From exploitation to empowerment: Ensuring fair compensation for informal waste workers

A critical part of the sustainability shift that is gaining momentum is the development of equitable supply chains, where all stakeholders – including informal waste workers – are treated fairly with respect to their rights and livelihoods.

In developing countries, plastic waste collection is dominated by the informal sector. For example, the informal sector is responsible for more than 95% of polyethylene terephthalate (PET) collected for recycling in Southeast Asia.¹ They bring significant value to the supply chain by extracting high-value post-consumer plastics, reducing the cost of waste management for municipalities.

These informal waste workers often work in low-income communities where there are limited formal employment opportunities, making waste collection vital to their livelihoods. However, they are frequently subject to occupational hazards and low wages as waste collection remains an unregulated sector, further perpetuating poverty.

Informal waste workers also lack bargaining power in the recycling value chain due to the absence of economies of scale. As a result, they are marginalized and often undercompensated for the recycled materials they collect.

Cohesive guidelines needed to promote industry-wide action

Determining fair prices for recycled plastics can be a complex process, as it depends on various factors such as market demand, supply chain costs, and other local economic conditions. Given this complexity, guidelines such as the NextWave Framework² are crucial in ensuring informal waste workers are not exploited in the recycling process.

The NextWave Framework promotes socially responsible ocean-bound plastic supply chains and emphasizes fair and predictable payment as a key goal. This involves compensating workers fairly, consistently, and in a timely manner, regardless of gender or other identity factors.

To achieve this, supply chains should establish a compensation policy with minimum wages, transparent and traceable payment systems, and regular monitoring and evaluation. Digital payment systems can be used to facilitate efficient and secure transactions, while also providing a record of payments. By prioritizing fair payment practices, supply chains can support the well-being and livelihoods of informal waste workers, while also contributing to a sustainable and socially responsible plastic recycling industry.

Fostering fair compensation and responsible sourcing in practice

One approach to achieving fair compensation for informal waste workers is for businesses to collaborate with local organizations and experts to develop pricing structures that reflect the true value of recycled materials and ensure that collectors receive fair pay.

Buy-back centers, for instance, ensure fairer wages for waste pickers and collectors, by mitigating the impact of fluctuating market prices for plastic waste and reducing exploitation by middlemen. In Nairobi, Kenya, Mr Green Africa, a for-profit recycler, adopted a business model that offers fixed prices per kilogram of plastic, which are estimated to be 30% higher than the prices offered by other local waste buyers. This has helped to increase the income of waste pickers and collectors, and reduced their vulnerability to price fluctuations and exploitation.³

Aside from providing fair prices, to maintain equitable supply chains, any interventions aimed at increasing the availability and accessibility of recycled plastics should also ensure that profits trickle down to informal waste workers. For example, brands can support the offtake of material by providing an additional support price to recyclers and ensuring that a proportion of the money flows through to earlier stages of the supply chain. A purchase assistance fee (PAF), which is an extra fee paid to recyclers, can provide financial assistance by increasing the purchase price of collected plastics. To arrive at a suitable fee, brands have to engage with recyclers and gather relevant information on the buying prices of recycled materials. As an example, to standardize the fee calculation, approximately 30% of the current bottle price can be used as the basis for the PAF. The provision of a PAF also promotes transparency as brands will have access to the recyclers’ financial statements. The fee can be weighted based on how much of the additional fee recyclers pass on to their suppliers, incentivizing recyclers to redistribute the fee to their suppliers.

As consumers become more socially conscious and demand for sustainable products increases, businesses that prioritize social responsibility and environmental stewardship will be better positioned to meet these demands. This will in turn help to build trust and credibility, and nurture brand reputation in the long run.

Coupled with the growing momentum to transform plastic value chains at scale, propelled by the ongoing treaty negotiations, there is a strong incentive and opportunity for businesses to ensure recycled plastic supply chains are equitable and designed to improve the livelihoods of the informal sector working within them.

References:

¹ GA Circular. (2019). Full Circle: Accelerating the Circular Economy for Post-Consumer PET Bottles in Southeast Asia [online]. Available from: https://static1.squarespace.com/static/6099f7ed4070c43737b65774/t/60b9a7cf165e1c3aaf686996/1622779895388/GA+Circular.2019.Accelerating+the+Circular+Economy+for+Post-Consumer+PET+Bottles+in+Southeast+Asia.pdf

² NextWave Plastics. (2021). A Framework for Socially Responsible Ocean-Bound Plastic Supply Chains [online]. Available from: https://static1.squarespace.com/static/5a2dc07eedaed8417153da27/t/6192a90269eeab7324d76723/1637001482411/Nextwave_SociallyResponsibleFramework_Nov2_FINAL.pdf

³ Barford, A. and Ahmad, S. R. (2021). A Call for a Socially Restorative Circular Economy: Waste Pickers in the Recycled Plastics Supply Chain [online]. Available from: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC8192276/