Room to grow

If you look at successful waste management companies across North America, you’ll notice that corporate growth is often born out of the right leaders pursuing the right opportunities at the right time.

Such were the circumstances surrounding the founding and subsequent expansion of Houston-based WCA Waste Corp.

WCA was formed in 2000 by former Browning-Ferris Industries founder Tom Fatjo, who made the strategic decision to acquire assets divested by Houston-based Waste Management following its merger with USA Waste. The company went public in 2004 and Fatjo ran it as CEO until it was taken private in 2012 by New York-based Macquarie Infrastructure and Real Assets. Through a combination of organic growth in key markets and acquisition activity, WCA has expanded its integrated non-hazardous solid waste collection and disposal business in 11 states across the Southeast and Midwest. The company currently owns 21 landfills, 28 transfer stations, 33 hauling operations and two material recovery facilities. Today, WCA’s 1,700 employees serve more than 650,000 customers across 600 routes in 15 markets.

Sensible sustainability

Looking for an established waste industry veteran to take the reins of the company, WCA tabbed Bill Caesar as its new CEO in 2014.

Caesar joined the company after serving as Waste Management’s chief strategy officer and president of the company’s Recycling and Organic Growth Group divisions. Before his time with Waste Management, Caesar had a 13-year tenure at the New York-based management consulting firm McKinsey & Company, where he advised clients across a broad range of industries, including waste management, on corporate strategy and growth initiatives.

It was these experiences that gave Caesar keen insight into the obstacles and opportunities waste management companies faced as he took over WCA.

Residential recycling and significant elements of commercial recycling are clearly not working today in the U.S.” -WCA CEO Bill Caesar

“McKinsey gave me the opportunity to work with companies across a broad range of sectors, including the waste sector, which helped me develop solutions for some of the most important challenges they faced,” he says. “I learned how to quickly identify the key performance drivers within an industry, to assess and quantify opportunities, and to communicate strategies and plans that would create value. An important part of that learning process was how to develop and manage people. During my time at Waste Management, my knowledge of the waste and recycling industry expanded significantly, and I learned a great deal about managing large enterprises. Waste Management also gave me my first opportunity to own a P&L (profit and loss) when I was given the responsibility of running WM Recycling in 2012. As the CEO of WCA since 2014, I have leaned heavily on my prior experiences to manage our business.”

Caesar’s experience overseeing recycling for Waste Management has colored his current perception of the market’s viability. According to Caesar, the low revenues generated from recycling have made collection an unsustainable practice with the current pricing in place.

“Residential recycling and significant elements of commercial recycling are clearly not working today in the U.S.,” he says. “By ‘not working,’ I mean that the business of recycling is not economically sustainable in its current configuration—there is not enough revenue generated from the sale of commodities or from tip fees to cover the costs of managing the collection and processing of recyclables and to invest in future plants and equipment. The business model where the value of recycled commodities more than covered the cost of collecting and sorting recyclables no longer exists in many places in the U.S.”

Although Caesar acknowledges that the costs of operating recycling programs are being shared more equitably with communities and municipal authorities today than in years past, the costs of contamination and dwindling end markets have continued to suppress recycling viability for many waste companies.

Presenting at this year’s Southeast Recycling Conference (SERC) in Orlando, Florida, Caesar called on industry participants—including haulers, processors, consumer packaged goods companies, packaging manufacturers, local governments and financial investors—to work together to address the unsustainability of the current recycling business model.

“I do not think that waste and recycling companies can solve these problems on their own,” Caesar says, elaborating on his SERC comments. “The waste and recycling companies are more than interested parties in this discussion, but without a broader discussion and without the participation of the other constituencies, I do not expect a long-term viable solution to emerge. … Despite WCA being a very small player in the recycling industry, we can have an impact on the evolution of recycling in the markets where we are engaged in business. We should also have a seat at the table of broader discussions, but we need the larger players—both in the recycling business as well as the packaging industry—to get behind sustainable change.”

Caesar says that a fundamental reevaluation of natural resource use is needed to move the ball forward in terms of the value that can be derived from recycling.

“We need to have a well-functioning recycling industry if we want to be thoughtful stewards of our environment,” he says. “The burden for ‘fixing’ recycling does not rest solely with waste and recycling companies. It rests with society at large. We collectively have to decide that we value the resources we have on this planet, and then we have to price them accordingly, including for things like carbon and water. If there isn’t a value placed on these elements, then we will make rational, but poor, decisions about how to use, reuse or expend them.”

Environmental considerations affect not just recycling, but the overall way waste is handled. Caesar says that until the current pricing structure of landfilling changes, it will be difficult for more conservation-based waste management practices to gain favor amongst haulers.

“Disposal capacity is an issue for every integrated solid waste company, including WCA. For the industry, it is a bigger issue in some regions than it is in others. As disposal capacity shrinks and disposal pricing climbs (as it is in the Northeast), the economic rationality for all sorts of recovery and reuse options improves,” Caesar says. “Without high disposal pricing, it is hard to make economic justifications for disposal alternatives, like conversion technologies or efforts to build circular economies within different industries. The challenge for WCA and for the entire industry will be to determine how and when to leverage the profits gained from the consumption of disposal assets into new assets that will replace or supplement traditional forms of disposal.”

With an eye on advancing the sustainability of waste management, WCA has put a structure in place to identify and execute opportunities within the organization. Caesar says that WCA established its Sustainability Committee in 2018, which reviews potential sustainability-focused proposals of interest and tracks the company’s ongoing efforts. Caesar says that WCA looks for projects that are both good for the environment and good for the bottom line in evaluating what to pursue.

“With every one of these initiatives, we have a dual-track approach,” he says. “The effort must reduce our impact on the environment and must make economic sense. We look at the investment costs, the environmental benefit and the economic value of each initiative. This allows us to prioritize our initiatives. The good news is that there are many ways to invest in sustainable projects that also generate value for our business.”

Caesar says that WCA has five or six active initiatives ongoing in any given quarter, with new projects being considered throughout the year. In addition to the company’s pursuit of alternative fuel technologies (roughly 20 percent of WCA’s 950 collection vehicles are powered by CNG), Caesar singled out WCA’s leachate management strategy in one of its Houston landfills as an example of how the company is pushing the boundaries to come up with environmentally friendly solutions for its waste management challenges.

“We have invested in a phytoremediation project at our large landfill outside of Houston,” he says. “As is the case with many landfills located in geographies that receive a lot of rain, we generate significant quantities of leachate, which are costly to treat. This project uses a particularly hardy variety of grass that absorbs leachate and effectively processes it as the plant grows. The cost of our investment in this phyto-field will be more than offset by a reduction in leachate management costs.”

Growing the WCA footprint

Caesar says that WCA is always looking for opportunities to grow, and last year was no different. The company closed a total of five acquisitions in 2018 and invested upwards of $100 million in those deals. On March 1, the company made news again when it announced it had acquired Kentucky-based D&D Sanitation and Texas-based Outreach Disposal. When considering acquisition opportunities, Caesar says WCA looks for smaller, well-run companies already doing business within the company’s geographic area.

“Our philosophy regarding acquisitions is fairly simple: We think that we can operate smaller companies more efficiently within our larger business and generate synergy value,” Caesar says. “Value can come from things like standardized operating and management practices, back-office efficiencies or lower costs of capital. ... We are always looking for additional acquisition opportunities and see [them] as one of our primary value creation levers.”

Because of the company’s size and profile, Caesar says WCA can make more strategic moves than other waste companies might be able to.

“WCA is of a unique size and structure in the waste industry,” Caesar says. “We have all the professionalism and assets of one of the publicly traded waste companies, but we are much smaller, and our organization is much flatter. There are only four people between me and a driver, for instance, compared to seven or eight at one of the bigger companies. We can make decisions quickly and can swiftly implement those decisions. We also benefit from being a private company that is not driven by a quarterly cycle of reporting our financial results publicly. Our results are reported to our board on the same calendar cycle, but we can take actions that generate long-term benefits for the company (like making a number of acquisitions), even if they put a squeeze on expected results in the short term.”

As the company has grown, Caesar says WCA has faced the familiar challenge of finding qualified fleet technicians and drivers in areas where it has looked to expand. He says WCA has adjusted its hiring practices, onboarding strategy, front-line management training and compensation and benefits programs over the past year to address these issues.

“Because there is no single lever that will address our [hiring] challenge, WCA has invested in a holistic approach that demonstrates to our people that we care about them, we want them to succeed, and we are going to give them the tools they need to succeed. The entire leadership team of the company owns this approach and is committed to making it work,” he says.

In addition to the company’s dexterity, it’s this focus on bringing in the right people and giving them the tools to succeed that Caesar says has helped WCA become one of the biggest waste management companies in the Southeast and Midwest.

“What really sets us apart is our people,” he says. “There have been a number of occasions—the aftermath of Hurricane Harvey, for example—where our people pulled together to not only help each other, but also to help the communities where we live. We also have a terrific management team that enjoys working with each other. We work hard, but we have a true sense of comradery and are completely aligned on our goals and how to achieve those goals. I am very proud of the company we have built and the people who work for WCA.”

The author is the editor for Waste Today magazine and can be contacted at aredling@gie.net.