By recycling 90% of the waste managed, Daiseki has built a business model that is not just good for the environment but also for shareholders. The Worldfolio speaks with president Daiseki president, Hideki Hashira.
The International Energy Agency predicts that the energy demand will grow 37% by 2040 and of course nowadays one of the most compelling challenges is to ensure economic growth combined with environmental sustainability. As an expert in this sector, is sustainability still a buzzword or have we reached a turning point with new regulations for example with COP21?
Speaking in a global sense, we have to group our thinking into two parts. I was born in 1960 but if you talk about this industry as a whole, there has been no change at all since. When thinking about energy consumption versus environment, energy consumption always took priority and environment has always been second, because it is a necessity of the society. However, this mentality of putting priority on energy consumption over environment changed with two events in Japan, the first one being the Tokyo Olympics and the second one being the World Exposition in Osaka. From these two events, Japanese relations with foreign entities and companies increased and from foreign influence; foreigners told Japanese people that we should have more concern over the environment.
Japan is a country that does not have its own natural resources. Of course, conserving energy is an important factor but there are some hardships that go along with it. “Mottainai” is a Japanese word which translates to a series of concepts, in English it means “reuse”, “reduce” and “recycle”. But all of these things are moving for business and economic reasons. A big way to reduce energy consumption is to give incentives to people for them to reduce energy consumption.
Touching on innovation now; for example, when comparing automobiles that use gasoline opposed to ones that use electricity, in order to convince the whole world to use electric cars we need to give more incentives to people.
At a smaller level, in regards to reducing energy consumption during the recycling process, every area of that process is benefiting economically. It’s important that we make the system a sustainable one, especially with new sources of energy such as biomass fuels and solar energy. As far as sustainability is concerned, the most important thing is to maintain it over a long period of time. If a business depends only on subsidies and financial aid, it’s not going to survive.
Abenomics has introduced a jolt into the economic with the three arrows policy, whether it has affected Japan positively it is debatable, but it has also the merits of trying to shift the economic paradigm towards a more sustainable path. In this context, what do you think it’s the role of a greener and improved waste management in Japan? Could you also share some of the key statistics of recycling in Japan?
There are three areas to this business. The part that has the most influence from Abenomics is the manufacturing area in environmental business because there are so many regulations.
Speaking about structural reforms, having changes in it is somewhat difficult because of the regulation. And the reason there are so many regulations is because in the industry in general there’s a lot of grey areas, therefore the government has many rules to ensure nothing illegal ends up happening. The structural reform hasn’t been going smoothly. They have addressed issues concerning inflation and devaluation of the Japanese yen, but there hasn’t been a lot of effects coming from the reform itself. There have been short term solutions, quick fixes to the problem, but we need long-term solutions.
In the industrial waste management, there has been a lot of progress. And the reason for this progress is because Japan is a small country in general, and we have a system where clients bring their waste, then a company recycles it and sells all the resources to another recycling company. Also, costs for transportations doesn’t mean much since Japan is small.
One of our recycling systems is used for car oil, to make it into gasoline which can be reused by customers. This kind of system is ideal for Japan, but if we try it in another country such as China or the USA, there will be issues with feasibility.
One popular method of waste disposal is incineration, but what that creates is excessive landfills, which is a problem for Japan being a small country. That’s why recycling businesses are becoming very important. In general, Japanese are frugal people, and that’s also an aspect from where the “mottainai” concept comes from.
In the latter 2000’s there has been a slight decrease of the total industrial waste amount. The number of facilities have decreased also. There are two reasons for this decrease, one is the staggering economy in general, but also that there is more awareness among Japanese people on how the industrial waste affects the environment. Many companies are really trying to reduce the amount of waste they put out. Individual households too are now even more careful about recycling and separating their waste.
We handle a lot of waste from different clients but the only amount we put on landfills is less than 10%. When we recycle industrial waste, it could be changed into so many different things, for example raw materials that are used for cement companies as well as raw materials for the production of steel and metal. This is the main reason we have been able to sustain throughout the years. This kind of business has been successful since Japanese people are good at making the most of anything, including recycling; taking an amount of industrial waste and then finding many different uses for it or many different ways to recycle.
Recycling is not just good for developed countries like Japan but also for developing countries. For example, you can have a cement maker going to a developing country and have the cement maker plus the recycling facilities in there at the same time to work together, benefiting both.
During an interview with the Minister of Environment, he said that Japan realised the goal of cutting CO2 emissions by 60% recently and the country couldn’t have achieved this without the commitment of the private sector that has incorporated environmentally friendly practices in its business culture. Since you mentioned regulation, what is your opinion about the policies that have been put forward by the government in order to create a better environment to support the sustainable growth of Japan and specially in terms of helping the waste management in the industrial waste?
It’s definite that the private sectors have had a positive effect in this regard. The good thing about the private sectors is that companies are thinking not only about how to reduce CO2 but how to make it profitable. In a typical situation, people who have oil will just burn it and use it up, but we think of ways of not just burning it but using it in different ways.
In regards to the government and private sector working together, I am not necessarily asking the government for subsidies for companies like us, but what I think is a good idea is the government providing facilities and infrastructure. If a company is in need of facilities that reduce carbon dioxide, it would be good if the government would be able to provide that. Now, if the government were to give subsidies, there are two things to consider: You can’t just have a subsidy helping with the initial start-up cost. But also the government should consider the cost of maintaining and keeping a system going. If the government is helping, an effective full-approach measure is necessary.
Local governments and municipalities generally handle household waste. But I believe strong synergies with households could be created. I think it’s totally possible for some cooperation to be born.
How does Daiseki transform waster into resources? Please share some key features about the innovative solutions and technology utilised.
We can take for example, a PET Bottle, everyone talks about recycling and one issue with recycling is the high cost. Our innovative mindset makes us think like arteries and veins. When people give us waste, that’s like an artery that goes into our company, the heart. And when we think about innovation we can’t simply think about what is going out, the resources we are recycling into. By focusing on what’s coming in, that’s where we are innovative because there are all kinds of ways to work on any item. Our focus on innovation has made us able to recycle anything that might come in through the arteries.
We do counselling and advise people on how to use the products that have been yielded from our recycling process. One reason why most of the waste management companies fail is that they focus too much on technique and technology. What’s really important is finding the customers and clients who can make use of what you recycle, the output product. Our innovation is innovation because we are thinking in a circular sense, not just how to recycle.
What are some of the key financial highlights for last year and an estimation of the value you generate by recycling all these materials?
2016 wasn’t a good year for us because the amount of natural resources had decreased alongside oil consumption. On top of that, what you recycle can only be sold for cheaper than the original material. With the amount of resources and prices decreased, the cost for actually performing this recycling does not change and the profit margin gets smaller. It has put a lot of pressure on recycling process’ facets and businesses. To offset these losses, we are not really thinking about how to improve certain specific points, but we are thinking on how to make cost cheaper to the system overall.
We are analysing opportunities for USA companies to enter Japan. And for many manufacturing companies, waste management is a key factor to consider, as you said the cost-benefit for your clients is a relation that is very strong and needs to be deeply analysed. For all the global investors that want to stablish their headquarters in Japan, why should they pick Daiseki as their business partner when it comes to recycling terms?
Currently we do have a lot of companies overseas that use our services. One thing about Japan is that the entity that creates industrial waste is the party that is responsible for it.
Because the regulations from the government are becoming so strict, we don’t have a lot of leeway of choosing how exactly we do things. Thanks to all these new regulations although there are some companies who are giving us more industrial waste and business to deal with, this is also stated in the CSR reports that are made by people in this company.
Our company does have a good reputation for this kind of industrial waste business and we follow regulations in a way that we create connections with the government, and for that reason, any company should choose us.
One more aspect about our company: Japan is very good at quick responses, it is a country that experiences natural disasters, so the way the people work is always based on quick response. There has been situations where a tanker in the ocean ruptures and there is a lot petroleum that leaks into the water. We are able to collect that and recycle it. One of our major focuses is helping the environment.
Do you foresee any potential alliances in order to develop a better knowhow or technologies to support the sustainable growth of Japan?
Due to the nature of industrial waste, it is not something we can take across borders. Exporting and importing industrial waste overseas is prohibited by regulation, so in that regard, it is impossible to have a collaboration in that sense.
Because of that, technologies and ways of dealing with waste is different from country to country, so if you take industrial waste from one country to another, there is no guarantee that they can deal with that. This is also true for different regulations between countries.
There needs to be an international regulation unified for how to deal with industrial waste. Getting everybody together under one set of regulations might allow us to make some progress with international businesses.
Each country takes innovation in a different the direction. This is also true because while natural resources are being reused, the tax system is completely different as well. This is the reason why the technology is completely different from country to country in waste disposal, as there are different tax systems, different regulations. Thus development takes different shapes as well.
What is your personal vision about the future of Daiseki and what would be your message to your American shareholders, looking at the future of the company?
We intend to keep focusing on the environment. Another important thing about this business is that you have to think about the finances and the actual technique. Our company will not forget one thing, as far as humans exist on this earth, they are going to produce waste. We are also focusing on that and how to reduce that usage and production of waste. But we also have to keep in mind financial constraints that this reduction might cost. We cannot always rely on the government to think that they are going to send us subsidies to help us.
One of the major business we had before was recycling industrial reused oils, and then recycling that again to make a better product. When we talk about helping the environment, it’s a very wide ranging topic, therefore there is a lot of potential for business. Our company is focused on small individual aspects and smaller problems within sustaining the environment and protecting it. Our company in particular is focusing on oil and metal. While I’m thinking about diversifying into different areas, we are really focusing on how to improve the processes of recycling oil and metal to become experts in this particular area of recycling.