorry.
No, that's okay. I mean, I think that innovation and technology, they're going to be key. I would think about it broadly. Innovation, both in terms of physical process, but then also in terms of how you think about your business model. Organizations will need to take a fresh look at their processes with an eye towards new paths. I would guess sensing and measuring technologies are particularly important, but then understanding the data analysis, knowing how to actually integrate that into your process to help figure out where the opportunities lie and where you can invest. I don't know, Kristin, maybe you know some more about specific technology in this thing.
I'm hearing a lot about implementation of AI technology specifically in a number of ways, but specifically to help optimize operations, right? The stuff I'm hearing is super cool about predictive analytics of predicting demand so you're not overproducing, right? Overproducing materials that are just stocking up in inventory and eventually go to waste. AI to manage reverse logistics, right? Optimize your backhauls. Of course, also the take-back or returning of products and recycling that material or reusing that material, AI can help with that and identifying matches and identifying inefficiencies. There are a lot of companies. I'm actually attending a conference this week. A lot of companies out there new, but also I don't think this operational efficiency software is new to the stage, but the implementation or integration of AI is really taking off.
From where we sit, we do offer or partner with companies that offer sensors or cameras. We're actually implementing cameras in our trucks that can help identify contamination in recycling and hopefully change behavior for our consumers or customers that are maybe not the best recyclers, right? Those cameras that when the container is tipping into the truck can identify things like black bags in the recycling. Of course, long-standing technology has been sensors for compactors that can identify when the compactor is full and then call us or notify us that we need to come haul it. The other exciting, I think, technology in the circularity space is around digital product passports and all the platforms for tracking materials as they flow through the value chain, right?
Tons of upcoming technology and software that can help us see where the material started, what country did it start from, where was it mined, where was it transported, and all the way through. I would say end of life, but back through, and providing those kind of certifications or assurances that the material did flow back through and was recycled. Really cool stuff. Really great stuff.
Good. Good. The last question that came in, it sort of ties to the one before that, but also highlights Republic in the sense that there's a question around the Polymer Center. This customer's read about the opening of the Polymer Center and that capability in Las Vegas, and they're curious to know if that's going to expand across the country to be more available to other folks.
Yeah. No. I mean, the Polymer Center, we opened up the first Polymer Center at the end of last year out in Las Vegas, and that's been ramping. I think that seems to be going pretty well. We've got our second Polymer Center under construction in Indianapolis. That's supposed to open up, I think, later this year with a ramp through next year. We're excited. We're adding on the back end of that. We've got our Blue Polymers joint venture that should actually be able to recycle some of the olefins that are there. We're broadening the market. For background, the Polymer Center, it has two streams that come out. One's PET, and the other ones are the olefins. We're creating more circularity through that. We've committed to growing that fleet to four locations that we should have some announcements coming up.
Right now, the process seems to be going well. We've seen really good responses from the market, and I expect that to or hope for that to continue.
Awesome. Good. That wraps all the questions that came in, and we're about right on time. Thank you all for joining. I hope you found this informative. More importantly, we hope that you go to the website, republicservices.com/circularity. You can download the full report there. Please read through it, take the survey, reach out to us if you have any questions. We'd love to be able to help you on your circularity journey as you develop your plan. With that, I hope you have a great rest of the day. Thank you, Kristin. Thank you, Tony. Bye.
Thank you.
Thank you.