HWRC shops overview 2016

Transcription

1 Final report HWRC shops overview 2016 A study of different re-use shops at HWRCs in England and Wales (January to March 2016) to establish implementation costs, potential income, and the average tonnage re-used. Project code: REU Date: July 2016 Research date: January-March 2016

2 WRAP s vision is a world where resources are used sustainably. We work with businesses, individuals and communities to help them reap the benefits of reducing waste, developing sustainable products and using resources in an efficient way. Find out more at Document reference: WRAP, 2016, HWRC Shops Overview 2016, Prepared by Resource Futures Written by: Emma Clarke and Caroline Lee-Smith Front cover photography: Leeds Seacroft HWRC, Revive re-use shop While we have tried to make sure this report is accurate, we cannot accept responsibility or be held legally responsible for any loss or damage arising out of or in connection with this information being inaccurate, incomplete or misleading. This material is copyrighted. You can copy it free of charge as long as the material is accurate and not used in a misleading context. You must identify the source of the material and acknowledge our copyright. You must not use material to endorse or suggest we have endorsed a commercial product or service. For more details, please see our terms and conditions at

3 Executive summary The sight of a re-use shop based at a household waste recycling centre (HRWC) is common place these days. Many have been operating for a number of years and local authorities, waste contractors or third sector organisations looking to set up their own scheme have a wide range of research, case studies and guidance to draw on. However, WRAP acknowledges that some aspects such as implementation costs, potential income, and the average tonnage of re-used items resulting from different HWRC re-use options have slipped through the net, making it difficult for local authority officers and their partners to present a convincing business case. This report provides aggregated data from a number of authorities that are operating re-use facilities, using either containers for off-site sales, small or large on-site shops. The figures, in conjunction with consideration of the options in Section 4 of the HWRC Guide, and the HWRC Procurement Guide, will enable local authority officers to identify the most appropriate re-use option. The document will be useful for local authority officers, waste management contractors and third sector organisations interested in establishing or enhancing re-use at HWRCs. Data suggests that HWRCs with tonnage throughputs of between 3,000 and 11,000 tonnes have achieved around 100 tonnes of re-use. The data has shown that a large on-site re-use shop can achieve up to 3.9% of total site throughput, or 450 tonnes annually (figures from East Leeds HWRC), with an average large shop (approximately 200m 2 ) re-using 1.4% or 122 tonnes per annum (sample size of 13). Small, on-site re-use shops (approximately 34m 2 ) are achieving up to 2.8% of total site throughput, or 157 tonnes (Kings Lynn, Norfolk), with an average of 1.1% or 41 tonnes per annum (sample size of 11). However, it is worth noting that the lack of a common monitoring framework used for HWRC shops (apart from weights for items specified in the FRN Product Weight Protocol), means that the tonnage levels reported (vs income) are highly variable. For those aiming to keep costs low, container sales require the least capital investment and the lowest running costs. Smaller shops cost an average of 5,000 to launch, while for larger shops, authorities need to set budgets in the region of 135,000, or 344 per sq. metre, to set up (although many have been set up for less). Most shops cover their running costs and larger shops can generate substantial tonnage and profit returns. Re-use income per tonne is variable but, in general, larger shops achieve a higher income per tonne than smaller shops. It is recommended that all shops on-site maximise the sales area wherever practical to do so, and include clothing and textile re-use; these materials have proven good income generators which encourage site users to browse the full range of stock. Adding a repair function (more than simply PAT testing and function testing of small electrical items) does not necessarily add significantly to the tonnage that is re-used, but does increase running costs. However, there are wider social and economic benefits to repair, especially through the training opportunities it may provide. HWRC shops overview

4 Contents 1.0 Introduction Key success factors Size of re-use facility Cost of set up Annual re-use tonnage Income per tonne from re-use Estimated running costs Profit margin of re-use shops Which items to include Textiles Bicycles Furniture WEEE Items segregated but not re-useable Additional tonnage associated with repair Loss of recycling income Additional HWRC recycling performance and income Financial arrangements Overall financial benefits Summary HWRC shops overview

5 1.0 Introduction Over many years, WRAP has undertaken significant research into re-use at HWRCs, including the different options available, the potential tonnage diverted, the quality of items and markets for re-use. Research papers, case studies and guidance are available on the WRAP website. However, data gaps exist around crucial information, such as implementation costs, potential income, and the average tonnage re-used from different HWRC re-use options. Information is available for specific local authorities but not consolidated into one single source. This report provides aggregated data from a number of authorities that are operating re-use facilities through on-site shops small and large and containers where items are separated for off-site sale. In total, data was examined from 11 HWRCs hosting smaller shops, 14 HWRCs hosting larger shops, and 35 HWRCs with re-use containers (for sales offsite). Data was requested through direct contact with the local authorities and their partners (when applicable) during January-March The data, along with consideration of the options in Section 4 of the HWRC Guide, will enable waste and procurement officers to identify the most appropriate HWRC re-use option for them. Issues authorities need to consider are: Set-up Size of area available for re-use activities at the HWRC. Traffic flow and space for parking; any infrastructure changes needed to accommodate the facility. Any history of re-use on or taken off site. Level of contractor engagement with re-use; any incentives in staff contracts. Any incentives in contractor-authority contract. Cost of building a re-use shop, for different types of construction options and different uses of the area. If including WEEE, is the producer compliance scheme (PCS) involved in discussions? Recycling and reuse performance Potential re-use tonnages from different re-use activities; how long will it take to achieve them? Which items should be included, which excluded? Is any repair or testing to be done on site and how much extra tonnage would be available if this was included? Financial Estimated income from re-use. Estimated running costs. Estimated profit margin of the re-use facility, based on use of the space (i.e. retail space, warehouse or storage space, repair or testing space). Potential recycling income lost due to diversion to re-use. Who keeps income from recycling of items that have been segregated but are then deemed not fit for re-use? Which financial arrangement to enter into with re-use operators, such as rental or licence fee, percentage of profits etc. Estimated net saving and payback period for initial investment. Many of these factors are very complex and require consideration on a local basis by the local authority. However, the sections below provide aggregated data from sites that operate smaller or larger shops or containers for off-site sales. HWRC shops overview

6 2.0 Key success factors It was previously thought that the throughput of the site and therefore customer footfall and the number of re-use items donated to the shop was the most important factor affecting tonnages. However, this research suggests that this is not, in fact, the case. Key finding: Sites with tonnage throughputs ranging from 3-11,000 tonnes are all achieving around 100 tonnes of re-use, from shops ranging greatly in size. Based on site visits and assessments from a range of shops on sites, it appears that the most important factors are: How well they mimic the high street retail experience, in terms of: o using space well; o cleanliness of products; o attractiveness of displays; o rotation of stock; o prices displayed; and o friendly, available staff. The level of incentive of site staff. If employed by the contractor or council, those who receive a direct and notable share of income from sales of re-usable items are more highly motivated. Third sector re-use organisations specifically attract staff who are highly motivated to sell re-usable goods and raise money for the charitable cause. It is worth noting that incentives linked to increasing site recycling and re-use rates are overwhelmingly geared towards recycling tonnages, rather than re-use activity; The dimensions of retail space. In retail, every square metre counts. Assuming an organisation has achieved the factors listed above, then the larger the area to display reusable goods, the higher the sales and tonnage levels. There are, of course, limitations to this but, as most HWRCs have a restricted area for re-use activity, the message here is prioritise retail ; and Continuity of site management. If the contract is renewed during the process, this could have a positive or negative impact on re-use, depending on how significant the incumbent operator believes re-use to be. 3.0 Size of re-use facility Our data suggests that smaller HWRCs with throughput of up to 6,000 tonnes per year tend to opt for a smaller shop, such as a converted shipping container or porta cabin. These have approximately 50m 2 of inside space, and many sites using this system utilise an additional container for overflow storage or supplying off-site sales. Similar sized containers can be used to store items for collection by a third party and sale offsite. This set-up is referred to within this document as containers. The set-up is often simple, with shelving and lighting inside and possibly a ramp for disabled access. Containers mainly stock bric-a-brac and other smaller items, with a limited number of larger items directly outside. They are often not manned, but dealing with public donations or the purchase of stock is included in the job description of all site staff. This means that any member of staff available is able to deal with re-use requirements, just as they would any recycling or waste activity. HWRC shops overview

7 Figure 1: Example of a small HWRC shop, Kings Lynn, Norfolk Larger shops have been classed as over 80m 2 of retail space, and these range from shops with little or no outside space to multi-floored, multi-building affairs covering almost 1,000m 2 and including retail, storage and workshop spaces. From the sites sampled, an average larger shop has approximately 200m 2 of retail space, of which approximately 80% is covered, and an additional 200m 2 of covered outside storage and/or workshop space. In addition, an average larger shop has 11 dedicated car parking spaces. These shops are all staffed on a full-time basis, often with multiple staff, trainees and volunteers. Although they have more space to display larger items, they often need to check and clean these before quickly putting them on display, which requires a greater number of staff. Staff are also required to help members of the public to load larger items into and out of vehicles. HWRC shops overview

8 Figure 1: Example of a large HWRC shop, Princes Drive HWRC shop, Leamington Spa, Warwickshire 4.0 Cost of set up Building a re-use shop need not be an expensive undertaking, although some sites do install purpose-built facilities or convert premises at significant cost. Where such facilities have been constructed, it is usually due to significant capital funding, or because the contractor is investing for a considerable period of time due to the length of the HWRC contract as a whole. Key finding: Smaller shops cost an average of 12,000 to set up (approximately 200 per sq. metre). Larger shops cost an average of 135,000, or 380 per sq. metre, to set up. The construction materials used vary from traditional brick buildings to concrete or metal sheds and warehouses, or porta cabins and shipping containers. Of course, the extent of the build and associated cost depend on what was present at the site already and the extent of the infrastructure required. Many re-use shops have added extensions, awnings or additional containers to their re-use areas as time has gone on, in a bid to maximise retail space and provide storage areas. The shop at Waterford Recycling Centre 1 in Scotland is one of the simplest temporary structures; it uses a poly tunnel. Since the picture below was taken, the staff have started to display items on pallets to avoid ground water damage. 1 Moray Waste Busters at the Waterford Recycling Centre. See HWRC shops overview

9 Key finding: The requirement for additional space is for extra sales areas (not storage). It is recommended to maximise the sales area from the start, wherever practical to do so. Figure 2 Moray Waste Busters re-use shop at Waterford Recycling Centre, Scotland 5.0 Annual re-use tonnage Tonnages re-used at HWRC shops are highly variable, as not all shops weigh items, or weigh them accurately. The FRN has an average weight protocol for use with larger household, bulky waste-type items. However, there are no nationally approved standard weights for many other items, including individual items of bric-a-brac, large variable leisure items, such as surfboards, or DIY items such as doors. In the absence of such a framework, Leeds City Council and Revive, the consortium of third sector organisations that manages the HWRC reuse shop, agreed some average weights for small items with the Environment Agency. The results of our survey of 35 HWRCs providing containers on-site for the storage of items for re-use, showed that the average tonnage taken off-site was 17 tonnes a year, with performance ranging from 0.3 tonnes to 32 tonnes. For small shops on sites, the data suggests that, on average, 34 tonnes of re-used items could be generated in the first full year of trading (ranging from 10 to 57 tonnes in year one); increasing to 72 tonnes by year five (ranging from 24 to 157 tonnes) (see Table 1 below). These are small sites, with total site throughput up to 6,000 tonnes. The small shop re-use tonnage as a percentage of total site throughput for established shops (i.e. running for at least two years) is, on average, 1.3%. Table 1: Aggregated estimate of annual re-use tonnage per year from operating a small shop Average re-use tonnage Percentage of site throughput Year 1 Year 2 Year 3 Year % 1.3% 1.6% 1.9% These figures are an average across a range of retail environments. However, if enough lessons are learnt from existing sites and integrated into a new facility from the start, these figures can and are starting to be beaten; some new sites have achieved 2-3% of site throughput in the first couple of years. HWRC shops overview

10 Data provided suggests that -in 2014/15, HWRCs housing larger re-use shops had an average total site throughput of approximately 8,800 tonnes. The data also suggests that in the first year of operating, a large shop could achieve 74 tonnes of re-use. The table below uses aggregated data to estimate re-use throughput. Table 2: Estimated annual re-use tonnage per year from operating a large shop Year 1 Year 2 Year 3 Year 4 Average re-use tonnage Percentage of site throughput 0.8% 1.2% 1.7% 3.3% These estimates rely on all factors remaining the same. In some cases a change of re-use operator has dramatically affected the productivity of the scheme. For example, at one site, local residents were unhappy that the local charity that had run the re-use shop for many years had lost the contract and, initially, they boycotted the newly-managed shop in favour of donating directly to the charity. This resulted in a re-use tonnage reduction of approximately one third in the next year. However, the scheme and re-use tonnages subsequently bounced back. 6.0 Income per tonne from re-use Prices at HWRC shops must be kept low, not least because items need to be sold quickly to free up space for large quantities of incoming goods. Prices should also reflect the location (in many people s eyes a re-use centre is still a waste tip or dump), and shop set-up (quality of building, layout, display etc.). Small shops in our study made between 5,000-30,000 per year. The level of income per tonne is low, averaging 366 per tonne, with goods selling from 50p up to a few pounds. At between 14, ,000 per year, income for larger shops is higher, with an average of 874 per tonne. This can be compared with around 700 per tonne for prices in traditional warehouse-based furniture re-use organisations, and 1,500 per tonne for high street charity shop prices. This makes sense since the stock in a large HWRC shop tends to be a mixture of the two. Shops rarely have a tiered pricing system for customers receiving income-related benefits. However, there are examples such as Bath and North East Somerset and Borough of Poole Councils, which encourage welfare departments and their clients to access their stock. Most HWRC shops offer very reasonably priced items. For example, a sofa will retail at 50, a dining table and chairs costs in the region of 80, and clothing and other smaller goods are set at 1 per item. Items may be cheaper if there is a need to turn stock over quickly. Income across HWRC shops is, however, highly variable and will be affected by how well managed and promoted the shops are, and whether they employ dedicated staff able to maximise the retail experience. This is more likely with larger shops that can mimic the high street retail experience and also display a greater variety of items with different price points. The only available figures for income from re-use containers (i.e. where there are offsite sales) came from Norfolk County Council s bric-a-brac sales, which generated 150 per tonne. The Ketteringham HWRC in Norfolk sold 18 tonnes of bric-a-brac this way in 2014/15, as well as 12 tonnes on-site, from a site with a throughput of 3,200 tonnes. Norfolk County Council recognised that much of this stock could have been sold in the on-site shop for higher levels of income. Selling at auction might return a slightly higher income per tonne, but is variable depending on the auctions available locally and on any additional costs involved in getting stock to HWRC shops overview

11 them. A partner organisation might have another sales route, such as selling through market or antique traders, which could add another source of sales. The tables below predict the re-use income per annum. Estimates are based on the values supplied by local authorities and is based on the average income per tonne and the average tonnage of re-use per year of operation. Income increases as tonnage increases as the facility becomes more established and grows. Table 3: Predicted re-use income per year for small shops Year of operation Predicted income 12,444 16,836 20,130 24,522 Table 4: Predicted re-use income per year for large shops Year of operation Predicted income 64,999 93, , ,306 Key finding: Re-use income per tonne that can be achieved is variable but, in general, larger shops achieve a higher income per tonne than smaller shops. However, some shops manage to bring in more than double the income and tonnage levels of other shops of the same size (on similar throughput sites) so, again, although size is important, just as critical is how well it is used. 7.0 Estimated running costs The costs associated with operations vary according to: How many paid vs. voluntary or trainee staff are deployed. This can change over time as the shop becomes busier; Whether specialist staff, such as carpenters or upholsterers, are used; Whether specialist equipment is required, e.g. for workshops; The type of building used and its associated maintenance costs; Whether any and which type of communications are employed; and Usage of utilities, water, shelving and storage, electronic payment systems (or other record keeping), business rates, telephone and broadband (if required). Annual running costs for smaller shops was, on average, just 1, The low level of costs was mainly due to staff wages being covered by the main HWRC budget. However, it is worth noting that there needs to be a strong enough incentive for site staff to take re-use activities seriously, while not so strong that staff neglect other duties on-site. Using a contract incentive scheme which links overall site recycling rates to pay is easily overshadowed by changes in recycling levels, due to the much higher tonnages generated through those activities. Re-use may need additional motivation for staff, such as a higher bonus for re-use, or a direct bonus linked to on-site sales. Larger shops were reticent to provide running costs due to their more competitive nature, but, anecdotally, they expect to spend up to half their income on running costs. Key findings: Small, un-manned shops can work well and cost little to run. Larger shops often generate substantial tonnage and profit returns. 2 This is a mode not mean average HWRC shops overview

12 8.0 Profit margin of re-use shops After tonnages re-used, by far the most important figure for those operating an on-site, HWRC re-use shop is the amount of profit to be made. Smaller re-use shops, especially those with no dedicated staff costs, of course do very well on profit margins, making almost their entire income as profit (minus any staff incentive as a bonus). A small, manned shop is probably the least profitable, spending everything it makes on paying for its one member of staff. Due to the commercially sensitive nature of the information, there is very little data on the profit from larger shops. However, there are economies of scale to be made in HWRC retail and, once the space is working hard, with a busy throughput of customers, high quality presentation, and efficient friendly staff, upwards of 100,000 profit can, and is, being achieved by some. 9.0 Which items to include Space will significantly impact what type and range of items to include in a shop. Some shops are more aligned with traditional high street charity shops, which focus on textiles, books, DVDs, bric-a-brac, housewares and potentially small electrical items. Items stocked may reflect whether a charity partner is involved or not. Other shops have a wider array of items, including larger pieces of furniture and other miscellaneous items, as well as the items previously listed. Outside space often displays a variety of items such as garden mowers, leisure items like surfboards and skis, plastic toys, children s ride-on items, garden furniture and equipment, bicycles, DIY items such as doors, and other miscellaneous waterproof items. Furniture is sometimes stored outside, but operators need to remember that, especially with soft furnishings, any bad weather will bring damp and, potentially, mould into the item. MDF and chipboard do not respond well to water either, tending to warp and eventually disintegrate. Therefore, where possible, items that are prone to weather damage should be stored undercover or indoors. The supply of items into a HWRC shop is constant and varied. There is no need to display according to the seasons (as in high street shops) or to worry about lack of stock and needing to fill spaces. The public expects a HWRC shop to display a huge and random variety of items, changing as items sell (or don t sell and are sent to recycling or waste), for low prices. All items received should be put on display quickly or rejected. Experience has shown that storage containers quickly fill up with items that are difficult to access and rarely brought out. Therefore, unless the site has an area which is only suitable for storage or workshops, the use of any other area for these activities should be kept to a minimum. In some situations, the organisation running the HWRC shop also has an off-site storage facility, workshops, additional retail outlets, or even an online sales facility or auction contacts. In this case, it is able to take better quality stock off site to test it or sell it via a route that will command premium prices. The HWRC shop can still work effectively without these off-site features; however, the smaller the resource available, the more tightly controlled it must be. 9.1 Textiles Textiles are usually segregated as a specific waste stream at HWRCs. However, if site users or staff identify textiles for re-use, the re-use operator may want to keep good quality clothing and bedding to add to the retail range in the shop. The price point for textiles reused is much higher than for ragbags and, due to the popular and well-used charity shop network in the UK, they are considered a normal part of the re-use experience. The impact in terms of tonnage on textile recycling from the site is likely to be negligible. Therefore, if there is room for clothing and other textile items to be included in the shop, this is recommended. HWRC shops overview

13 Key finding: Add clothing and textile re-use to on-site shop to generate income and encourage site users to browse the full range of stock. 9.2 Bicycles A notable tonnage and income can be gained from re-using bicycles. However, these should be properly checked, and the facilities and spares available to service them require a great deal of space. Ideally, an area of around 100m 2 is required for a workshop, in addition to outside racking to display bicycles for sale, as in the picture below. Also, the job of bicycle engineer is a specialised one, which can have qualifications such as City and Guilds attached. It is advisable to have bicycles refurbished off-site by qualified staff or trainees in a dedicated bicycle workshop. If space allows, they could then be brought back on site for sale once refurbished. Figure 3 Bicycle sales area at a Warwickshire HWRC shop 9.3 Furniture Most on-site HWRC shops have a limited amount of room for furniture and therefore tend to deal only with smaller, more valuable items and those which can easily be sold or which site users are able to take home in their cars. Larger furniture items are donated less often, but are suitable for re-use. Although they are often of low value, they are still basic household items which makes them very suitable for people on low incomes looking to furnish their homes. If space is available for on-site storage, large items could be segregated for collection by a local furniture re-use organisation and taken for sale off-site. 9.4 WEEE Small WEEE items (such as lamps, music players, TVs, toasters, juicers etc.) and televisions are often segregated for re-use in larger shops on-site. These require Portable Appliance Testing (PAT) and function testing, which requires a PAT testing machine and staff trained in PAT testing on-site. This can increase the running costs for the shop, but the value of some of these items compensates for that. Function testing is required to ensure functional as well as electrical safety. Some re-use of large domestic appliances and cooling equipment does take place through third party agreements between the WEEE contractor and producer compliance scheme, but the items are rarely segregated, tested and sold in on-site shops. Small WEEE, once PAT HWRC shops overview

14 (and function) tested, can also be segregated as a separate re-use income stream from the shop, for sale to specific partners such as private traders Items segregated but not re-useable It is inevitable that some items will be accepted for re-use but, once assessed, will be deemed unsuitable for re-use; or they may simply not sell. In such cases the items will require recycling or disposal. When items are taken off-site by a re-use operator, it is usually the operator s responsibility to assess re-usability on-site prior to removal, so that any unwanted item can be recycled or disposed of at the HWRC. The cost or income will be retained by the local authority or contractor. Once the item has been removed from the HWRC, the responsibility and disposal cost or recycling income is likely to be retained by the re-use operator. In some instances, the re-use operator may have an arrangement with the local authority that waste is either returned to site for disposal, or that the contractor will cover disposal costs. The re-use operator (if a third party) may be encouraged to operate a high level of acceptance for re-usable items to ensure the items can be sold through the shop. This requires careful monitoring of donations to ensure the public do not dump waste. The waste from the shop (i.e. items that cannot be sold), can be disposed in the HWRC recycling and residual containers, however to limit waste arisings from the shop, disposal arrangement may involve free tipping under a specified tonnage threshold, with charges applied once this threshold is reached. Items for recycling tend not to have the same restrictions, and some shops break items apart to enable this. This works well when there is a physical separation, such as a separate entrance and car parking, between the re-use shop and HWRC. The income (and costs) will then be retained by the local authority or contractor. There is unlikely to be sufficient space on site for the re-use operator to have its own containers for waste segregation Additional tonnage associated with repair Joinery and upholstery workshops or WEEE testing and repair tend to exist on sites with: A specific space that cannot be used for retail; A supply of volunteers or trainees and, Access to an income stream associated with training and job creation. There are examples of HWRC workshops at Smugglers Way, (Wandsworth) London and Banbridge, Northern Ireland. Smugglers Way has no retail space on site; items are sourced from the adjoining HWRC and from bulky waste collections. The Restore project in Banbridge was set up with funding support from the Department for Education and Learning. These types of training facilities are not very common at HWRCs and additional tonnage may not be significant, given the cost to set up and run them. Banbridge estimates throughput of approximately 14 tonnes per annum, however it delivers many wider social and economic aims. In Wiltshire, the Repair Academy sources items from the county s HWRCs, and items are transported to an off-site facility to be repaired and refurbished. Whilst diversion from the residual waste stream is important, again the focus is on helping young people to learn vocational and functional skills, and on personal development. The projection for 2015/16 is to re-use approximately 33 tonnes. Key findings: Repair does not necessarily add significantly to tonnage that is re-used. However, the wider social and economic benefits can be substantial. HWRC shops overview

15 12.0 Loss of recycling income Re-use activity will divert items from the residual waste stream and also from recycling. Recycling of some materials will generate an income for the local authority (or their contractor) which may be tied to the contract price (i.e.) management fee paid to the contractor or it can offset operational costs for the local authority. Any (financial) impact as a result of diversion of recycling will need to be considered. The potential recycling income lost due to diversion to re-use is complex to calculate and will fluctuate depending on market prices for materials which, in turn, will be dependent on factors such as: Local authority appetite for risk; The length of the deal/fixed price for recyclate materials; Frequency of price review (monthly, quarterly or annually depending on price variability); Frequency of uplift required/ability to store full skips; and Consistency of quality. The study into the re-use potential of household bulky waste estimated that 49% of items (by weight) were deemed to be neither repairable nor recyclable. Whilst HWRC shops accept a broader variety of items for re-use, using an estimate that 51% of items entering a re-use shop would otherwise have been disposed of as residual waste, with the remainder destined for recycling, would seem reasonable. Of this, it is difficult to estimate the composition, although a large number of materials and potential income streams would be present. To estimate the loss of recycling income, an average of 30 per tonne has been used, based on average recycling figures seen for HWRCs in 2015/16 HWRC reviews conducted by Resource Futures. The table below calculates that the total savings for 100 tonnes of re-use, taking account of the loss of recycling income, is 3,854. Table 5: Estimate of landfill savings and recycling income loss associated with re-use Tonnes re-used 100 Estimated annual re-use throughput Of which diverted from landfill 51% Of which diverted from recycling 49% Landfill savings 5,324 Recycling income lost 1,470 Total savings 3,854 Based on weight Estimate based on Landfill Tax of and average gate fee of 20 (from WRAP Gate Fees report 2015) Based on an average recycling value of 30 per tonne 13.0 Additional HWRC recycling performance and income Resource Futures has developed a HWRC recycling rate predictive model based on detailed assessments of over 300 HWRCs across the UK. Data on all significant aspects of HWRC infrastructure, operation and performance were collated for all the assessed sites. The data was analysed using multiple regression analysis, with HWRC recycling as the dependent variable. This analysis was used to identify which factors are statistically significant in being associated with higher HWRC re-use and recycling rates, and to separately identify the effect of each factor (whilst accounting for the effects of all other factors). The model has a very high explanatory power (adjusted R 2 > 70%, which crudely speaking indicates that the factors identified in the model account for over 70% of the variability in HWRC recycling rates). The model can be relied upon with a high degree of confidence regarding the predicted effects of improvements, which were found to be statistically significant. A similar model was produced for the National Assessment of Civic Amenity Sites (NACAS) project (Resource Futures, 2004), and an updated version of the model was produced for the WRAP HWRC Guidance and available as a toolkit. HWRC shops overview

16 The national HWRC directory includes average recycling rates for each of the nations 3. The directory indicates that the average UK re-use and recycling rate per HWRC, excluding inert, is 61%. The directory also suggests that the average site throughput is circa 6,000. Using the example of a site throughput of 6,000 and aiming for 100 tonnes of re-use, it is possible to estimate how much of the predicted re-use and recycling rate increase is from re-use and how much is from the knock on effect of encouraging more recycling. Table 6: Estimated increase in HWRC re-use & recycling rate when re-use added to a site Percentage Tonnage 2014/15 UK HWRC re-use and recycling rate (excluding inert and Scotland) 61% 3,660 Predicted new re-use and recycling rate 63.8% 3,828 Predicted increase from re-use 1.7% 100 Predicted increase from recycling 1.1% 68 Total predicted increase in re-use and recycling rate 2.8% 168 Income is estimated using a figure of 30 per tonne. This is based on cost data reviewed by Resource Futures for a number of authorities in 2015/16. This will, of course, vary depending on the composition of the additional tonnage. The estimates are based on all other factors remaining the same; however, when re-use is added, other site improvements may be made, such as rebranding of a site, new signage, or additional staff. These other factors also help to increase the re-use and recycling rate and, therefore, the potential increase in tonnes and income could be greater than that illustrated. These tables are very indicative and will depend on local factors within the HWRC Financial arrangements The financial arrangement a local authority enters into with re-use operators will depend on the size and longevity of the operation, and where the risks and costs lie. Where there are containers on-site for off-site sales, often the HWRC operator or local authority will also be responsible for any on-site equipment such as shipping containers. The re-use operator is responsible for off-site haulage and, if any money changes hands for the items to be re-used, this will take the form of re-use credits 4. For on-site shops, an increasingly common arrangement especially for the first shop in a local authority area, which come with a higher risk factor is for the profits to be split between the partners involved. The calculation of profit must use open-book accounting between the partners, so as to take account of all directly associated costs, whichever partner incurs them. This option may be any combination between the local authority, its contractor and a re-use operator, depending on who runs the shop and what the contract arrangements are. If a waste management firm is running the site, the local authority may often not see an actual profit-sharing income; however, income made by the contractor from this activity can be included in the final contract price with the authority. Local authorities with a longer track record in running on-site shops are more confident in the expected profits to be made. For example, in 2014, Warwickshire let a contract for a number of lots, including three large shops at HWRCs, which each had a minimum 50,000 3 excluding Scotland as no data is available for 2013/14 or 2014/15 4 A re-use credit is a payment, the value of which recognises the saving an authority makes from avoiding disposal costs. It is lower than landfill (disposal) costs) but can provide valuable additional income to third sector organisations. Re-use credit values are often the same as recycling credits. HWRC shops overview

17 annual franchise fee. In Leeds, re-use organisations pay a lease to be present on the site. This guarantees an income for the authority, and encourages the re-use staff to work hard in order to generate extra income for their organisations. Further detail on these options is available in the How to Procure Re-use Services Guide Overall financial benefits The table below summarises the potential savings, costs and income provided by re-use, based on the example of an HWRC with a throughput of 6,000 tonnes and re-use diversion of 100 tonnes. Table 7: Estimate of financial benefits to local authority or its contractor of re-use (example scenario) Tonnes re-used 100 Of which diverted from landfill 51% Of which diverted from recycling 49% Landfill savings (associated with re-use diversion) 5,324 Recycling income lost 1,470 Total savings 3,854 Additional recycling income 6 2,040 Landfill savings (associated with additional recycling) 7,099 Net waste and recycling saving 12,994 Predicted re-use income 7 87,400 Predicted annual running costs 47,000 Total savings and profit 53,394 Figures in red are income/savings Of course, the actual income a local authority will receive will depend on whether other partners are involved, and whether running costs include annualised expenses associated with original set-up costs Summary The data has shown that the best performing large 8 on-site re-use shop can achieve up to 3.9% of total site throughput, or 450 tonnes annually (figures from East Leeds HWRC), with an average large shop re-using 1.4% or 122 tonnes per annum. Small on-site re-use shops 9 are achieving up to 2.8% of total site throughput, or 157 tonnes (Kings Lynn, Norfolk), with an average of 1.1% or 41 tonnes per annum. However, it is worth bearing in mind that the lack of a common monitoring framework for on-site shops (apart from weights for items specified in the FRN Product Weight Protocol, means that the tonnage levels reported (vs income) are highly variable and possibly erroneous. Providing a container for off-site sales can cost very little to set up, especially if a container is already available on site. Smaller shops cost an average of 5,000 to set up, while larger shops cost an average of 135,000, or 344 per sq. metre. Un-manned small shops can work well and cost little to run; larger shops can generate substantial tonnage and profit 5 Link to be added 6 Additional recycling income is as a result of the larger positive impact re-use has been found to have on recycling rates at HWRCs as identified in HWRC statistical modelling carried out by Resource Futures. 7 Calculated on the average net income per tonne for a large shop: 874 (see Table 8) 8 Based on data from 13 re-use shops with inside sales areas of m 2 in size. 9 Based on data from 12 re-use shops with inside sales areas of 32-47m 2 in size. HWRC shops overview

18 returns. Re-use income per tonne is variable but, in general, larger shops achieve a higher income per tonne than smaller shops. Taking account of the key success factors and operations at HWRCs, larger shops should, unsurprisingly, generate larger tonnages. Wherever practical, it is recommended to maximise the sales area from the start, while adding clothing and textile re-use is beneficial in terms of income generation and also encourages site users to browse the full range of stock. Adding a repair function (rather than simply PAT testing) for some small electrical items does not necessarily add significantly to the tonnage that is re-used, but it does increase running costs. However, there are wider social and economic benefits both from repair and from the training opportunities it may provide. The following table gives minimum, maximum and average figures for small and large shops, as well as for containers. Containers refers to sites that segregate re-usable items which are sold off-site. Table 8: Summary data for small shops, large shops and containers Small shops Large shops Containers Sample size Size of indoor retail space 10 (sq. m) Cost to set up Annual running cost HWRC 2014/15 throughput (tonnes) Day per week operating Re-use tonnage Re-use % of Total Throughput Re-use Income Net per tonne of re-use Small shop scenario: Min Max Average Min 5,000 26,000 0 Max 52, ,000 2,000 Average 11, ,607 1,000 Min 1,000 16,740 0 Max 1, ,000 0 Average 1,000 76,230 0 Min 1,026 3,368 2,381 Max 6,200 21, ,531 Average 3,449 8,754 7,567 Min Max Average Min Max Average Min 0.02% 0.42% 0.31% Max 2.81% 3.88% 0.47% Average 1.10% 1.44% 0.38% Min 3,543 14,396 - Max 29, ,000 - Average 13, ,508 - Min Max 611 1,479 - Average Additional outdoor retail space and workshops attached to larger shops have been excluded from this estimate 11 Data provided includes waste accepted at the waste transfer station as HWRC tonnage not separately calculated HWRC shops overview

19 A site with a 3,500-tonne throughput and a shop of 52m 2 would cost 5,000 to set up and 1,000 to run. It could achieve 34 tonnes re-use per annum (equivalent of 1% of site throughput) and an income of 366 per tonne ( 12,444). Large shop scenario: A site with a throughput of 8,800-tonnes and a 200m 2 shop would cost 135,000 to set up and 76,000 to run. It could achieve 74 tonnes of re-use in year 1 (equivalent to 0.8% of site throughput) and an income of 874 per tonne ( 64,676). HWRC shops overview

20 Waste & Resources Action Programme 2 nd Floor, Blenheim Court 19 George Street Banbury, Oxon OX16 5BH Tel: info@wrap.org.uk