PURPOSE, INC.

‍Participants:

Michael Young

Tom Szaky, Founder and CEO, TerraCycle

Michael Young:

Welcome to the Purpose, Inc., the podcast where we discuss corporate purpose and stakeholder capitalism. I'm your host, Michael Young.

When you pause and think about the amount of waste that humankind produces, the numbers get overwhelming pretty quickly. And globally, that volume is set to expand dramatically over the next 20 years as a growing middle class of billions get expanded choices for consumer packaged goods and that's a lot of waste hitting land, ocean, rivers. But there is a growing movement among manufacturers and consumers to move from a one-way take-make waste economy that's burying the world to a circular make-use recycle-reuse economy.

And my guest today is Tom Szaky, the founder and CEO of TerraCycle. Tom is a recycling pioneer and an eco-capitalist who's built a business devoted to eliminating the idea of waste. The company has a range of recycling solutions for businesses and municipalities that focus on hard to recycle waste streams, everything from coffee capsules and light bulbs and batteries to lab waste and even cigarette butts. And through partnerships, TerraCycle has enabled over 200 million people worldwide in 21 countries to collect and recycle enough waste to raise over $44 million for charities around the world.

Tom is the author of four books including his latest, The Future of Packaging which I just finished and that book explores current issues of production consumption around packaging and waste reduction. Tom and TerraCycle are the recipients of hundreds of awards for sustainability, environmentalism and entrepreneurship. Tom has a broad and expansive view of the role of business consumers and government in creating sustainable solutions and Tom and I get into a very wide-ranging discussion about the world that we are inured to under shareholder capitalism and how that should change in stakeholder capitalism. We talk about how and why consumer values and behaviors don't always line up. Turns out we are very selfish. Tom shares his thoughts about the circular economy. We talk about Loop which is TerraCycle's new circular shopping platform and we wrap it up talking about COVID and what we're witnessing here in terms of the awesome power of nature. So, in all, a great conversation with a true innovator and pioneer of a sustainable future. So, without further ado, my conversation with Tom Szaky, CEO of TerraCycle. Tom, thanks for coming on the podcast.

Tom Szaky:

Happy to be here.

Michael Young:

You've got an incredible background and a career devoted to rethinking a very large problem of waste and recycling and you're an eco-capitalist. And I want to talk about both sides of that idea as you've put them together. And I think, as you know, on this podcast, we talk about the extent to which corporations can be productive social actors. And so, my first question to you is capitalism. It's based on unsustainable models of growth production and consumption. Discuss.

Tom Szaky:

Yeah, it's interesting. I think many times when we think about capitalism, we think of it as a destructive entity vis-a-vis the environment. But I would argue capitalism isn't in itself good or bad. Frankly, I mean I was born in communism. Communism isn't in itself good or bad. These are just sort of rules of the game and the real question on capitalism and I think where maybe it has led itself astray a little bit is that today and the way at least it was taught in textbooks when I went to school just 15 years ago was that the purpose of capitalism is profit to shareholders. And if that is the only purpose one serves, then the tool of capitalism can create negative outcomes that are very profitable for shareholders. There's many examples of that. I think what is interesting and amazing about capitalism is that it really allows for innovation and merit to really be the winner and if one were to focus on not just the one god of prophet but maybe allow in two other important gods, let's say, the god of planet and the god of people so society and environment, then it can be very balanced and be an incredible force for good. So, capitalism itself is just sort of the rules of a chessboard let's say and I think the question is what gods does it serve and that's really determined by the people running businesses within the framework of capitalism.

Michael Young:

Absolutely. So, your view then we need a polytheist orientation here which we haven't had.

Tom Szaky:

Exactly. And the challenge is that we have been so fierce on that the only thing that should matter is profit to shareholders is then we don't realize that there are many things that are not accounted for. We're not accounting for the cost on our environment or society. And if those are not accounted for, then we're not really fully accounting for profit or we're not really fully accounting the costs of our profit and we're running in this great game in a way that our eyes aren't wide open let's say. So, system today doesn't measure externalities properly and make us pay for them, we need to think of those voluntarily. And in fact, that will be the best for the long run. It's sort of like if you're going to install LED light bulbs in your home, a really simple idea, it's going to cost you more today but it'll save you money in the long run and that's because you have that long-term view. With capitalism, today's version of capitalism, not only are we serving the god of profit only and we're not fully accounting costs, we're also doing that in a very short-term point of view, quarterly results for public companies, versus a long-term point of view. And the more long-term we can think about things, the more naturally we're going to be accounting for externalities even if the law doesn't force us to.

Michael Young:

And we've heard a lot of talk recently about stakeholder capitalism. Are you optimistic, hopeful? How do you think capitalism is and will evolve in the coming years? And maybe touch on what we're seeing now especially with the pandemic.

Tom Szaky:

What is exciting to me is that this idea of purposeful capitalism, social capitalism, eco-capitalism, they're all fundamentally synonyms but what they're trying to say is it’s capitalism thinking about other things, not just profit. That's why they sort of put those pretenses of eco, social, purposeful, whatever benevolent words you want to put in. I call those all synonyms. There's this on event happening where especially startups are becoming more a common than it was say 10 or 20 years ago. In fact, business schools, the classes on being a good actor that used to be mandatory in business schools were ethics classes. You'd have to take an ethics class to pass or to graduate but ethics classes are just sort of the let's say it like drawing the floor. Like thou shall not be a total asshole or not a commit fraud or those things but that's really the bottom. What's exciting now and this was never taught before is schools are now forcing students that they must take sustainability classes and they must take classes on social capitalism to graduate like ethics was a mandatory requirement. What's nice about that is that is sort of moving up into what can capitalism be to create good, not just how to protect against complete corruption. And that's a new thing that’s coming out more and more and that definitely gives me optimism that we can use this amazing wonderful tool of capitalism to leave the world better than we found it.

And I think to your question on what's happening now with the pandemic is an interesting one because the world is objectively breathing better because of us slowing the gears of industry down. We are seeing less smog, less pollution and this is not hearsay. This is objective and I'm sure you will see scientific reports backing up these statements within the coming months. But this is very data-driven. I think you're seeing also some subjective things like the dolphins swimming in the canals of Venice and animals coming back where they haven't come before, hearing birds that you may not have heard and then even more subjective where people are tying our mistreatment of the planet and especially animals and exotic animals to COVID even coming onto the scene. And so, I think what's going to happen is once we get out of our focus on our own safety which is of course paramount right now and reflect, I think what we will absolutely see in objective and subjective ways is that the world was better for us taking a break. And will we react to that and change our approach is the real question. No matter what, it will be tailwind to the environmental movement and in part to the social business movement. So, I'm optimistic there on what it will bring.

Michael Young:

Excellent. And I want to hop to your latest book, The Future of Packaging. It is an expansive survey of the topic and a rethinking of consumption and waste through the lens of packaging and a very impressive range of voices that you brought in. And I would say to my reading, it is both sobering and hopeful, sobering in the sense that the growth of fast-moving consumer goods seems to be overwhelming. It's accelerating. But also hopeful and I think you conclude in the book, you write to quote, “view your purchases as having a direct impact on the goods and services companies choose to make and if you want to eliminate waste in your life and in the world, the answers always come down to one simple thing: consume differently.” So, that's why it was hopeful to me. And I want you to kind of unpack where you are in your journey and you've been on this a long time and I will say I was struck in reading your bio just about—I think you're one of those people who just found a calling early and have stuck with it which is incredible speaking as someone who was all over the place for most of his life. I found my calling late in life. But I want you to really unpack this idea of consuming differently if you would and I want to then kind of drop into a couple of other topics, circular economy and what you're doing with Loop.

Tom Szaky:

Absolutely. What's interesting that I find and it's probably one of the biggest misnomers out there today is many times individuals who are looking to make a change, looking for the world to be better are saying well, what can they do as individuals because it's the big companies that are effectively creating the products, marketing it to people and we're sort of like lemmings to their will let's say. And what can we as individual consumers do, feeling incredibly powerless in the equation of large companies producing things and large retailers selling them and so on and so forth. And the irony of that is that it's in fact exactly the opposite. Any consumer product company, big or small, is in the business of figuring out what do consumers want and to get that to them in the most convenient, affordable and exciting way possible. And the real genius marketers can go just one little step ahead which is to figure out what we want that we don't yet know we want. But there is no consumer product company out there in the world trying to convince people to buy what they don't want.

And to take this one step further, one of the things I love in an anthropological way is when I travel around the world and I’ve had the privilege to—I mean not today but travel quite a bit and see many, many countries—is I like going to supermarkets in countries because what is on the shelf of a supermarket say in Tokyo and how much of what is on the shelf is on the shelf is a direct reflection of the desires of those people. So, if people desire more of product A, there'll be more product A on the shelf and if they desire less of product B, there'll be less of product B on the shelf. It's a direct mirror of our desire. And in fact, when we go purchase things, we are actively voting for the future we want. What we purchase, more will appear and what we don't purchase, less will appear. And this is so ridiculously powerful. It's more powerful than the political vote we cast every four years or whatever increment is in our country or we're choosing between a few choices. The economic vote we cast multiple times a day for what we buy really fundamentally shapes the future of the world.

Think about it this way. Next time you go shopping and you want to buy a beverage, whatever you buy, two more will appear the next day, one to replace the one you bought and one to signify the trend. And whatever you didn't buy because not buying is also an active vote, whatever you didn't buy, one less will appear tomorrow just to signify the trend because there's nothing to replace. And that's exactly how it works. And so, what frustrates me a little bit to be honest is people out there are not aware of the ultimate power, ultimate power they hold in their purchase decision and because of that are purchasing blindly and that would be equivalent to voting and not looking at who you voted for. And that is the problem. It's the blind leading the blind because we're consuming blindly, not realizing this and the organizations that are giving the products and making them available are just serving this demand. And in the end, the entire decision on the future of the world is in the hand of the individual consumer. No one else has the power.

Michael Young:

Yeah. That is a really interesting idea about our choice and casting that vote. And how do you think about the idea of—and take it to circular economy? Because producers are trying to say hey, to we're going to think about how we design the product in a more holistic and in circular fashion. How do you think about circular economy, where it is and where it needs to go as an idea?

Tom Szaky:

Absolutely. So, just as a quick backdrop on circular economy. So, basically a linear economy is our take-make waste where we produce things, use them for typically an incredibly short period of time, throw them out because there's no other choice. So, that's the take-make way’s linear system. Circular is about how do we make it regenerative, ideally get things to be recycled and made from recycled materials, maybe even better make them reusable but basically bend that line into a circle and then keep tightening the circle as much as possible and tightening means having things rotate with as few possible steps as needed. Now, the circular economy is something that is gaining a lot of momentum. Over the past 20 years, I've seen it move from an interesting idea to something that is just core to so many discussions and it has a lot of promise in the sense that it is regenerative and it's really what the world needs to do is become a circular economy. In fact, that is what nature is. Nature is the ultimate circular economy.

The key question in the transition from a linear economy to a circular one, you can look at that in energy. Linear energy is fossil fuel energy. Circular energy would be renewable energy like wind, solar and so on. So, this exists all over the place. The challenge is in doing so is that it's going to disrupt business models. So, business models today would have to either transition into a circular one or linear ones die and circular ones come onto the scene and that will create definitely some short-term pain for long-term benefit but it is in the end necessary for us to do. The easiest way to do this would be to force full cost accounting of everything that when something is produced, you have to pay for the damage it does to the air, to nature, to all the different stakeholders. Now we don't do that today. There's no economic system out there that is forcing that. So, the only way to do it is to hope really that companies do it voluntarily and the way companies will do it voluntarily is if they can benefit from it and ideally, attract consumers to their product versus a company that is not doing so. And that is something that is actively happening and I think this is the nice thing about people waking up right now more and more is that there's more and more of that consumer pull. But this is again why consumers are the ultimate voice in the end.

Michael Young:

I think the intuition, at least mine along that journey is that we need to change consumer behavior and you've said really the opposite, right? It's not about trying to push people uphill.

Tom Szaky:

No, no. This is exactly it. I’ve painfully learned this over 20 years that we as consumers, myself included, are not benevolent creatures. We're incredibly horrible selfish people, individual consumers. We care about convenience, affordability and features and benefits first and foremost. Sustainability is hardly even there and in fact, it's not there. We care about price performance and convenience. And so, if you think about something like waste, the most convenient thing to do is have a throwaway lifestyle. That's why disposability when it came onto the scene in the 1950s won. Everything used to be reusable and long-lasting, made to last before the 1950s since the dawn of time really and then 1950s disposability is invented and everyone flocks to it because of its unparalleled affordability and convenience and we still vote for it over and over and over again to this day. And when models are brought out, take like reuse for example and people are asked to go to a store and refill a bottle themselves which means they have to clean it at home, they have to transport it to a store, they have to go to a refill station, they have to fill it at the refill station and then check it out. While people may aspire to that and wish they do it, the data shows that they really don't. They just prefer the convenience and the affordability. And so, I think in the short term to create meaningful shifts, we need to play into that and instead of metaphorically swimming upriver which is equal to changing behavior, let's swim down river and try to play into the behavior but do so with business models that are de facto more circular.

So, we have a platform called Loop which you mentioned earlier which is a reuse platform and what it tries to be is make it feel, make the experience of the consumer feel as disposable as possible while acting reusable and ideally without even realizing it. So, you can buy your favorite products whether Haagen-Dazs ice cream or Tide laundry detergent, so on and so forth in now beautiful reusable containers like Tide is now in stainless steel and then when you're done, you throw it away. You have a disposable experience. But instead of it ending up in a garbage can or recycling bin, it ends up in a reuse bin and Loop picks it up, cleans it and it goes around again. I think this is so important because in sustainability, we many times are hoping people are better than they really are and while I think consumer behavior is uninspiring, it's better to know how the pieces on a chessboard move and then play the game than move the pieces of the chessboard how you hope they move and if you do that, you'll probably lose every time. And I think this is a big issue in the social sustainable business community is that we're hoping people are much better than they really are in many cases.

Michael Young:

Right. And your point of we are indeed, Adam Smith was right, we are indeed selfish in our pursuits. So, we've talked about consumer and business. What role then for the state and for government and regulation?

Tom Szaky:

Well, so I think what's—and America does not do a great job with this unfortunately especially not now. What does the state have? It has carrots and sticks it can use. Sticks are things like tariffs, regulation. Carrots are incentives and so on. And I think the role of the government is not to not be involved. The role of the government is to tilt the playing field in favor of where the world needs to go and it's clear the world today is in an environmental crisis. It's so black and white clear and the government now needs to tilt the balance to favor things and models that are going to benefit the planet and not harm the planet and that's the fundamental role of the government. It's not to not get involved. It's to help nudge the free market in the right direction and I think that is something that we really need to think about especially in the United States which is very anti-legislation. It's much more pro-deregulation than regulation. But in the end, these are really smart things that help nudge the economy in the right direction and we have to incentivize the right things and de-incentivize the wrong thing. It's sort of like the parent in the equation that is helping nudge the child to do the right things but the child still has free will and does what it wants to do. It's just being coached in the right direction let's say.

Michael Young:

And another actor in this is obviously the role of capital and we are seeing the voice of capital in the market starting to say we are looking much more closely at corporate conduct and trying to get through some of the let's call it purpose washing, green washing, circular washing, whatever it is. Capital is a very fierce judge of corporate behavior and I actually see that as a great positive going forward is that large investors have said you know what, we're really going to take a sharp look at what you're doing in terms of sustainability. How do you think about the role of capital?

Tom Szaky:

Well, so I think it's really interesting the trend you mentioned because I’m seeing it as well. The role of what you would call like impact investment, the investment focused on purposeful, where the money is not just about a return but also about creating benefit is growing tremendously which is wonderful. We've seen the ability to raise capital at TerraCycle. It's way easier than it ever has been before and that's a wonderful thing. But it's still by percentage very small. So, there's a long, long way to go but it's good to see that that trend is coming in a very, very meaningful way. I think capital is a very, very strong force to help guide businesses because while today they're serving profit to shareholders, the shareholders are the capital or capital is the shareholders and that's a voice that has to be leveraged. And I think if you have a 401k out there or you're investing in some way, you should really think about just like consuming when your act of buying is projecting what products are being made, your act of investing is also projecting what companies will gain capital and what will not and it's just as important.

And so, when you invest your mutual fund let's say or your 401k into a mutual fund, it's worth asking what makes up the companies in the mutual fund and are they companies that are benefiting the world or are they companies harming the world and you should be full-eyes aware. Make whatever decision you want but know what you are actively voting for and own it. You can't be pro peace but be putting your money into companies that make ammunitions and instruments of war. That would be a very ironic thing. But I bet you there's many people who actively are doing that blindly by saying to their fund manager tell me what the best investment is and I'll invest in that and not peeling back the surface and asking well, what makes up that fund and do I believe in those organizations and do I want to be giving them my money. Money in this system is the most powerful tool whether it's what you buy, where you invest and also what you don't buy and what you don't invest in because the act of not supporting is just as important to vote as the act of supporting.

Michael Young:

So, last question and then I’ll let you go. Are you ultimately hopeful in our ability through private interests, market forces, capital regulation that we're going to make an impact on what has been really your life's work, the elimination of waste?

Tom Szaky:

It's an interesting one, a very interesting question and I would say hope is an amazing human quality and necessary. It's necessary not just through the bad but to enable the good. Innovation is based on hope. And so, I am eternally hopeful no matter how dark it is outside. What I would say is that I think the forces that are going to get us there are not just the forces that you mentioned but one other really big force which is the force of nature pushing back on us. My question is really how much bad do we have to go through before we emerge on the other side enlightened to the way we need to act? My fear is it's going to be a lot more bad than we've gone through today. But I think that at some point after enough punches in the face, we're going to realize that we need to shift. Of course, the overall question that many people ask is will humanity be able to survive it which means do we have so many punches in the face that we can't survive or are we going to make it through and be able to come out the other side in a much more enlightened state where we're really stewarding and benefiting all the things around us and not just ourselves? I noticed this. Every time there's a major environmental disaster whether it's Fukushima in Japan, whether it's Australia and Brazil burning down just recently and many, many other examples, the interest and caring for the environment goes up by the population and the bigger the disaster, the more it persists and doesn't go away.

But isn't it strange that we need to have that to create the reaction? And so, the only question is how much of this negative will have to occur for us to emerge the other side? And in a way, the negative is going to keep coming till we solve it. So, it's self-induced. Fukushima was a human error. The fires in Australia are climate change. Every single one of these things are more or less self-induced questions. So, at what point do we stop doing it to ourselves and realize? And at some point, it's just how much pain do we have to go through.

Michael Young:

Well, that's a great point about Mother Nature. She has some pretty powerful tools in her toolbox and we are seeing that.

Tom Szaky:

More powerful than we have because we are a part of it and these things are responses to our actions, right? So, you can't beat nature when you are fundamentally a part of nature. The only question is can you see the wisdom?

Michael Young:

Tom, this has been fantastic. We're going to have to leave it there. I am very grateful for your time today. Thank you so much.

Tom Szaky:

It's my pleasure. It's great to connect today.

Michael Young:

Thank you. The Purpose, Inc. Podcast is a production of Actual Agency, helping innovators communicate in a changing world. More at www.Actual.Agency.

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