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Recycling in the U.S. is an absolute mess. This lawsuit shows just how hard it is

TerraCycle, the recycling company behind L’Oreal, Clorox, and others, was sued for misleading customers. Here’s what happened next.

Recycling in the U.S. is an absolute mess. This lawsuit shows just how hard it is
[Source Image: ferlistockphoto/iStock]

While many of us are eager to recycle the plastic products in our homes, the recycling process in the United States is often confusing and opaque.

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New Jersey-based TerraCycle is a recycling company that has partnered with consumer goods brands to make this process easier. But a recent lawsuit—and a settlement this week—shows how many problems exist in the plastic recycling system, and how much work companies still need to do to clean up their practices.

In the suit, filed in March, a California-based nonprofit called the Last Beach Cleanup argued that eight consumer goods companies led customers to believe that they could send back plastic packaging and/or single-use products for free to be recycled by TerraCycle. The LBC said this encouraged customers to shop from these brands and use plastic products without worrying about their environmental impact. In reality, however, only a certain number of customers could actually recycle those products for free. Then, customers would either have to pay to recycle the product or throw it away.

According to the terms of the settlement announced Monday, the eight companies (Coca-Cola, Procter & Gamble, Late July Snacks, Gerber, L’Oreal, Tom’s of Maine, Clorox, and Materne) will now make it clear on their labels when participation is limited. TerraCycle has also agreed to pay the LBC’s legal fees and implement a supply chain certification program to give customers more confidence about how their products are recycled.

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Misleading Claims

Tom Szaky founded TerraCycle two decades ago as a way to fill the gaps in the U.S.’s broken recycling system. Municipal curbside recycling programs accept only some forms of plastic, like PET bottles and takeout containers. They aren’t equipped to handle more complex plastic products, like makeup packaging or baby food packets, which are often made from several different materials.

TerraCycle partners with dozens of companies—including the eight in the lawsuit—that pay TerraCycle to collect packaging from consumers and then recycle it. These sponsored recycled programs are by far TerraCycle’s largest source of revenue, generating $10.5 million for the company in 2020. However, these brands set aside a limited amount of money to pay for the recycling, which means that in some cases, when demand is high, they run out of money to continue operating the program.

“In some cases, the programs are so popular that the budget hits a limit,” Szaky explains. “So we limit the number of participating locations that can take part.” Fast Company reached out to all eight consumer companies for comment, but none responded by the time of publication. Szaky declined to provide specifics on what these companies’ budgets were.

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Jan Dell, founder of the Last Beach Cleanup, ran into these limits. She started collecting her plastic waste—like toothpaste tubes, makeup containers, and plastic cleaning bottles. But when it came time to send them in to TerraCycle, she discovered that the recycling program was closed to new participants. When she went online, she found people on Reddit in the same situation. She would either have to throw out all the plastic she’d accumulated or pay for one of TerraCycle’s “Zero Waste” boxes—which can cost consumers anywhere from $42 to more than $100—to collect and send in her recyclables. (These boxes are TerraCycle’s second-largest source of revenue, generating $7.5 million in 2020.)

[Screenshot: TerraCycle]
To Dell, this was a big problem because she believed consumers like her were being misled. Consumers might choose a particular product believing that it would be properly recycled for free; if they had known the program was so limited, they may not have made the purchase. It also seemed problematic that brands were able to have the sheen of sustainability by advertising their recycling program, when in fact only a portion of their packaging would be recycled. “Brands were telling the world that all these products could be sent back to be recycled for free, but there were actually limits,” she says. “It was clear to me that this could not be legal.” (Neither the LBC nor TerraCycle specified how many customers were turned away from these programs.)

The LBC worked with Lexington Law Group to file the suit against TerraCycle, asking for its labels to be corrected to make it clear that participation is limited. Per the terms of the settlement, brands must say on their packaging that there may be some limits to the TerraCycle recycling program. Szaky points out that there are many companies that have never hit their budget limit. Out of the 15 companies that offer pet food recycling programs, for instance, only two have limits.

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When it comes to the required supply chain certification program, Szaky says TerraCycle was already working on an audit of its third-party recyclers. He says the company will share it publicly as soon as the audit is completed next year. “I want to be clear that we began doing this audit before the lawsuit even came up,” he says. “This was something we were already working on.”

The Broader Recycling Problem

While TerraCycle and these eight companies are the latest to come under fire for deceptive practices, they are far from the only companies accused of misleading customers about recycling.

In December 2020, Greenpeace sued Walmart for falsely labeling items as recyclable. It claimed that several plastic products, like applesauce and yogurt cups, can be recycled only in certain areas. The court dismissed the suit, saying that Walmart was not deliberately misleading in its labeling practices, and the judge has given Greenpeace the opportunity to file a new, amended complaint. In 2018, Keurig faced a class-action lawsuit for making false claims about its coffee pods’ recyclability. While the pods are made from recyclable plastic, most municipal recycling facilities aren’t able to process such small pieces of plastic, meaning they’re actually not recyclable to many consumers. The case is still in court.

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Meanwhile, there’s increasing evidence that a lot of plastic that people put in their curbside recycling bins ends up in landfills. For years, the U.S. sent enormous quantities of plastic to China to be recycled, but in 2018, the country said it would no longer accept the plastic. Extensive reporting from NPR and PBS has found that in many parts of the U.S., municipalities end up dumping this plastic into landfills. Since plastic doesn’t biodegrade, it will break into smaller and smaller fragments that may eventually end up in the food chain, potentially poisoning animals and humans.

Dell believes this sets up a situation in which consumers think they can continue using and recycling plastic with abandon, when it fact their plastic consumption is actively harming the planet. She advocates for companies to redesign packaging to use biodegradable, nonplastic materials or to use packaging that can easily be recycled in municipal recycling facilities.

Szaky also believes that the recycling system is broken. He says this is why TerraCycle is currently directing its profits toward Loop, a new division of the company founded in 2019, which helps companies move away from single-use plastic to reusable bottles. It has created durable containers for dozens of brands, including Clorox, Häagen-Dazs, and Seventh Generation, which consumers can send back to the retailers to be refilled. The program is already up and running in the U.K., France, and Japan, and it’s planned to roll out in the U.S. in the coming months.

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In other words, even though TerraCycle’s business model now depends on recycling, Szaky believes reuse is the way forward. “Recycling—whether through TerraCycle or through municipal recycling—is only a Band-Aid,” he says. “We believe reuse is the right answer and we’re continuing to pour all our profits into making Loop work. And frankly, if Loop really takes off, it will actually cannibalize our other business, kind of like Netflix’s streaming killed off their DVD business. That will be a good thing.”

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About the author

Elizabeth Segran, Ph.D., is a senior staff writer at Fast Company. She lives in Cambridge, Massachusetts

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