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PFI distorts the market not social enterprise groups

Matthew Thomson

… on third sector involvement in waste management

Bill Swan, managing director of BPR Group, is not wrong when he calls for better focus of our energies (MRW 15 October), but he is wrong to limit his advice to charities and voluntary groups. The real challenge facing us all right now is to do more, do it better and to do it for less.

In sustainable resource management this must mean maintaining a focus on material and service quality. It also means we must take every opportunity to maximise the wider benefits of our services to communities, customers and the environment. But the mainstream waste management and recycling industry still falls short on handling materials to maximise their quality and usefulness. Waste arisings are not falling swiftly enough. The quality of much recyclate produced is too poor to be reprocessed in this country. Too much organic waste is going to landfill. Politicians obsess about service frequencies without recognising the waste prevention impact that a well-designed service can have.

Social enterprise or community groups have every reason to challenge this state of affairs and have a good track record of doing so. The third sector gets involved in waste management to maximise the social and environmental benefit of resource manage-ment activities. Commercial companies do so to maximise their own economic advantage.

Swan is right to celebrate community successes and his heart clearly still beats for our sector. But that is not why he has been busily acquiring social enterprises. BPR’s acquisitions are designed to bring additional value to his business, and Swan has an eye for a lean operation with a great client base.

In a value-focused sector starved of working capital, it is inevitable that social enterprises will fight on to deliver services against odds that would defeat a profit-led company. Yes, money has been wasted by the third sector and, yes, some have failed. But the failure rate is no higher than in the mainstream commercial SME sector or the innovation sector - in fact, it is a good deal lower. And social enterprises are flourishing in sustainable resource management.

Let’s be clear: a business that does not make a profit is not a business. But by reinvesting their surpluses in the communities they serve, either directly or through better services, social enterprises and community organisations deliver a raft of benefits that the Government and others would otherwise pay handsomely for: training volunteers, getting ‘difficult’ people back to work, rehabilitating offenders, regenerating neighbourhoods, furnishing people in poverty…the list goes on. These activities often attract grant funding and few would dispute the necessity of that. It is misleading to suggest that grants subsidise recycling schemes: they fund vital social activities.

We are all governed by state aid regulations that prevent market distortion. Where grants are given, they are intended to address market failure, often to initiate new services where only value-focused organisations will lead.

The biggest market distortion in our industry falls within PFI, where lengthy contracts underpinned by unrealistic gate fees enable the construction of superfluous infrastructure that discourage service efficiencies.

Matthew Thomson is chief executive of the London Community Recycling Network

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