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Retailer turned recycler is an industry game-changer

ao

The scale of AO Recycling’s plant for treating large domestic white goods is certainly impressive. An 80-tonne shred­ding machine is at the heart of the operation – able to process more than 700,000 fridges a year, around a fifth of the total volume thrown away in the UK. Alongside this, its reuse operation salvages the best-looking items for resale.

Anthony Sant, AO Recycling’s sales and mar­keting director, explains that the company did not set out to build the biggest fridge plant. It was the result of building a facility that could handle huge American-style fridges, which are a growing waste stream. But why did the retailer want its own recycling operation?

Sant explains that AO’s founder, John Rob­erts, made a strategic decision to put customer service and ‘doing the right thing’ at the heart of the business. “John’s attitude was that if we always make it easy for the customer, because we care more than anybody else, then, guess what – we will always continuously win busi­ness,” Sant explains.

For this reason, about 10 years ago AO bought its logistics supplier, Expert Logistics, after recognising that it needed greater control over the delivery of its goods rather than relying on a third party. The retailer realised that, apart from interaction with the company via the internet or occasionally on the phone, the point at which goods were delivered was a key moment of customer contact for the business – and so was the impression this service left.

According to Sant, Expert Logistics was losing money when AO bought it. The retailer invested in it and, a decade on, it is a profitable business with a 9.7/10 Trustpilot rating. “But the drive [to buy Expert Logistics] was about doing the right thing, and what we have ended up with is a phenomenal business,” Sant says.

It is this way of going about business that AO believes sets it apart: “Too many people in life say ‘if you give me the harvest, I’ll plant the seed’. AO absolutely always will plant the seed and then expect the harvest in a few years’ time.”

AO’s move into recycling echoes its story with logistics. When conducting an analysis a few years ago, it concluded that there was not enough fridge recycling capacity in the market. It calculated that more that 260,000 tonnes of fridges are placed on the market each year and 2.8-3.5 million fridges are thrown away a year. Alongside this, its data revealed that fridges had got 20% bigger, despite being made of lighter materials.

It was worried about the country’s ageing fridge recycling plants, their reliability and the possible implications on AO. It wanted to future-proof the business, to ensure that it would always have a safe and reliable outlet to process the increasing number of white goods its customers wanted to dispose of when their new ones were delivered.

Along with his brothers and father, Sant had worked for the family business The Recycling Group (TRG), which operated a fridge recy­cling plant in Wales. It first won a contract to process all of AO’s waste fridges in around 2004 and the two companies developed a good working relationship.

Sant explains: “Although we had never let them down and we had always taken away their items, there came a point [when AO ques­tioned] what happens if something did happen to TRG? Our plant was getting older and, unfortunately, there was just no chance of investment in the industry. Fridge disposal prices reached an all-time low, and were being driven not from an economic point of view, but just from ‘we’ve got a plant, let’s fill it’.

“AO looked at [the fridge recycling situation] and said ‘it is too big a risk to our brand and it is too important’.”

So TRG became part of the AO business and AO Recycling was born. Sant explains that his brother Robert, AO Recycling’s managing director, was tasked with building a plant that was able to deal with all of AO’s fridges, and was guaranteed to meet the regulations at the high­est standard, because no plants had been built in the country since flammable blowing agents were deemed hazardous in 2012.

After assessing the market, he chose Andritz MeWa to build the plant, and a warranty was agreed whereby AO could was agreed whereby AO could seek recompense if the plant fell short of current standards.

The plant was built with no financial con­straint and cost £8m-£10m. Sant says: “I think that is quite unique because we didn’t tell them ‘you have to build it for this much money’ – we told them we need to build a plant to meet the regulations whatever it cost and then agree a figure. We have put environment and recycling and legislation first and foremost, and then we worried about the money afterwards.”

He stresses that AO approached the build in “a very different way”. He uses the analogy of the recycling industry mining for gold and says that, when the Telford plant was built, its moti­vation was to ‘go after the dirt’ – such as the blowing agent (which he is confident the plant is collecting significantly more of than anybody else) and oil from fridges.

“The recycling industry has got to stop think­ing like gold miners and start thinking like dirt miners,” he says. “If we are going to leave this world in a better place than it was before, we have got to mine for the dirt. But we need to be rewarded for the dirt because, at the moment, you only really get rewarded for the gold.”

Back in 2000, AO’s founder John Roberts made a £1 bet with a friend that he could change the way white goods were purchased, via the internet. He set up a business called DRL and the group’s first e-commerce website, Appliances Online, was born soon after. Other big-name retailers then started using the business to manage their own online white goods platforms, and to supply and deliver their goods.

Around 2009 it acquired Expert Logistics from retailer Iceland. In 2013, Appliances Online relaunched as AO.com and it was ranked fourth in The Times’ 100 Best Mid-Sized Companies to work for. A year later, AO World floated on the London Stock Exchange and in 2015, AO launched in Germany. The following year, it launched in the Netherlands. In 2017 the company posted total revenues of more than £700m.

anthony and robert sant in the recycling plant

 

But AO’s driver for the recycling facility was to ensure it could look after its customers’ waste white goods, and it made a decision to do so by aiming for the highest standards: “We have a duty of care to protect that AO smile [on its logo] because we are only ever as good as our last Trustpilot report or our last delivery. We cannot afford to sully the AO brand by doing things wrong.”

A “big proportion” of the volumes treated at Telford come from AO. But it also does deals with some of the UK’s largest producer compli­ance schemes. Sant explains that there is a marked difference in the condition of white goods that have come in via local authority col­lections and its own reverse logistics system.

AO-collected goods arrive on the trucks in a single layer and are protected by return pack­aging from deliveries, offering a greater oppor­tunity for repair and reuse. All incoming fridges from AO have their compressors intact, whereas white goods that arrive via council sites can be stacked several high and a “significant number” of fridges arrive without compressors.

But Sant is hopeful that times are changing and such ‘WEEE-leakage’ will become a thing of the past: “Defra has sent out a consultation all about waste crime and how you can increase standards. There is a sea change here.”

I ask if AO envisages a future where it oper­ates a closed system, treating only AO-collected white goods, and Sant replies: “We will always basically deal with AO’s fridges and we must always make sure we have capacity for AO first and foremost – that is why we built the plant.”

When the company canvassed customers to fill the additional capacity that was available, it found that customers wanted to unload at a specific time. “They wanted to unload in an hour because lorry drivers are on a tachograph [recording their activity]; if they can incorporate their 45-minute break while we are unloading fridges, then, happy days, that saves transport costs.”

As a result, AO allows 15 minutes for some­one to arrive on-site and 45 minutes to unload. It has a strict, prearranged booking procedure in place but because the recycling plant’s oper­ations must follow the operating times of the retailer, it is open 24/7, closing only on Christ­mas Day and Boxing Day.

Sant says people were “quite cynical” about whether it would be able to deliver on its prom­ise of a one-hour turnaround at a specific time. It has – and it has essentially brought a retailer’s approach to its recycling operation.

He believes the time is now ripe for the recy­cling industry to change the way it works and think about things differently.

“The industry has not got the greatest name, let’s make no bones about it. If I go to a dinner party and people ask what I do, and I say I recycle fridges, I get ‘oh, bloody hell, watch the lead on the roof!’ That’s quite sad because we are doing something very special here,” he says.

He thinks the industry should have more visibility about the recycling and recovery rates achieved at plants, similar to food hygiene rat­ings, but this requires a level playing field: “We are looking at how we can represent this infor­mation; we are talking to Defra and working with the Environment Agency to come up with something. And, yes, one of the things we have talked about is that we might publish them.”

Sant uses plastics as an example of the cur­rent issues faced by Approved Authorised Treatment Facilities (AATFs) with regard to recycling figures, because the material can make up 20-25% of a fridge: “If you send all your plastics off for recycling, that in theory could be classed as recycling 100% of your plastics. But if you actually delve into it, it might be that where you actually send it achieves only an 80% recycling rate.

“Now, under AATF accreditation, you should only work off that 80% figure. But people will measure the AATF accreditation [differently] – some will take the 100% and others will take the 80%. It is important to make sure that you have the same ‘marking examiner’. We have got to make sure we have got a level playing field with regard to measurement before we start announcing rates.”

“We didn’t tell them ‘you have to build it for this much money’ – we told them we need to build a plant to meet the regulations whatever it cost and then agree a figure.”

He says it is quite easy to find buyers for the plastics that come out of the plant because it is clean. But he adds that there are not enough processors in the UK or even Europe to deal with all the mixed plastic the country generates.

“Companies need to invest in recycling over­all. The industry is desperate for investment. The Government has got to find a solution to how to encourage investment. One of the big­gest challenges is that most waste is producer-funded and, from a producer funding point of view, do they want to spend any more money? That is the question, because somebody has got to fund it – it is not just down to the recycler to find that gold. Somebody has got to fund the dirt.”

A number of manufacturers have visited the plant and Sant says it has opened their eyes: “I think their perception of the recycling indus­try is probably like the people at the dinner party. They feel there is a lot to be desired; they don’t see [recyclers] as being particularly pro­fessional.

“Don’t get me wrong – we have moved a long way from Steptoe and Son, but there is still a bit of a stigma attached. We have got to change that perception and I think we will.

“I have an email from somebody in the Gov­ernment saying that AO coming into recycling is a game changer for the industry – and it really is. I have never come across an organisa­tion that has done what we have done and been driven in this way – and I think that is what sets us apart from everybody else.”

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