Increased competition typically leads to competitive prices and a greater variety of services, but things have worked out quite differently in one sector of Poland's economy
By Wojciech Kosc
After years of fragmentation, Poland's recycling and packaging waste recovery market is becoming more consolidated. The smallest, least effective and least efficient companies are either going out of business or are being forced to merge with bigger players. This development will hopefully improve Poland's track record of packaging waste management.
The main problem is that the excessive number of recovery and recycling companies in Poland has actually been a harmful influence on the market. Companies that produce waste can either assume care of waste recovery or recycling themselves, or have their waste recovered and/or recycled by specialist companies. Given the growing market for waste recovery, several such 'specialist' companies have appeared, but with many of them operating in a dishonest capacity. Some of the more disreputable firms perform waste recovery and/or recycling activities 'on paper' only, while others have offered their services for rock-bottom prices without taking into consideration the total costs involved in the adequate performance of services. This has resulted in waste being barely processed, or in not being processed at all. Naturally, this dynamic has served to undermine the quality of service and to reduce waste recovery and recycling in Poland to unacceptably low levels.
The number of 'specialised' waste recovery firms now in Poland will likely shrink from about 40 to 10 at the most, which is actually quite a few compared to the Czech Republic or Germany, where there are one and three such companies respectively.
Poland-based companies involved in businesses that produce packaging waste need to pay a product-fee and to ensure that a fixed percentage of create waste created will be recycled. Some of these firms — and the number will in all probability grow — are outsourcing recycling activities to specialist firms.
Krzysztof Kawczynski heads one of Poland's largest recovery and recycling firms, Polski System Recyklingu (PSR), which processes some 185,000 tonnes of packaging waste annually. Kawczynski believes that Poland's approach at the onset of a market-based economy in the late 1990s was much too liberal.
"Anyone [at that time] could set up a recovery and recycling business, regardless of actual plans or potential for, say, investment in selective collection of waste," says Kawczynski. "This had a great deal of negative impact, like non-credible firms performing collection and recycling on paper only, or offering dumping prices that never took actual waste management costs into account, and so on."
Unhealthy competition
"As with any business, credible and non-credible companies exist on our market," Piotr Szajrych told monthly Wirtualny Nowy Przemysl earlier this year. Szajrych is the CEO of Rekopol, another of Poland's leading waste management companies. "The former invest in selective recovery and strive to offer the widest possible choice of services," the CEO claimed, adding that company involvement in the development of a countrywide system of selective collection of packaging waste is a particularly good test of long-term commitment, as opposed to pursuing a single-minded get-rich-quick strategy.
According to some recyclers, intense competition between as many as 40 recovery and recycling companies fighting to take over recycling duties has led to major distortions on the market, instead of — as one would typically expect from increased competition — improved levels and variety of service.
This becomes clear from the money that companies producing packaging waste pay to have it recycled (about EUR 20 million), an amount that has remained more or less the same for a couple of years.
"The real result is that only a fraction of this money ends up with companies that are really working to recycle waste," says Krzysztof Chojnacki, owner of the Flora-Impex recycling firm. Flora-Impex, which processes approximately 150 tonnes of packaging waste per month (less than 1/1,000th of the amount processed at PSR), appears destined to either disappear or merge with one of the larger companies.
Another problem is the lack of a mechanism to properly verify what is actually recovered and recycled. Documents are supposedly verified by regional authorities on an annual basis, but the reality is that there are massive delays. Last year's report from the NIK, Poland's state audit institution, confirms Kawczynski's remarks: Some companies have never even bothered to carry out recovery and/or recycling activity, while others have performed the activities for years, but without the necessary permits. The report also provides examples of companies that never reached minimum recycling quotas, even quotas as low as 5 percent.
Today, however, the market is on the brink of a breakthrough. As much as 85 percent of the market is now controlled by companies whose services are not limited to particular kinds of waste. These firms are also less limited geographically, and they are generally pursuing a strategy of investment in countrywide selective collection system for packaging waste.
The main companies in question are Rekopol, Polski System Recyklingu, Biosystem, Ekopunkt and Branzowa Organizacja Odzysku, and these operations have made good time in separating themselves from the competition. This year's EU-imposed levels of recovery and recycling of packaging waste are set at 50 percent and 25 percent respectively, but will rise to 60 percent and as high as 55 percent by 2014. In other words, demand for services is certain to grow.
The estimated value of Poland's recovery and recycling market for 2007 is roughly PLN 100 million [EUR 26.3 million], but this amount could grow nearly tenfold by 2014. According to Kawczynski, there were roughly 4 million tonnes of packaging waste on the market last year (of that number, 3.5 million tonnes were subject to mandatory recovery and recycling under the Packaging Waste Law), up by about 10 percent compared to 2005. "This has been the first year of solid growth," says Kawczynski.
A morphing market
Economic growth in general is the main driver behind this growing market, as people with greater spending power will purchase more (regardless of how much 'green lifestyle' advocacy takes place), which, of course, results in the creation of more waste that needs collection and recycling. Furthermore, the disappearance of companies engaged in dishonest and illegal practices will work to the advantage of large, more reputable companies offering a variety of services nationwide. Finally, legal business operations will result in proper documentation, which will therefore add to the 'book' value of the waste recovery and recycling market.
Major recycling firms, as well as associations of companies that produce packaging, argue that there has to be a central registry of recovery and recycling firms, just as there is for those who deal with electrical and electronic waste.
According to PSR's Kawczynski, the market may now be changing on its own in a sense, with smaller or disreputable companies no longer able to win customers, but a lot depends on how seriously authorities will approach the execution of all legal regulations that the NIK report described as breached.
"If that's what the authorities are really after, then the market will consolidate in two to three years' time," Kawczynksi argues. "If not, it will take a lot longer, and that will harm the entire system."
