Mondi paper recycling: Outsourcing the supply chain
In the developing world, recycling is essentially driven by economic necessity, with the associated environmental benefits being a useful and positive by-product. The main incentive for recycling waste, including paper, is its residual economic value. In a developing country like South Africa, businesses in the formal sector are experimenting with models that leverage the strengths of the informal sector in order to streamline their supply chains. Mondi South Africa, a very significant paper producer with a global presence, has created economic opportunities by outsourcing its supply chain of recovered fibre, the industry term for waste paper. Through an ‘owner-driver’ scheme, it has encouraged some of its former employees to create their own paper pick-up and delivery businesses, creating opportunities for empowerment, encouragement and economic development further down the value chain, with direct and indirect benefits for hundreds of people in the form of employment, increased income, skills transfers and enterprise development.
The case for recycling paper and leveraging the strengths of the poor in the recycling process is largely made. The main question beyond that is whether Mondi’s model, in its current shape, is truly empowering, or whether it is first and foremost an elaborate cost-cutting and cost-control measure benefitting the business rather than its supposed beneficiaries further down the value chain. The beneficial side effects for the poor are certainly real in terms of increased incomes and opportunities, not to mention the overall environmental benefits. Mondi’s owner-drivers supply a remarkable 16% of all recovered fibre in the country, and the average turnover of each of the owner-driver businesses hovers around the 1 million rand mark (ca. US$133,000 at December 2009 exchange rates. There may, however, be further room to enhance the model in favour of the main actors in the supply chain of recovered fibre: owner-drivers, sorting and bailing companies, buy-back centres, and even more so, the estimated 12,000 hawkers who depend on paper recycling for their livelihoods.
Citation: Coetzer, Pierre. "Mondi Paper Recycling: Outsourcing the Supply Chain." GIM Case Study No. B083. New York: United Nations Development Programme, 2010