Docstoc

Kimberly Clark Disposable Diaper Waste Management ... - MyWebSpace

Document Sample
Kimberly Clark Disposable Diaper Waste Management ... - MyWebSpace Powered By Docstoc
					The Green Baby Project
Sustainable Diapering Research for Kimberly-Clark


December 1, 2008


Research team:

Katherine Thibault
Rebecca Smith
James Harrod
Sarah Baranowski


Academic advisor:

Thomas Eggert, Esq.


Special thanks to our
Kimberly-Clark facilitator:

Larry Sawyer




                                                    Page | 1
Contents
Introduction to the Issue .............................................................................................................................. 3

   Early Research Process.............................................................................................................................. 3

   Brainstorming Possible Solutions.............................................................................................................. 3

Four Solutions in Detail ................................................................................................................................. 4

   Solution #1: Incinerating Trash as Fuel ..................................................................................................... 4

   Solution #2: Diaper Compost-Recycling Programs ................................................................................... 5

   Solution #3: Compostable Diapers............................................................................................................ 5

   Solution #4: Sustainable Capital Investments........................................................................................... 6

Recommendations ........................................................................................................................................ 6

   Kimberly-Clark’s Personal Care Business in FY'07..................................................................................... 7

   A Risk-Sensitive Approach at an Appropriate Scale .................................................................................. 7

References and Appendices .......................................................................................................................... 8

   References ................................................................................................................................................ 8

   Appendix A – Review of Technology Options ........................................................................................... 9

   Appendix B – Feasibility Calculations for Trash-as-Fuel Option ............................................................. 21

   Appendix C – Municipal Compost-Recycling Program Analysis .............................................................. 22




                                                                                                                                                   Page | 2
Introduction to the Issue
The Personal Care Products division of Kimberly-Clark asked a student team at the University of
Wisconsin–Madison to conduct a sustainable diapers research project. Sarah Baranowski, James Harrod,
Becky Smith, and Kate Thibault signed onto the student team. Larry Sawyer, of Kimberly-Clark, served as
our contact, provided information, and answered questions throughout the project. Our purpose was to
provide Kimberly-Clark with an external perspective on technologies and product development methods
that could reduce the environmental impact of diaper use, while maintaining a healthy bottom line for
Kimberly-Clark.

This report summarizes our findings and recommendations. We begin with a high-level look at the
project, what we learned, and how we approached the problem. We conclude with our specific
recommendations and an overview of how we envision structuring a series of pilot programs around
testing these ideas.

Early Research Process
The challenge of developing sustainable diapering practices in the United States—like many
sustainability challenges—is complex and daunting, but also entirely solvable. Our research led us to the
following framework for approaching the challenge:

1. Complex system – Although disposable diapers are a relatively new product, a complex system has
   developed around them. Childcare outside of the home has increased, and time for household
   chores has decreased. New sustainable solutions must take these systemic factors into account or
   risk suffering the same fate as cloth diapers (available and cheap, but only used by a niche segment
   of the market).
2. Diverse waste streams – The U.S. has a highly diverse set of waste streams. Municipal services vary
   from one city to another; for example, some offer composting programs, while others do not. Rural
   areas and smaller cities have an entirely different set of incentives and interests than large cities do.
   And taxpayer willingness to pick up the tab for new municipal services such as diaper recycling is
   highly variable. Therefore, the best solutions are sustainable under many waste stream conditions.
3. Diverse solutions required – Because of the diversity of both available waste streams and consumer
   behaviors, no single solution can meet the entire challenge. Especially at this early stage of
   development, the best approach involves testing many theories, studying the results, and then
   implementing the best results on an increasingly larger scale. The goal should be to develop a
   package of solutions, rather than a single magic bullet solution.
4. High incentive to act – Finally, we found that sustainable solutions in diaper manufacturing are also
   likely lead to supply chain efficiencies, material use reduction, preferential treatment from retailers
   and consumers, and/or creation of new consumer segments and opportunities to gain market share.
   The company that finds the right diverse package of solutions is likely to gain a competitive
   advantage in a market.

Brainstorming Possible Solutions
With this framework in mind, we set to work discovering as many potential solutions as possible. The
result was a list of candidates for further research that looked something like this:

                                                                                                   Page | 3
   Compostable (municipal or personal)                     Traditional incineration as power source

   Closed vault biodegradable                              Plasma incineration as power source

   Personal composter technology                           Methane digesters

   Cloth diapers at home                                   Flushable diapers

   Cloth diapers service                                   Landfill (status quo)

   Municipal diaper down-cycling                           Offsets

   Recycling at Kimberly-Clark plants                      Reusable shell / reusable components


After further research we narrowed the list down to four primary candidates. Feasibility, current
availability of proven technology, and economic logic were our primary litmus tests. For example, cloth
diapers came off the list because they have already proven unfeasible under consumers’ current lifestyle
constraints. The status quo option came off the list because of the risks associated with ignoring the
likelihood of an upcoming market shift towards sustainable alternatives. We also discovered after
further research that some of the options were really part of the same solution, and in those cases, we
merged them together. Finally, we assessed potential environmental and financial returns and selected
what we thought were the four most promising solutions to research in detail.

Four Solutions in Detail
Following the process of elimination described above, the final portion of our research focused on four
remaining possible solutions. See Appendix A for our complete analysis of each of these four solutions.
Our analysis included feasibility factors, ROI factors, and environmental impact factors. In this section
we provide a brief overview of each of these solutions:

   Trash-as-fuel programs – municipal programs that incinerate trash, including diapers, for energy

   Diaper compost-recycling programs – municipal programs that use one of a couple available
    technologies to separate compostable materials from the recyclable plastics in a diaper

   Compostable diapers – a new product that can be composted, will degrade in turned landfills, or
    can be flushed if local sewage capacity is high

   Sustainable capital investments – an investment fund designed to incubate new businesses and
    technologies aimed at addressing the issue of waste from Personal Care products

Solution #1: Incinerating Trash as Fuel
In this solution scenario, diapers and possibly certain other types of trash are burned, creating steam
that turns turbines that generate energy for consumer consumption. This solution is feasible in
communities that are already burning matter for energy generation; diapers and other waste can be
used to supplement coal-fired plants with no major refitting. In fact, businesses already exist to convert

                                                                                                  Page | 4
paper and plastic waste into a burnable fuel. If implemented, this scenario would call for partnerships
with trash-as-fuel businesses across the U.S. After completing a cost-benefit analysis, we decided to stop
pursuing this solution. The reasons included the following:

1. The amount of energy that can be extracted from trash such as diapers (3,810 kWh per ton) is much
   lower than even coal can produce (7,620 kWh per ton). Using trash as fuel increases the amount of
   burning that must occur to maintain the same level of energy production and also increases
   emissions. Furthermore, these emissions contain a lot of chloride, a carcinogen.

2. Garbage tipping costs must reach a high level (estimated at $172 per pound) to provide compelling
   incentive for garbage disposal services to divert waste to incineration. These high tipping costs are
   only prevalent in large dense metro areas where coal-fired plants are rare.

Sidebar – Burning trash for heat and energy is a common practice in parts of the world. To sustainably
support this practice, Kimberly-Clark may want to consider developing chloride-free “burn friendly”
diapers. The focus of our project was in the U.S. and so we did not explore this issue in depth.

Solution #2: Diaper Compost-Recycling Programs
Municipal compost-recycling programs involve the collection of used disposable diapers, which are then
processed to retrieve recyclable materials and to compost biodegradable elements and human waste.
Currently, there are two implementations that deal with this disposal in different ways. (See Appendix C
for a complete discussion of these technologies.) Environmentally, both of the recycling and composting
solutions offer a great improvement over the traditional landfill solution. The existing solutions report
that their processes remove 85-98% of diaper mass from the waste stream. Both processes result in
recyclable materials that may be reused in new diapers and in composts that may be sold to recover
some of the plant’s costs. Meanwhile, the resulting waste reduction has the potential to divert up to 4
million tons per year away from landfills if implemented nationwide (according to EPA statistics).

Costs – Because the two known compost-recycling programs are not run by publicly traded companies,
we did not find much good information about the real costs of these programs. However, Kimberly-Clark
is already partnering with the more cost-effective of the two companies (EnviroComp) in New Zealand
and most likely could acquire cost information. In budgeting, Kimberly-Clark should anticipate upfront
costs to build a processing facility and ongoing costs to collect and process diapers and maintain the
plant. Our research suggested building costs ranging from a few million dollars (for EnviroComp) up to
$10 million (for KnowWaste). Kimberly-Clark could consider sharing these costs with a local municipality.

Solution #3: Compostable Diapers
Compostable diapers are an alternative to disposable diapers and are currently manufactured and sold
by small startups in the industry (gDiapers is the most notable of these). Compostable diaper startups
pose a competitive threat in a niche segment—and Kimberly-Clark should consider a response to
neutralize the threat—but the compostable diaper is also promising in its ability to attract a new market
segment to Kimberly-Clark. As opposed to disposable diapers, compostable diapers aim to decrease or
eliminate materials that do not decompose easily, such as plastics, and to reduce waste destined for
landfills. The biggest environmental benefit of this solution is its flexibility; these diapers can be

                                                                                                 Page | 5
discarded sustainably into multiple waste streams: composted (in personal or municipal composts),
flushed (in high-capacity sewage systems), or thrown away (will degrade quickly in turned landfills).

Costs – At least in the short run, we are assuming that increased raw materials costs to manufacture
compostable diapers can be absorbed by the unit pricing of the diaper. That’s because the pilot program
should be aimed at the small market segment willing to pay more for a sustainable product. (One goal
during pilot stages should be to find ways to reduce raw materials costs to make mass market
commodity pricing profitable.) That leaves us with change-over costs and the costs associated with a
small-scale marketing campaign. Change-over costs include approximately $1 million for retooling 2-3
production lines, along with unknown costs that we estimate around $5 million for new product design,
making changes in supplier relationships, and training employees. Marketing, merchandising, and
acquiring shelf space with retailers that participate in the pilot may also cost up to $5 million.

Solution #4: Sustainable Capital Investments
By supplying resources to cash-poor but innovation-rich organizations, Kimberly-Clark could contribute
to breakthrough technical solutions that address today's unsustainable landfill consumption. Targeted
areas of innovation might include separation and sorting of raw materials, extraction of energy from
waste, reduction of waste volume, etc. Innovation investments have a low barrier to entry in that they
do not require immediate changes in Kimberly-Clark’s infrastructure, supply chain, materials use, or
brand and consumer relationships. If structured as venture capital, these investments could contribute
to the overall public good, improve consumer perceptions of Kimberly-Clark's role in waste stream
management, and lead to potentially healthy financial returns for Kimberly-Clark as the funded
businesses mature. According to one venture capital expert in Madison, a well-managed fund yields a
17-28% annualized return, after paying fund management expenses (mainly salaries and bonuses).

Costs – The costs of this program are highly controllable. Investment level can go up or down depending
on desired gain. However, given the failure rate of entrepreneurial ventures, it’s critical to fund at a level
that allows for adequate diversification of risk. $15 million would allow financing of 5-6 companies,
which is suitable for a first-time pilot program. A full-scale program should be budgeted at $50 million to
allow financing of about 20 companies on a 10-year cycle with a new fund being created every 5 years.

Recommendations
Of the four solutions that we investigated, we are recommending investments in three of them at this
time. We dismissed incinerating trash as fuel because of its high emissions relative to energy output,
potential negative public health impacts, and the high garbage tipping costs required to make it cost-
effective compared to simply unloading diapers at the dump. However, the other three solutions each
appear to have their place in Kimberly-Clark’s sustainability strategy.

Diaper compost-recycling programs, the development of compostable diapers, and sustainable capital
investments are all feasible solutions today, based on existing technologies. All three solutions
complement one another in an overall solution package, and all three also have good potential to
improve the environmental and economic sustainability of diapering practices in the United States. We
are not recommending an all-out blitz of any one solution. Rather, we are recommending that each of


                                                                                                     Page | 6
these solutions be tested with a small pilot budget, studied, and then rolled out on a progressively larger
scale over time as positive results accumulate.

To provide an appropriate baseline for our pilot budgets, let’s first look at the scale of Kimberly-Clark’s
diaper business:


 Kimberly-Clark’s Personal Care Business in FY'07
 Net sales from all Personal Care                                                                        $7.5 billion
 Operating profit from Personal Care                                                                     $1.5 billion
 % of net sales from diapers *                                                                           56%
 % of net sales from other **                                                                            44%
 % of net sales to biggest customer (Wal-Mart)***                                                        13%
 Net sales growth over previous year                                                                     12%
 Operating profit growth over previous year ****                                                         20%

 * Huggies, Pull-Ups, and Little Swimmers.
 ** Depend, Poise, Kotex, and Lightdays may all benefit from the same sustainable capability developments as diapers.
 *** This percentage is important because Wal-Mart is seeking improvements in sustainability measures from its suppliers.
 **** Operating profit grew faster than net sales, indicating one possible source of funds for sustainability projects.



A Risk-Sensitive Approach at an Appropriate Scale
To determine feasibility of a pilot on low budget, we used 1% of operating profit as a reasonable and
conservative cap for piloting each of our three programs. In other words, we assessed each pilot for
feasibility at or below a $15 million implementation budget. Given the 13% net sales to Wal-Mart, which
is mandating sustainability gains from its suppliers, one might argue for a more aggressive sustainability
budget for Personal Care products. Kimberly-Clark has the option to increase the scale of any of these
programs as it sees fit; however, we used $15 million to be conservative.

We found that each of the three recommended pilot programs—municipal compost-recycling,
development of compostable diapers, and sustainable innovation investments—were feasible at or
below a $15 million budget cap (for a total investment of $45 million or less) in fiscal year 2009. The
purpose of the investment is both short-term and long-term. In the short-term, the spending can serve
to improve the public image of Huggies and to bolster relations with Wal-Mart, which represents a
nearly $1 billion account for Personal Care. In the medium-term, innovation investments will begin to
yield financial returns, and municipal compost-recycling programs will begin to reduce the actual
amount of diaper waste flowing to landfills. In the long-term, diapers will feed into natural and technical
closed-loop cycles, with biodegradable components nourishing soil, and with plastics and other technical
materials feeding back into diaper manufacture to lower overall production costs. Small investments
made now will build the foundation for this sustainable future.

Thank you for the opportunity to be a part of this exciting project.


                                                                                                                          Page | 7
References and Appendices
References
Arida, George, Managing Director for Venture Investors LLC. "Visionary Investments." Presentation.
November 6, 2008.

Birmingham Post. "Nappy recycling plans go on show in Birmingham." 29 October 2008. Birmingham
Post. <http://www.birminghampost.net/birmingham-business/birmingham-business-
news/environmental-and-sustainable-industry/2008/10/29/nappy-recycling-plans-go-on-show-in-
birmingham-65233-22152798/>.

EnviroComp Ltd. Home - The Nappy Solution. <http://www.envirocomp.co.nz/Home-0.html>.

EPA. EPA Clean Energy. <http://www.epa.gov/cleanenergy/index.html>.

gDiapers. gDiapers Flushable Diapers. 2008. <http://www.gdiapers.com>.

Kimberly Clark. "Kimberly Clark 10-K Report for Fiscal Year 2007." 2007. Kimberly Clark.
<http://www.kimberly-clark.com/investors/annual_reports.aspx>.

Knowaste. Latest News. 12 November 2008. <http://knowaste.com/latest_news.php>.

Natural Babycare. Natural Babycare Diapers. 2008. <http://www.natyusa.com/>.

Sawyer, Larry, Kimberly Clark. Interviews. October-November 2008.

Seventh Generation. Natural Diapers. 2008. <http://www.seventhgeneration.com/Diapers>.

Werre, Rick, Electrical Engineer, University of Wiscosin-Madison Physical Plant. Interview. November
2008.

Westerman, Marty. Disposable Diaper Recycling. 1992. <http://www.p2pays.org/ref/06/05440.pdf>.




                                                                                               Page | 8
Appendix A – Review of Technology Options

A1. Trash as Fuel
This area includes several methods of using discarded waste (diapers) as an alternative to fossil fuels in
energy generation. Items would be burned, creating steam that would turn turbines creating energy for
consumer consumption.

Feasibility Factors
                                   Consumer would have to separate the diaper if the diaper would be
Consumer Behavior
                                   the only trash that is being used as fuel. If all waste were being used
Changes Required?
                                   as fuel then there would be no change needed.
                                   No design change would need to occur. However there are issues of
Product Design Changes             chloride being released during this process, if this issue were to be
Required?                          addressed KC would want to reduce the use of plastics in their
                                   diaper.
Scope of Change: Society,          Change would be minimal unless an alternative is used in place of
Industry, or Company?              plastic shell.
                                   This is / would be suitable for any community currently burning for
Feasible in Which
                                   energy generation. Plants would not require major refits. There may
Locations?
                                   be filters that would need to be added for emissions purposes.
                                   Timeline could be relatively short due to the fact that no major refits
Timeline of Change                 need to occur. The largest hurdle would be to receive permits to use
                                   the waste as fuel.
                                   Alternative fuels are currently being used / researched at the UW
Pilot Program                      Charter Street plant which uses coal as the main source of fuel.
Requirements                       Items are purchased from Pellet America which uses paper waste
                                   and other products to produce a burnable fuel.

Return on Investment Factors
                                   No cost / no investment would need to be made by KC, if waste from
                                   the community went straight to pellet plant for energy. However, if
                                   alternative routes for diapers only were created then there would be
                                   fairly large costs (we roughly estimate the cost as $1.50 per mile plus
                                   the wage of employee). Current tipping fees are $33 a ton but this is
                                   currently part of taxes in this community. I will use the University's
                                   weights for the figuring (we compare roughly to a town of 50,000
Costs
                                   people. Last year 6192 tons of trash (non recyclables) was taken to
                                   the dump ~ 6192 * 33 =$204336 total tipping fees, if diapers are 2%
                                   of the problem then their tipping fee would roughly equal $4000. By
                                   taking items to Pellet America, there would not be a tipping costs,
                                   which would be a savings of $4000 to help offset the cost of a driver
                                   and mileage. See Appendix B for a detailed analysis of costs, returns,
                                   and relative tipping fees to make this a feasible solution.
Expected Returns                   This program would not be self-sustaining unless all waste was
                                                                                                  Page | 9
                                    diverted to fuel. A return could be received through either selling
                                    energy into the grid or selling pellets as fuel through a Pellet America
                                    setup, but this is unlikely to recoup the entire cost of the project
                                    unless landfill tipping fees exceed the $172 level required for a 7-
                                    year return on investment (as calculated in Appendix B).
                                    In the short term, there would be no return on investment besides
Timing of Costs and                 diverting waste to the landfill. As calculated in Appendix B, if tipping
Returns                             fees exceed $172 at conventional landfills, there will be a breakeven
                                    at 7 years and potential profits in the longer term.

Environmental Impact Factors

                                    We would be using less in terms of fossil fuels, but there would still
                                    be emissions issues. Our research found that chloride could be
Waste Stream Impact
                                    released from the diaper's plastics during the burning process, which
                                    is a major emissions concern.
                                     The burning process can release chlorides, which have been linked
Human Health Impact
                                    to birth defects and cancer.
Materials Use Impact                The materials and supply chain would remain unchanged.
                                    There are fairly tight regulations concerning waste as a fuel source,
                                    not to mention that there most likely would be a public outcry in
Regulatory Impact
                                    response to the release of potentially harmful chemicals from the
                                    burning process.
                                    - The volume of diapers going to landfills would be reduced.
Overall Good                        - Diapers could be used as a renewable fuel/energy source.
Accomplished                        Consequentially, fossil fuel use would decline if this method was
                                    widely used.

This would solve landfill issues but would open another whole can of worms (emissions and
environmental impacts, public disapproval of the method, etc). Since this is not a self sufficient way to
deal with the problem I think we should look elsewhere.




                                                                                                   Page | 10
A2. Diaper compost-recycle
This system collects all types of disposable diapers via either a municipal pick-up system (akin to
recycling) or a commercial pick-up model. The diapers are then sent to a processing plant where they
may be processed in one of 2 ways:
1. (the KnoWaste model) Processed to extract recyclable materials from diapers (some plastics, papers),
with the remaining materials composted, used as biomass energy, or sent to a traditional landfill.
2. (The Envirocomp / R5 HotRot model) Compost in plant, then remove any plastic contaminants (11-
13%). Plastic may then be recycled or land filled. Kimberly-Clark is already sponsoring a New Zealand-
based pilot program with Envirocomp and R5 Solutions/HotRot.

Feasibility Factors

                                  - Separate trash pickup for diapers is required. This should be a
                                  minimal consumer behavior change, since many households already
                                  dispose of diapers in separate containers or use "Diaper Genie" type
                                  devices. It can be safely assumed that most households will be happy
                                  for any new way to separate stinky diapers from other household
Consumer Behavior
                                  waste.
Changes Required?
                                  - Diapers will need to be put into biodegradable bags instead of
                                  traditional plastic.
                                  - A UK survey showed that households were prepared to adopt these
                                  small behavioral changes. 90% of surveyed households were willing
                                  to segregate diapers for a separate collection (Knowaste).
Product Design Changes
                                  No.
Required?
                                  Societal/municipal-level change. It requires a large investment from
Scope of Change: Society,
                                  the municipal government to construct the diaper processing plant
Industry, or Company?
                                  and collect the new diaper waste stream from homes.
                                  Feasible only in urban areas. For rural areas, the transportation costs
                                  and energy expenditures are expected to exceed any financial and
                                  environmental benefits of the compost-recycling program. However,
                                  as the technology evolves and improves, it may become cost-
                                  effective in smaller-sized communities. For example, a 1992 Proctor
                                  & Gamble study determined that the then-existing diaper recycling
Feasible in Which                 technology was only cost-effective in metro areas of greater than 10
Locations?                        million people (Westerman article). However, the recent Envirocomp
                                  composting solution has been piloted in communities as small as
                                  500,000 people.

                                  It is also more cost-effective where tipping costs for traditional
                                  landfills are high, such as in highly populated urban areas, especially
                                  those in Europe.
                                  We estimate that it will take less than one year to build a plant,
Timeline of Change                arrange municipal programs, educate consumers, and get a pilot
                                  program up and running. It is difficult to determine the exact

                                                                                                Page | 11
                               timeline due to the lack of information available and the very limited
                               trial programs that have already been run. This estimate is based on
                               the fact that a Knowaste recycling plant in the UK was announced
                               this November and is expected to be up and running in 2009.
                               Additionally, the Envirocomp-Huggies partnership project is taking
                               place over a 3-year duration, and is also expected to have a working
                               plant by the end of 2009. Smaller, local pilot programs may be put
                               together in less than one year.
                               A US-based pilot program could be based around the model of the
                               New Zealand Envirocomp program that is currently being sponsored
                               by Huggies/Kimberly-Clark. Knowaste's unsuccessful pilots in Santa
                               Clarita, CA, Toronto, ON, and numerous European destinations
                               should be examined for lessons learned.

                               The pilot should be taken on at the smallest scale that is expected to
                               be cost-effective. Based on our research of the limited information
Pilot Program
                               that is publicly available, we expect that this will be an urban
Requirements
                               community with a population of approximately 500,000.

                               The pilot will require the following investments and municipal
                               services:
                               - Plant construction, land purchase, staff, and maintenance
                               - Municipal pickup (trucks, transportation, staff)
                               - Education of consumers on separating diapers from traditional
                               waste stream

Return on Investment Factors
                               Because the two known compost-recycling programs are not run by
                               publicly traded companies, we did not find much good information
                               about the real costs of these programs. However, Kimberly-Clark is
                               already partnering with the more cost-effective of the two
                               companies (EnviroComp) in New Zealand and most likely could
                               acquire cost information. In budgeting, Kimberly-Clark should
                               anticipate the following costs:
                               - upfront costs to build a processing facility. Our research suggested
                               building costs ranging from a few million dollars (for EnviroComp) up
Costs                          to $10 million (the cost of Knowaste's newest plant in Birmingham,
                               UK). Kimberly-Clark could consider sharing these costs with a local
                               municipality.
                               - ongoing costs to maintain the plant. Although specific costs could
                               not be determined, estimates could be gathered from the
                               Envirocomp partnership and from existing municipal waste
                               processing plants.
                               - ongoing costs for infrastructure to collect and process diapers. This
                               cost will likely be shared with the local municipality.
                               - marketing to educate the public about the small consumer behavior

                                                                                            Page | 12
                               changes (separating diapers, choosing biodegradable disposal bags).
                               Since they are only minor changes, an inexpensive campaign of fliers
                               or simple advertisements would suffice.
                               It is difficult to find good information about the returns of these
                               programs because they are not run by publicly traded companies and
                               most have not been active for a long enough period of time to
                               announce considerable returns. Since KC is already partnering with
                               EnviroComp in New Zealand, more information could likely be
                               acquired from the partnership.

                               From the available data, we have determined the following:
                               - KnoWaste stated that its latest plant in Birmingham, UK would have
                               returns of around $80 (£50) million for its owner, but it was unclear
                               of how this return would be established. The profits appear to be
                               coming from biomass energy sales and recycled plastics, but in our
Expected Returns               research we have not seen evidence of this level of income from
                               these outputs.
                               - Possible income will also come from selling fresh soil (the outputs
                               of the composting process). The value of this compost may vary
                               depending on the geographic region in which it is used.
                               - There will also be a small return from consumer fees for diaper
                               collection, which surveys have shown that the majority of consumers
                               would allow to be set at approximately $5 a month. With a
                               conservative estimate of 10,000 families using the service, this will
                               bring in $50,000 / month.
                               - This process will also result in consumer goodwill for the Huggie's
                               brand and Kimberly-Clark, but it is difficult to quantify this in financial
                               terms.
                               Initial sunk costs for building the plant and building the municipal
                               infrastructure - all within the first year.
Timing of Costs and            After 1 year of construction and infrastructure building, return will
Returns                        begin to flow from collection fees and sales of process outputs. It will
                               take several years to breakeven and begin to profit, but the exact
                               timing is difficult to determine without more information.

Environmental Impact Factors
                               -Removes most diaper wastes (98%) from typical waste stream
                               -Compost
Waste Stream Impact
                               - Recycling / down cycling to recycled products (used for roof tiles,
                               etc)
                               for baby: No change in health - same diaper materials is used.
                               for general public:
                               + Removes human wastes from general trash waste stream.
Human Health Impact
                               - There have been some concerns that the soil outputs of
                               biodegradation will still contain dangerous human pathogens,
                               bacteria, medicines, etc. However, the existing processes use heat or

                                                                                               Page | 13
                       sanitizing processes to remove any dangerous content before
                       recycled products or compost is sold for reuse.
Materials Use Impact   No change
                       None known, although further research should be done to meet
Regulatory Impact
                       regulations for dealing with human wastes.
                       - Diapers do not go to landfills - 2% reduction in landfill waste
                       - Easy diaper disposal
                       - Consumer appreciation that diapers are no longer as
                       wasteful/harmful as in the past
                       - High-quality compost soil is created
                       - less methane in landfills
                       - Other parts of the diaper may be recycled/reused
Overall Good           - Knowaste: "For every tonne of nappy waste recycled, 400kg of
Accomplished           wood, 145 cubic metres of natural gas and 8,700 cubic metres of
                       water is saved" (http://knowaste.com/latest_news.php)
                       - Knowaste: “It diverts untreated human waste from landfills thereby
                       preventing public health risks; diverts some 98% of nappy waste
                       from going to landfill, thereby dramatically reducing associated gases
                       such as methane and carbon dioxide; and at the same time creates
                       new products.” (http://knowaste.com/latest_news.php)




                                                                                   Page | 14
A3. Compostable Diapers
Instead of throwing diapers into the landfill, where they could last up to 500 years, compostable diapers
are a chance for waste material to decompose and either return to soils in waste-water stream or
municipal/home composting. Compostable diapers are also acceptable to throw in the garbage, where
they will decompose along with other waste.

Feasibility Factors
                                   Consumer is required to separate lining from shell, and placement of
                                   soiled diaper can be/is encouraged to be composted or flushed.
Consumer Behavior                  Compostable diapers can also be thrown in garbage if alternative
Changes Required?                  actions are not possible/are convenient. Some brands of
                                   compostable diapers do not require separation of a lining, due to
                                   lack of liner (entire diaper biodegrades).
                                   Design would be significantly altered. Current disposable diaper
                                   design would need to eliminate plastics and fossil fuel based
Product Design Changes             adhesives and absorbent material. Shell would need to be designed
Required?                          as well if shell-based design was chosen. Less material would be
                                   required if shell design was used. There will be fewer costs once
                                   process had taken off.
                                   Company would need to encompass compostable diaper idea, and
Scope of Change: Society,          the necessity for a change in design. If the entire industry redesigned
Industry, or Company?              diapers to be compostable, competition would lead to a decrease in
                                   cost.
                                   Urban – suitable for families living without gardens or yards.
                                   However, may present problems to waste water streams if
                                   compostables are flushed and overwhelm the municipal system.
                                   Infrastructure needs to be sufficient to handle increased volume of
Feasible in Which
                                   solids.
Locations?
                                   Rural- Compostables could go into compost, under the assumption
                                   households know how to and have the means to compost. Problems
                                   attributed to added volume to water waste systems would need to
                                   be addressed for septic tanks, municipal handling.
                                   The timeline may vary from a few months to a few years. The
                                   timeline of change would be however aggressive the company was at
                                   designing a compostable and putting it into production. If there are
Timeline of Change
                                   any manufacturing differences than conventional disposables,
                                   perhaps time would be added to adjust for installment/transition of
                                   equipment.
                                   There could be a change similar to Clorox’s addition of “Green”
                                   brands - have both products next to each other in the store, and see
Pilot Program
                                   if consumers are attracted to the flushable/compostable idea. Give
Requirements
                                   out coupons at first if there is a price difference (which there
                                   probably will be).


                                                                                                Page | 15
Return on Investment Factors
                               Compostable supplies are more expensive. Not only because
                               materials are mostly non-fossil fuel based, much of current
                               compostable diapers come from sustainably harvested forest and
                               organic/sustainably certified suppliers.
                               Although materials costs are not readily available, we can estimate
                               cost feasibility based on the consumer prices of similar products. Of
                               competitive diapers in the market, diapers range in price from $11
                               for 35 (. $31/diaper) (Seventh Generation) to $14.50 for 52
                               ($.29/diaper) (gDiapers), but not including the $16 for the outer
                               shell. This is compared to Huggies, where 112 size 1 diapers cost
                               $37.50 ($.33/diaper), which is actually slightly greater than the cost
                               of the compostable competitors. This leads us to believe that the
                               resources are available to develop competitively-priced compostable
                               diapers at Kimberly-Clark. Additionally, this design reduces
                               petroleum use and will be less expensive as oil prices rise again.
                               According to our talks with Kimberly-Clark, a full-scale conversion of
                               the production line to compostables would take several million
Costs
                               dollars. We recommend a smaller scale pilot project initially, which
                               could be established for less than a million dollars as a supplement to
                               the existing diaper line. At least in the short run, we are assuming
                               that increased raw materials costs to manufacture compostable
                               diapers can be absorbed by the unit pricing of the diaper. That’s
                               because the pilot program should be aimed at the small market
                               segment willing to pay more for a sustainable product. (One goal
                               during pilot stages should be to find ways to reduce raw materials
                               costs to make mass market commodity pricing profitable.) That
                               leaves us with change-over costs and the costs associated with a
                               small-scale marketing campaign. Change-over costs include
                               approximately $1 million for retooling 2-3 production lines, along
                               with unknown costs that we estimate around $5 million for new
                               product design, making changes in supplier relationships, and
                               training employees. Marketing, merchandising, and renegotiating
                               shelf space with retailers that participate in the pilot may also cost
                               up to $5 million.
                               It would take awhile to build up a consumer base, and then to get
                               supply costs down to make compostables profitable. If compostables
Expected Returns               make z noticeable change, and niche market is strong enough,
                               returns could be good. Education about composting and the effects
                               of decreased volume to landfills may also take awhile to gain notice.
                               It is difficult to estimate the timing of costs and returns. If KC
                               aggressively pursues and markets a compostable diaper, it could
Timing of Costs and            complete a pilot infrastructure change and gain a following in a niche
Returns                        market within a few years. A slower change would have reduced
                               upfront costs, but slower adoption – adoption may follow in areas
                               that have simple municipal composting systems and/or sewer

                                                                                            Page | 16
                                    systems that can sufficiently handle flushed diapers.

Environmental Impact Factors
                                    Added volume could result in problems in sewer systems being
                                    backed-up. If compostable takes over market, infrastructures may
Waste Stream Impact                 result in being re-designed with added volume as a factor. Diapers as
                                    compost could be used as nutrients for soil after being processed
                                    through current waste-processing technology.
                                    If people compost their diapers, people will need to be educated
                                    about how to do it carefully, and not apply human waste to
Human Health Impact
                                    produced to be consumed. Reducing the amount of plastic is safer
                                    for baby (even though plastics are generally deemed safe).
                                    Hopefully, if materials are taken from sustainable suppliers, impact
                                    of extracting materials will be less harmful than disposable diapers.
                                    FSC certified wood is more expensive than wood that has no
Materials Use Impact
                                    certification. Corn is used for some biodegradable linings on diapers.
                                    Impacts on environment could be problematic since some
                                    agricultural practices are not eco-friendly.
                                    Similar regulations would be placed on flushable diapers as other
Regulatory Impact
                                    flushable items, such as toilet paper and feminine hygiene products.
                                    - Reduced volume of diapers to landfills
Overall Good                        - More volume of solid waste that could be used as manure for local
Accomplished                        farmers.
                                    - Reduction of petroleum based plastics reduces need on foreign oil.


Existing Competitors and Materials
Companies already selling compostable diapers include gDiapers, Seventh Generation, and Nature Baby
Care.

gDiaper (www.gdiaper.com): The outer material of flushables is viscose rayon, a natural polymer that
comes from trees. It is the only polymer used in the textile industry that comes from a natural,
renewable and non-fossil fuel source. It is both compostable and flushable. The fabric has a stay dry feel,
which keeps your baby happy. The contents of the flushable are made of soft, fluffed wood pulp and
super absorber (SAP). Like the outer material, the inside of the flushable comes from sustainably
managed forests using an elemental-chlorine-free (ECF) process.

Seventh Generation (http://www.seventhgeneration.com/Diapers): Materials include Chlorine-free
wood pulp fluff, Sodium Polyacrylate (SAP), Polyolefin nonwoven fabric, Adhesives, Polyolefin
film, Synthetic rubber elastic strands

Nature Baby Care (http://www.naty.se/naty.aspx): Sixty percent of the content is biodegradable and of
biological origin compared to about leading brands who content 80% for oil based. The back sheet of the
Nature nappy is a lamination of renewable/biodegradable corn Bio film and of natural tree-pulp TCF-
pulp (totally chlorine free) tissue. The tissue in the lamination is made of natural tree-pulp TCF-pulp
                                                                                                 Page | 17
(totally chlorine free) with FSC certification. The printing color on the nappy is, certified by OK Compost.
Certificate attesting to the fact that the printing ink is free of heavy metals injurious to health. As a
distribution lawyer Nature use a material based on 100 % renewable /compost able material. Naty AB
has developed the compost able /biodegradable corn Bio film, which is used in the lamination. The film
is based on cornstarch and biodegradable polyester. The compost ability of this product is certified by
the ”Ok Compost”.




                                                                                                   Page | 18
A4. Sustainable Capital Investments
By supplying resources to cash-poor but innovation-rich organizations, Kimberly-Clark could contribute
to breakthrough technical solutions that address today's unsustainable landfill consumption. Targeted
areas of innovation might include separation and sorting of raw materials, extraction of energy from
waste, reduction of waste volume, etc. Innovation investments have a low barrier to entry--meaning
that it does not require immediate changes in the company's infrastructure, supply chain, materials use,
or brand and consumer relationships. If structured as venture capital, these investments could
contribute to the overall public good, improve consumer perceptions of Kimberly-Clark's role in waste
stream management, and lead to potentially healthy financial returns for Kimberly-Clark as the funded
businesses mature. Furthermore, the public at large may benefit more from an investment that
addresses society's general landfill and other sustainability problems than from an investment targeted
strictly at diapers, a relatively small percentage of the waste stream.

Feasibility Factors
Consumer Behavior
                                   None.
Changes Required?
Product Design Changes
                                   None.
Required?
                                   Company. (The long-term goal is to change society, but in the short
Scope of Change: Society,          term, the company simply seeks out organizations and individuals
Industry, or Company?              who are already innovating and would benefit from additional
                                   resources.)
Feasible in Which                  Anywhere waste stream innovation occurs (mainly small to large
Locations?                         cities).
                                   Rollout can occur almost immediately, with some investment in staff
                                   time required and some budget set aside for funding the program.
Timeline of Change
                                   Time to measurable impact is uncertain, but would likely require
                                   several years at a minimum.
                                   Recommend devoting a small percentage of net income from
                                   personal care products to a pilot investment fund. (For example, one
                                   percent of personal care net income is $15 million. This scale would
                                   probably allow funding 3 to 8 companies and paying salary to
Pilot Program                      manage the fund.) The pilot may require hiring somebody to start
Requirements                       and manage the program if the available time and skills (finance and
                                   investment analysis, sustainable business models, corporate
                                   responsibility) are not already available elsewhere in the company.
                                   Part of the program's budget will need to be devoted to promoting
                                   the program to eligible candidate ventures.

Return on Investment Factors
                                   We recommend a $15 million investment (based on 1% of net
                                   income from personal care products; this number could be lower for
Costs
                                   a small pilot and could grow larger as investment returns warrant).
                                   The costs of this program are highly controllable. Investment level
                                                                                               Page | 19
                               can go up or down depending on desired gain. However, given the
                               failure rate of entrepreneurial ventures, it’s critical to fund at a level
                               that allows for adequate diversification of risk. $15 million would
                               allow financing of 3-8 companies, which is adequate for a pilot
                               program.
Expected Returns               $19.5 million ($4.5 million ROI) assuming a 30% return on the fund.
Timing of Costs and            1-2 years to identify companies to fund, additional 5-10 years to
Returns                        realize returns.

Environmental Impact Factors
Waste Stream Impact            Unknown.
                               Unknown, but probably neutral. Impact focused on landfill
Human Health Impact
                               consumption rather than public health.
Materials Use Impact           None.
Regulatory Impact              None.
                               One risk of this program is that its benefit is unknown. Kimberly-Clark
Overall Good                   could mitigate this risk by carefully researching candidates for the
Accomplished                   funding and also by spreading the funds across many recipients,
                               similar to diversifying a risky portfolio.




                                                                                                Page | 20
Appendix B – Feasibility Calculations for Trash-as-Fuel Option
This appendix includes a detailed analysis of costs, returns, and relative tipping fees for trash as fuel.

The national average for waste is 4.4 pounds of waste per person per day, with an estimated population
of 300,000,000 (2007) nearly 241,815,378 tons of trash is produced each year. Consider that diapers are
2% of the problem that would equal 4,836,307 tons of diapers being land filled each year. Diapers being
used as fuel would create 18,426,726,553 kWh with a value of $368,534,531 from power sales to the
Grid. That is the equivalent to 7 - 300 mega watt plants (Cassville) at an estimated cost of 1.2 billion
each. This new infrastructure would need to be created in the east due to the fact that most power
generation is from Nuclear power and plants powered by Natural Gas. Using waste as fuel would
economically make sense when tipping fees reach $172 per ton nationally creating a 7 year return on
investment. This does not consider the environmental aspects related to using trash as fuel. Municipal
solid waste produces 2.6 times the emissions than that of natural gas. Emissions from using municipal
solid waste as fuel would equal 26,718,753 tons of carbon dioxide, 7370 tons of sulfur dioxide and
49,752 tons of nitrogen oxide; this would be the same as taking 36,000,000 cars off the road.

Calculations/ Useful Information
1 lb of municipal solid waste = 6500 Btu.
1 ton of municipal solid waste = 13,000,000 Btu.
3412 Btu = 1 kWh
1000 kW = 1 Mega watt
1 kWh = $ .02 (sold to the grid)
1 Mega watt hour = $ 20

300 Mega watt plant would create 2,628,000,000 kWh/year

Pay off, 7 years:

8,400,000,000 / 7 = 1,200,000,000

1,200,000,000 = 368,534,531(income from power sales at 100% capacity) + 4,836,307(x)
-368,534,531 -368,534,531

831,465,469 = 4,836,307 (tons of waste from diapers per year) X
4,836,307    4,836,307

X = $171.92 per ton

Information gathered from: EPA web site (http://www.epa.gov/cleanenergy/index.html) and Rick
Werre, Electrical engineer, University of Wisconsin–Madison, Physical Plant.




                                                                                                    Page | 21
Appendix C – Municipal Compost-Recycling Program Analysis
Municipal compost-recycling programs involve the collection of used disposable diapers, which are then
processed to retrieve recyclable materials and to compost biodegradable elements and human waste.
Currently, there are two implementations that deal with this disposal in different ways.

Recycling-focused
The first is a process with an emphasis on retrieving the recyclable materials (super absorbent polymers,
wood pulp, and plastic). Other materials may be composted, disposed of in the normal waste stream, or
used to generate green energy. A UK-based company called Knowaste is the primary producer of this
technology, and has piloted programs in Europe, Australia, Canada, and the US. However, none of the
pilot programs have had long term success, citing economic reasons – in most municipalities; it is much
less expensive to dispose of diapers in landfills than in a recycling plant. Knowaste is promising a new
plant in the UK that will “generate turnover of £50 for its owner” due to production restructuring and a
focus on biomass energy outputs, but there is little evidence that this plant will be more successful than
its predecessors (Birmingham Post).

Composting-focused
The other type of municipal diaper program is focused primarily on composting wastes, with other
materials separated out and recycled or disposed of in the normal waste stream. This process is
currently being piloted in New Zealand by Envirocomp Ltd with sponsorship from Kimberly-Clark’s
Huggies brand. Using HotRot technologies designed by R5 Solutions, this plant will be able to process up
to 10 tonnes of diaper waste per day, while producing fertile soil and recyclable plastic outputs
(EnviroComp Ltd).

Analysis
One of the major considerations of this solution is the level of external activity required beyond the
diaper manufacturing plant. This has both positive and negative implications for Kimberly-Clark. First,
since the processing plants will accept and separate the materials of any disposable diaper, there is no
need for a costly change to the product design of Huggies. However, this may encourage a long-term
adherence to a product design that is not competitive with the growing number of biodegradable
alternatives, and which may eventually harm consumer perception of KC’s environmental responsibility
efforts. Additionally, this type of solution represents a major shift for Kimberly-Clark into waste disposal
and municipal partnerships on a large scale. The company may address these partnerships in two ways:
it can financially sponsor projects, as it did with Envirocomp, or partner closely with municipal programs
and recycling plant developers. Either way, KC has only limited control over the waste management
efforts that take place outside of the company.

This solution has a considerable impact on municipal infrastructure. Municipalities will need to organize
pickups for diapers alongside their other recyclable collections, which will require additional vehicles,
transportation, and staff. A diaper processing plant needs to be located within or near each city, so the
cost of building and maintaining each individual plant must be considered, as well as the complexity of
partnering with countless separate municipalities worldwide. In most pilot programs, individuals were
charged for diaper pickup, and a UK survey showed that the majority of parents were willing to pay a

                                                                                                  Page | 22
small fee or tax to dispose of their diapers in a more environmentally-friendly way. However, as many as
one-third of parents were not willing to pay any additional costs, and the small amount that the public is
willing to donate will not cover the full costs of the program, which then has to be supported by
municipal governments or corporate sponsors (Knowaste).

Another concern involves the geographic areas where this solution would be economically feasible. It is
primarily an urban solution, since the cost of collection and transportation from small or rural
communities to regional processing plants would be too great in comparison to traditional landfill
charges. The sunk costs of building a plant and the ongoing maintenance costs are currently too great to
be supported in a rural area. However, the plants are becoming affordable to smaller communities as
technology improves. For example, a 1992 study by P&G found that the then-available diaper
technology was only economically viable in metro areas with populations greater than 10 million
(Westerman), while recent pilots by Envirocomp have taken place in communities as small as 500,000.

This solution requires only a minimal behavioral change for consumers, who would be required to bag
diapers separately from other trash. Research (sponsored by Knowaste) in the UK has shown that as
many as 90% of consumers are willing to do this separation, and many already are using separate diaper
disposal bins for convenience at home (Knowaste).

Environmentally, both of the recycling and composting solutions offer a great improvement over the
traditional landfill solution. Knowaste reports that its process removes 98% of diaper wastes from the
waste stream, recycling 84% and using the remainder for biomass energy (Knowaste). Likewise,
Envirocomp reports composting about 85% of each diaper into usable soil, with the remaining plastics
extracted in a way that allows them to be recycled (EnviroComp Ltd). Both processes result in recycled
materials and composts that may be sold to recover some of the plant’s costs. However, the market for
recycled plastics is overwhelmed with supply and has limited demand, so it is difficult to make a profit
selling the reclaimed materials.




                                                                                                Page | 23

				
DOCUMENT INFO