At a time when the costs of doing business are on the rise, and the industry's top players are bullish on acquisition potential, it's becoming more rare to see privately owned companies stay competitive in large urban markets. Yet fewer than 20 years after it started out with two trucks, the Action Environmental Group is now a dominant force in New York City.
According to a 2016 study of the city's commercial waste landscape, Action is the local industry's largest company in terms of revenue. The company, backed by private equity firms and individual owner-investors, also has a large presence outside of the five boroughs through a merger with Interstate Waste Services. They now employ more than 860 people in New York and New Jersey. Action has continued to expand their footprint in the area through multiple small acquisitions, including a larger takeover of Waste Management's New York City assets in 2007. In 2013, the company opened a new material recovery facility in a building that once served as a Republic Services transfer station.
Waste Dive spoke to CEO Ron Bergamini, who has been on the job for more than 10 years, to hear his thoughts on the many changes in New York's industry. In addition to the latest recycling rules, Bergamini had plenty to say on safety, organics collection, the push toward a franchise system and proposed legislation that he views as one of the local industry's biggest threats, during the July 24 interview.
The following interview has been edited for brevity and clarity.
WASTE DIVE: The Department of Sanitation (DSNY) will begin enforcing new commercial recycling rules in August. I've heard some concerns about everyone being ready in time. Are there any concerns on your end about meeting the new expectations?
RON BERGAMINI: We're more or less ready for it. Part of this involved getting out new stickers, which is perhaps a very parochial thing for New York here. But every commercial customer needs to have a sticker in its window indicating what it is doing. And it took a while to get those to us. So if the hauler didn't receive the sticker, how could they then send it out to a customer? I would think early on it'd be warnings to customers rather than fines right out of the gate. Because I think people are still struggling with this. Believe me we get a lot of calls every day on it.
There has been a lot of talk about commercial recycling rates being low in New York recently. I know you think there's a better way to look at it. How should we be measuring commercial recycling rates if not that way?
BERGAMINI: When you compare cities it's an unfair comparison, depending upon if it's a vertical city like ours. So it's not even so much that the number is inherently flawed, but there are different ways to get to that number. And I think you could game that system a bit. So if the ultimate idea is to have less greenhouse gas emissions, or less truck traffic, you need to look at other things. Because right now, with the organics law in New York City, we're sending three trucks to some customers. And I'm not clear, frankly, if that's the better or worse move from an environmental perspective.
On the topic of organics, the city has also proposed new rules for source-separating food scraps at additional business categories. I know Action was one of the first to get into this space.
BERGAMINI: We've been doing it for over 10 years.
For some companies it can be a bit of investment. You need to get seal-bodied trucks, need to find out if the processing capacity is there. Why did you decide to make the investment then, and how has it been going?
BERGAMINI: Well we reacted to the market. Some folks wanted it done. So we provided that service. We're free market people, and when somebody wants that service, we see what it takes to be able to provide it. You need to get to a critical mass and we had that. One of the ironies right now, is as more organics is required, there now is a challenge on disposal, because more people are doing it. The city's thought was by requiring this, people will then build it, and the market will react. And the market's been slow to react to that. I'm not exactly sure why. I think there's skepticism on whether it will hold or not, because it's a big investment to do this, to scale this up. And space is at a premium, so that's difficult.
The City Council is having discussions on cutting back on people's capacity. So why do I invest in something when a year or two or three later, the legislature, with a swipe of the pen, might change my business model? So I think that creates some hesitation. Ultimately you have to answer to the banks and investors.
Though based on customer demand you chose to make that investment?
BERGAMINI: Well we made the investment in purchasing vehicles. Like every other company we're looking into some processing opportunities, but all we did was buy a couple trucks.
How do the margins on that compare to the other parts of your business?
BERGAMINI: Not all that good frankly. Food waste is heavy. But we're a believer that the more services we provide a customer, the stickier that customer will be. So sometimes you can break even on one component of the business just to keep the customer.
You mentioned Intro-495 [a local bill to reduce transfer station capacity]. Do you think there's a chance we see movement on that before the end of the year?
BERGAMINI: I don't think so. But predicting legislative action, one does that at their own peril. I don't think it solves the problem they're looking to solve. I think many in city government realize that. But I understand [that] in certain neighborhoods, the gentrification has caught up. So the industry was there first. Now people are moving in and that creates an inherent conflict. I get that. I'm not positive how to resolve that. I think making the facility better helps, but cities need industrial neighborhoods.
The other big topic in the local industry is a zone collection or franchise system. Some companies split off to form their own group, New Yorkers for Responsible Waste Management [NYRWM], but Action stayed with the National Waste & Recycling Association [NWRA]. Why not go with the others?
BERGAMINI: We work with the other group. We're all on the same page in our efforts with franchising. We're a bigger company. We like to go it alone in some ways. We've been in the national organization for a long time and part of the leadership of it, so felt a certain obligation there. But the underlying merits of improving safety throughout the industry in the city, improving worker conditions, those are issues we've been behind for a long time. So we welcome another group supporting that.
So it is safe to say you may have some small differences, but [like NYRWM] you still think you can achieve those things without a franchising system?
BERGAMINI: Absolutely. And even the most optimistic supporters of franchising tell you it's a five, six, seven, eight year timeline. So if part of the reasoning of franchising is to improve safety and improve worker conditions and improve efficiency, why wait that long? We've argued for a while the standards should be high. We're for training, we're for partnerships, and frankly the city is too. The [Business Integrity Commission] and DSNY have put together [two safety symposiums so far] and we're going to do another one in the fall. We're proud to be part of that.
So you're receptive to smaller changes, maybe through new city rules, but not a whole new franchise system?
BERGAMINI: There is something to be said for free market principles. I think that free market principles is what compels you to do more and to be more innovative. I think a lot of the smaller companies will [adapt] either through merger, through purchase, through folding. It's hard for all businesses. The complexity curve keeps going up. New York City has new emissions standards coming in 2020. That's hard to meet. So I understand part of the city's goal is that there should be less players, but better players. I think that's happening. I think it's happening organically.
"You need to be local. You need to be on the ground."
CEO, Environmental Action Group
It seems like DSNY has been getting more involved with the commercial side than they used to be. Do you see that?
BERGAMINI: I think so. Safety's the most obvious, and safety's not proprietary. So if you have an idea that can reduce incidents, share it with me and I'll share it with you. We've gotten ideas from DSNY, I hope they've gotten ideas from us. We both have different types of data that we share and I think it just creates a better mindset, and even a respect for the industry. This is a hard industry. I don't think the folks that are out there day in, day out get the credit they deserve. And [DSNY Commissioner] Kathryn Garcia knows that. I know that. These people are working hard performing a vital public service.
When the city division of street sweeping started in 1881 they held parades for the folks...We haven't had any parades lately. Not that I need a parade, but you want people to respect it.
What do you think is different about working for Action? How would you describe the company culture?
BERGAMINI: We try and be as transparent as we can. So we have what we call huddles every other week and people call in and they can listen. When I go into the town halls we get a chance to talk to the drivers, to talk to the mechanics and say thank you. And I assure you it's not feel good stuff. It's good business and not everyone gets that, but keeping employees is a challenge. No business person you know says, 'oh finding good people is easy.' So when you find those people you have to give them reason to stay.
The command and control approach is not working. That's an era that's not there anymore. You have to explain to people where they fit in the puzzle. We miss a route, we miss a stop, and all sorts of things happen as a result of that. Phones ring. Billing changes. It's not an isolated event. If a truck goes down — and trucks go down — 40 people don't get their garbage picked up. The whole company is thrown into a tither there. So we want people to understand that and how important it is.
How has Action stayed private at a time when so much national consolidation is happening?
BERGAMINI: Well, we still believe it's a local business. You might want to ask, 'why aren't there national companies in New York City?' Waste Connections is the one that's left now. You need to be local. You need to be on the ground. And we're all from here. We're also very fortunate. We are private equity backed so we have very good partners there. And we're continuing to grow. We want to grow this business.
What does that look like? Trying to go public or expanding to new regions?
BERGAMINI: One never knows. We're opportunistic, so we have our eyes out. We certainly want to continue to grow through acquisitions. Right now in this region, this is where we know. New York, New Jersey certainly for sure, and take it from there.