It looked like it would be a cinch when Roy Brown, chief executive of the Canadian firm Knowaste, first showed up in Europe with a plan to create a new market recycling incontinence and diaper products. It could not compete in North America where traditional costs of landfill disposal ran at $30-$40 a ton, well below Knowaste’s cost threshold. But in Europe, where its own costs were two-thirds the $100 a ton it cost to incinerate waste, the company saw its opportunity. It would be easy, Mr Brown and his partners figured, to convince Europeans to recycle incontinence and diaper products because it was better for the environment. That was the first miscalculation.

Miscalculations

“I went over with the feeling Europe was more green than North America and so had a willingness to pay for environmentally sensitive products,” Mr Brown recollects. “I learned that’s not true. It may have that reputation, but when you get there it’s all about economics, like it is here in North America. They won’t pay one euro extra for a superior alternative if they don’t have to.”

Today, the company can beat waste competitors by as much as 10% per ton at its plant in the Netherlands, where it opened its first recycling facility in 1999 and where it now commands 50% of the recycling market. But at the time, Knowaste was hampered by high production costs that made marketing very difficult. Mr Brown eventually worked through that problem by employing a North America-style bonus system that encouraged local employees to come up with innovative work methods.

Cost issues

But getting there was tough. Not only was it difficult to work around the cost issue, Mr Brown had to overcome resistance to the concept. That meant convincing local nursing home and day-care facilities that it was worth the trouble of separating incontinence and diaper waste for recycling and paying to haul it to a recycler rather than an incinerator.

It was a tough sell all round. “The low points were getting a lot of doors closed in our faces with people not seeing what we saw. There were lots of days we came back to the hotel room and wondered what we were doing,” he says.

A big break came when his group was introduced to the Development Authority of the Dutch government through the trade commission of the Canadian embassy in 1997. The Development Authority, now a shareholder of the company, “got us a permit, helped us deal with the bureaucracy and found a location that made economic sense,” he recalls. The plant is located in Arnhem, the extreme eastern part of the Netherlands bordering on Germany, in a large industrial site vacated by Akzo Nobel. Knowaste obtained a 10-year renewable lease for the site and built the plant at a cost of $25m. The location was ideal for cross-border business with Germany – or so he thought.

Cross-border problems

“We went into Europe with the feeling that the EU had one set of rules. But permit-wise, it’s very difficult to operate cross-border. You really have to do your homework before you go,” he says. Mr Brown also discovered that local communities do not want to transport their waste outside because processing nearby means local jobs. This was a problem because the Netherlands plant is not yet running at capacity, although it is now in profit.

Knowaste plans to open a much smaller recycling plant in Germany. “We built the Netherlands plant with the idea ‘if we build, they will come’. We won’t do that again,” he says. Now, the company will only build when communities have committed tonnage to recycle. “We’re adjusting. If you’re a small company like us, you can be nimble,” he says.

Suzanne Miller