It is sometimes easy to forget, among the bad news that surrounds French multinational utility giant Veolia Environnement (VE), that its UK waste operation - which has the highest profile of its UK subsidiaries - is not doing at all badly.
When I ask Jean-Dominique Mallet, chief executive, about a drop in revenue of 8.4% in the first quarter of this year, he is quick to point out that the company has grown by around 6% a year for the past five years.
Sustainable development is much more important than waste
But he admits that VES has been affected by falling commodity and recycled material prices and declining waste volumes caused by the global economic crisis.
“The waste industry in the UK today is suffering from a reduction in waste which I think is linked to the recession. Volumes of waste are going down. I think we are very resilient to this as we have long-term contracts and our volumes are not going down too much,” he says.
“But it is a very competitive market. And commodities prices have gone down a bit. So there is an exposure to commodities prices that affects a lot of the waste industry. Sometimes we share the losses with our customers. But we don’t control the markets; we are an operator not a trader.”
I start to ask what that means for the future if VES is so exposed to volatile commodity markets and global economic trends. But before I’ve finished the question, Mallet says: “We are entrepreneurs, we take risks, and we are looking at long-term cycles. We don’t expect the UK economy to be in recession for the next 25 years.”
He went on: “We are long-term investors in this country. We are hedging our models the best way we can, identifying the risk we have and finding solutions around it. But our activity in the UK is satisfactory; we have been growing over the past year in a significant way.”
But he admits: “What is true is that our industry is one of the first to be affected by recession: when industry is hit by recession, it produces less waste. And local authorities are facing extreme challenges.”
Mallet speaks with steadfast optimism about the future of his company and industry.
“We must avoid entrenched positions”, he says on possibly the most entrenched debate in the industry: commingling versus source segregation. “At the end of the day, the importance is on the amount being recycled,” he says, maintaining that commingling does not put a brake on recycle rates.
While he understands the positions of those reprocessors who want only separate collections, or at least commingled only in exceptional circumstances, he questions the motives of some of the supporters of the ongoing judicial review.
“I would like to make sure that everybody challenging has only environmental interests in mind. Some people, yes. Some people maybe are interested in kerbside-sort collection for their own purposes in terms of end products.”
He adds that the focus should be on the need to improve recycling, which means “coming up with products which are purchased by the market”. Then commingling would certainly be a valid method of collection.
And what of those reprocessors who say, in that situation, that they are being held to ransom by a market that will not produce material of the quality they want?
“Commodities is a worldwide market. I have absolutely no problem discussing with the reprocessors what their requirements are. The same as we can discuss with European reprocessors what they require or Chinese reprocessors. You have to understand that the Chinese reprocessors audit all our MRFs before they accept recyclates from them.”
Mallet joined Veolia with a background in civil engineering and infrastructure, and now sits on the infrastructure board of the Confederation of British Industry. But, unlike many in the sector, he is not worried that the National Planning Policy Framework announced in May did not mention waste.
“Sustainable development is much more important than waste,” he says. “Waste happens to be at the heart of sustainable development in terms of environmental protection, in terms of the economy - because a waste infrastructure is absolutely needed - and in terms of communities and employment.”
Discussing the future of public-private partnerships in waste infrastructure finance, Mallet’s optimism again shines through.
“The market will find the solutions,” he says. “Because if we don’t build some waste infrastructure, the penalties to the UK and to local authorities will be significant. We have to find solutions, but the market will drive it because of the consequences of not doing it.”
The money markets and the Green Investment Bank will help to find financing solutions for building waste infrastructure, but Mallet is not overly concerned about the demise of PFI.
“At the end of the day, PFI has never been financing the construction. It’s never been a funding issue. PFI is a way of facilitating local authorities’ reimbursement within a defined framework,” he says.
In March MRW revealed that Defra was scrutinising a £26m contract between Sheffield City Council and Veolia in order to look for savings and to inform Government thinking. Mallet says Veolia welcomes the initiative.
“We have already invested a not insignificant amount of money. We have taken all the risk in construction. If people want to review the cost of the project, fine. But we will have to review, also, the scope of the project,” he says.
Mallet slaps the table hard for emphasis: “It’s not that suddenly we’ve invested all the money and said, ‘well, we’re going to reduce your revenues when the capital is already invested with all the risk it took’. Nobody was questioning us when we had to invest more than originally planned.
“It’s perfectly acceptable; so [there needs to be] absolute transparency, absolute availability. If we have to adapt, we will adapt. And I welcome the opportunity to be transparent with Defra, and see exactly what has been done, how it is structured and what the consequences are.”
Transparency, openness, public image and engagement are key to Mallet’s optimistic vision of the industry’s future.
Summing up, he tells MRW: “I see a bright future for the waste industry in terms of image, recognition and attracting more graduates, through sustainable development and the impact we have on communities and the priority we give to learning.
“The economy is not what we had before 2008. But I still see the same enthusiasm in this company to move forward because we are in a business that ticks all the boxes [in terms of] of green growth and sustainable development.”
J-D MALLET CV
Mallet began his career in banking at Continental Illinois Bank in Chicago and BAII Bank in Paris before joining construction firm Compagnie Générale des Eaux.
He has been chief executive at VES since 2007, having been at the Veolia Environnement group since 1990 and in the waste management arm of the company since 1995. He has chaired the Environmental Services Association since November 2011.
Mallet is also executive vice-president of Veolia Propreté and heads VES operations in northern Europe and Australia.