The Dilemma of Waste Management Startups
Wed, 23 Nov 2022
Residents around a garbage bin separating types of waste in Depok, Monday (21/11/2022). ValidNew sID/Fikhri Fathoni
JAKARTA - Indonesia has great potential in the recycling industry. Not without reason, data from the Ministry of Environment and Forestry (KLHK) noted that Indonesia produced 92.34 million tons of waste in the last three years.
If averaged, 30.78 million tons of waste are produced by the citizens of this country every year.
Of that amount, in 2021 alone there were 10.94 million tons or around 35.44% of the total waste that was not managed. A figure that is quite large if it can be utilized by business actors in the domestic recycling industry.
One of the startups, Duitin, is trying to utilize this huge potential. Duitin, a movement to sort, collect and manage waste that can produce benefits through the recycling process.
CEO and Founder of Duitin Agdya Fasanto projects that the potential of the waste management business in the country is getting bigger. In fact, he said that in the future, this industry is very bright and tends not to be affected by economic crisis conditions. The market is still good.
The reason is simple, he sees that in the future the development of the population in the country will continue to grow. That means, the waste generated will also continue to increase.
"This means that producers' needs for the community will also continue to increase," Agdya told Validnews in Jakarta, Monday (20/11).
Yes, needs and waste generated are directly proportional. The increasing population of society and its needs also inevitably increases the quantity of waste.
Established since 2019, Duitin admits that they are not really chasing results for now. Because, they are doing an environmental awareness movement.
Therefore, Agdya said, for now Duitin does not prioritize price. They don't want to compete in commercial terms. "We are more inviting a habit that we hope will become a culture for Indonesia," she added.
Currently, Duitin has not received funding from any investors. The startup admits that it is still moving and developing on its own. They are still looking for investors who want to work together.
Since its birth, Duitin has collected more than 350 tons of waste. The waste collected is dominated by plastic and paper types such as cardboard. In general, the company, which has 30 employees, accepts various types of waste ranging from plastic, cardboard, glass, used cooking oil, multi-layer boxes, aluminum cans, to baby diapers.
Through the Duitin application, people can pre-process recyclable waste by accessing the waste pick-up facility through a mobile application. This application has also been downloaded by more than 150 thousand users.
In the process, recyclables that have been picked up will be cleaned and sorted by type, color and material. Then, the clean waste is sent to the shredding plant.
The results of the shredding can be reprocessed into new items such as sacks or plastic bottles. Not only that, the shredded waste can also be processed as materials to make plastic seeds, yarn, and fabric.
Focus on Waste Transportation
Angkuts, is also one of the players in the waste management industry ecosystem. Founded in Pontianak, this startup connects communities and actors in the waste ecosystem.
Angkuts CEO Muhamad Hafiz Waliyuddin explained the background of the startup. Angkuts was motivated by wanting to add value to the social status of janitors or garbage porters. For this reason, the company focuses on transportation services.
"Now angkuts focuses on waste transportation services or waste distribution from the source to the waste management site (TPS)," he explained to Validnews in Jakarta, Tuesday (22/11).
Angkuts is a partnership method with drivers or so-called haulers. The company receives a commission from each customer who subscribes.
The company, which was founded in 2016, has a B2C or business to consumer business model. As a transportation service, Angkuts focuses on providing waste transportation services for residential and business customers such as offices, restaurants, and others with a monthly subscription pattern.
For the B2G business model, Angkuts also provides software services for the government in managing waste data from the government's waste bank partners.
The fees set by Angkuts also vary. The variation depends on the mass and volume of waste to be transported. "The cheapest is Rp50,000/month for waste transportation services," said Hafiz.
The type of waste transported is domestic waste or residential waste which includes low value, high value, organic, and residual waste.
To date, Angkuts has distributed approximately 2 tons of waste per day in Pontianak City and surrounding areas. This estimate is based on Pontianak City Government data which states that the waste produced by a resident is 0.1-1 kg / day.
Last September 2022, Angkuts had just started operating in Bandar Lampung, precisely on Pasaran Island. Because it has just opened, the daily waste that has just been transported is only 150-200 kg.
Regarding funding, Hafiz revealed that his company has not yet received bootstrap funding or is still using its own funds for operations in Pontianak.
Meanwhile, in Bandar Lampung, Angkuts received a grant from the Anak Bangsa Bisa Foundation (GoTo Foundation). The grant covers Angkuts operations from May 2022 to May 2023. When asked how much the grant received, Hafiz did not reveal it.
"We have not been able to mention the total grant given by the Foundation formed from the proud company of the nation's children, Gojek Tokopedia (GoTo) Group," he said.
Regarding profit, Hafiz was also reluctant to mention it. What is clear, he said Angkuts has a business scheme that prioritizes partner welfare. Now, Angkuts is at a financially sustainable level, where income is greater than expenses.
However, Angkuts continues to develop the application until it has a real impact on driver partners or Pengangkuts.
Looking at the vast market, this startup targets to open branches in various cities in Indonesia.
Like Duitin, Angkuts also operates adopting ideal values. In Hafiz's perception, Angkuts will be great if driver partners or Pengangkuts are prosperous.
Hafiz reasoned that the total waste production is directly proportional to the Human Development Index (HDI) which always increases every year.
"So this sector will always be unsaturated for waste processing absorption, what's more, waste management in Indonesia is still a shared homework and shared responsibility," he said.
Unlike Duitin and Angkuts, which are still independent, Waste4Change has received Series A funding. The value is quite large, up to US$5 million or equivalent to IDR 78.65 billion from AC Ventures and a row of other investors last October 2022.
This funding round was led by AC Ventures and PT Barito Mitra Investama, and joined by a series of other investors, namely Basra Corporation, Paloma Capital, PT Eight Satu Investa, Living Lab Ventures, SMDV, and Urban Gateway Fund.
Waste4change is an old player in the recycling industry. Established in 2014, until now the amount of waste that has been managed has reached 9,237 tons. The quantity reduces 54% of the waste that ends up in landfills.
"This number will increase following the opening of several new material recovery facilities, such as RPM Telaga Kahuripan which officially opened in October 2022," Waste4Change Head of Communication & Engagement Stephanus Kenny Bara Kristanto told Validnews in Jakarta, Tuesday (22/11).
Stephanus explained that the fresh funds obtained will be used to expand the reach and increase the capacity of waste management.
The waste management target is targeted to reach 100 tons per day in the next 18 months. Also, reaching more than 2,000 tons per day in the next five years.
In addition, the fresh funds will also be used to strengthen partnerships with the informal waste sector in Indonesia, which is currently supported by waste pickers, waste banks, waste kiosks, and waste collectors.
Speaking of profits, Waste4Change stated that the business has grown 10-fold in just one of the services provided.
"Waste4Change recorded a 10-fold business growth in one of the services provided. Although we cannot share the profit data because it includes confidential company information," said Stephanus.
Stephanus believes that the implementation of circular economy will be a long-term solution for global economic growth considering that resource exploitation is already destructive and leads to an inevitable climate crisis.
With the increasingly serious commitment of Indonesia and other countries in the world in the adoption of circular economy in the future, the company believes that Waste4Change's business growth will be positive in the future.
Currently, Waste4Change assesses that the waste recycling rate in Indonesia is still relatively low. The recycling industry in Indonesia only absorbs 30% of domestic waste, the rest is fulfilled by importing waste.
"If the waste management flow is improved, the waste recycling rate in Indonesia will be higher. This can significantly reduce the pile of waste that ends up in the landfill," said Stephanus.
The proliferation of startups in the recycling industry is also noted by the government through the Ministry of Industry. As of 2021, the Ministry of Industry noted that there are around 600 large industries and 700 small industries in the field of plastic recycling with an investment value of IDR 7.15 trillion.
In total, the ability to process plastic waste can reach 2.3 million tons annually with added value reaching more than IDR 10 trillion per year.
Although it has mushroomed, the Ministry of Industry still notes that there is 50% idle capacity in the plastic recycling industry. The ministry considers that this can still be optimized by implementing a circular economy, so that plastic waste can be processed into commodities that can be reused and have economic value such as bottle packaging and PET plastic.
Still Not Aware
Head of the Center for Innovation and Digital Economy at the Institute for Development of Economics and Finance (Indef) Nailul Huda admitted that the potential of the recycling industry in the country is indeed quite large. However, talks about businesses engaged in the green economy and blue economy are still the talk of the upper middle class only.
"Awareness of the lower middle class about the green economy or blue economy is still far away," he told Validnews in Jakarta, Monday (21/11).
The lower middle class still talks about whether or not an item or service is cheap. Nailul sees that people have not seen whether the goods or services they use can help preserve the environment, such as waste management startups.
Until now, he believes that various waste management service startups still have a limited market. Therefore, Nailul believes that the growth of this industry will be slow.
"It's different from e-commerce and online motorcycle taxis, which are growing fast. E-commerce, for example, because of price wars and people realizing that they don't need to go to the store anymore to shop, has increased awareness," he continued.
Even so, he believes that as time goes by and talks about the green economy and blue economy become more frequent, the potential for waste management startup businesses will also increase.
According to him, the development of this business also depends on how startups "burn money" to increase the number of users to create public discussions that make people more "aware" of environmental issues.
Conversely, incentives provided by the government will also not boost the development of the industry if the fundamental factor of awareness has not been embedded in society.
"Incentives will be difficult, because it has not become awareness. People would rather talk about today and what to eat tomorrow, than talk about environmental damage. I think it needs to be included in the education curriculum," said Nailul.
The issue of environmental awareness is a dilemma. While the number of environmentally conscious people is increasing, the industry is still unable to capture the niche.
This is recognized by Dewi, a housewife in Depok, West Java. She already knows about waste management startups. She also wanted to try out the existing waste collection apps.
However, because her place is far from the hustle and bustle of the city, none of these startups have yet reached her residence. Even if there is, the garbage pickup must meet a minimum standard of the amount of waste that can be transported.
"So far, there is none, and even if there is, there must be a lot of waste picked up. So it must be collective to the neighbors. For example, I am collecting cooking oil waste. It can be picked up at home by belijelantah.com but it must be 18 liters. Even though I have only collected about 3 liters in the past month. Yes, because I rarely fry with oil too," the 26-year-old woman told Validnews in Jakarta, Monday (21/11).
Dewi admitted that not many of her friends and neighbors knew about the existence of an application that could pick up and manage household waste.
She said, only those who care about the environment know that there is such an application.
She also hopes that, in the future, startups engaged in waste management can reach areas where there may be potential consumers.
"But they haven't been able to reach out widely because maybe not many people know about them and in the end there are not many enthusiasts," said Dewi.
Original news: HERE
This article was originally written in Bahasa and translated later on to English