Environmental Groups Profit From "Stranded" Inventory
The Green Widget Company (GWC) was in a quandary: Acme Widget Supply had executed a purchase order for $200,000 worth of recycled Widgets in a unique sea foam color, then promptly went out of business. GWC was sitting on inventory it couldn't sell, and it was spending money every day to warehouse the order. What to do?
Luckily, owner Ben Green was a reader of E Magazine, so he knew about industrial surplus programs. GWC could donate the burdensome widgets through a nonprofit broker organization; an environmental group could benefit from its sale on the open market, and GWC would get a tax write-off.
GWC and Acme don't really exist, but the problems—and the solution—are real enough. The Industrial Surplus Network (ISN), a Massachusetts-based broker, is right in the thick of such deals. “Business now has the option of donating what it doesn't want or need to support worthwhile groups,” says Larry Sprague, ISN vice president. “It's a win-win because it helps avoid disposal problems, and there is a tax deduction, too.” The basic concept takes the established and successful program of donating unwanted cars to charities like the American Kidney Foundation and extends it to unwanted inventory and other industrial surplus.
According to Sprague, ISN takes the burden off business by taking responsibility for every aspect of the donation process, including payment to the charities and liability for transportation. To calm fears that sale of a donated item or inventory might benefit a competitor, the donating company can impose sales restrictions. The beneficiary, which most likely never actually sees the material it “owns,” receives approximately 70 percent of the sales price. Selling the inventory usually takes 30 to 45 business days.
Industrial surplus promotes reuse, the overshadowed “R” in the “reduce, reuse, recycle” equation. “Why is reuse so important?” ask Nikki and David Goldbeck in their book Choose to Reuse. “Because at the same time that it confronts the challenges of waste reduction, reuse also sustains a comfortable quality of life and supports a more productive economy.”
Industrial surplus programs are a close cousin to the for-profit waste exchange concept, in which brokers resell inventory from a seller to a buyer. There are more than 70 such exchanges in the U.S. (see “Waste Not, Want Not,” Currents, March/April 2000). Adding in a nonprofit group as beneficiary introduces the tax advantage, which is pegged to the company's estimation of the material's value.
The strongest sellers are precisely the types of excess inventory many companies may find themselves sitting on, from used office furniture and partitions to corrugated boxes, crates, pallets, surplus paper and used machinery of all types.
Boston's nonprofit WasteCap of Massachusetts works with state businesses to reduce their non-hazardous solid waste. It also operates a Surplus Inventory Donation Program managed by ISN.
Stephen Greene, Polaroid's corporate environmental manager, praises WasteCap for allowing the company to put “nonperforming assets” to work. “This innovative method of support gave us a tax deduction for supporting WasteCap's excellent work,” he says, “and it cost us nothing.”
Stop & Shop supermarkets used WasteCap to dispose of a large supply of outdated uniforms. “We were able to donate a valuable resource for other companies to use while eliminating needless landfill material,” says David Small, the supermarket chain's vice president of regulatory compliance.
Despite the praise, however, WasteCap Executive Director Barry Cullen says that donations through the program have progressed slowly. “It makes a lot of sense as a concept and it has a lot of potential to provide a new revenue stream, but it needs more traction,” he says.
ISN's Sprague says industrial surplus programs work best for nonprofits with “activist” boards of directors. For instance, in our earlier example, if the Green Widget Company's president is on the board of a nonprofit organization, he'll be able to steer donations their way.
Industrial surplus is the whole reason for being at the Donation Depot, run by New Hampshire College. The program collects office furniture and supplies from businesses in a warehouse on campus, and opens its doors to nonprofits that want to make use of the stuff. Depot material has been taken in by schools, and by Girl Scouts, museums, church missions and many other groups.
In yet another variation on the theme, The Loading Dock, based in Baltimore, has been very successful in taking unwanted construction materials and home-building equipment and donating it to community groups and individuals involved in affordable housing projects. According to Loading Dock's executive director, Leslie Kirkland, the program reclaims materials “that would otherwise end up being landfilled, and helps people on fixed incomes who are struggling to make improvements on their homes.”
Not every nonprofit group can fill its coffers through industrial surplus programs, but it's a useful tool—as well as a great approach to reuse—for those who are thinking strategically.
JIM MOTAVALLI is editor of E.