Oil-rich Abu Dhabi hit the headlines in November as the city’s annual Formula One circus rolled into town. For one weekend only, the emirate’s Yas Island track morphed into a media spectacle as drivers, celebrities and royalty jostled for the spotlight that trails the world’s richest sport. Less glitzy, and significantly less reported, was the rubbish that accompanied the Grand Prix. In just three days, fans churned out 800 tonnes of discarded drink cans, paper plates and ripped-up leaflets; enough to fill a football pitch with a 6 metre-high pile of trash.
For Malek Sukkar, CEO of Lebanon-based waste management firm Averda, it is the rubbish rather than the racing that raises his pulse. The contract for the Grand Prix clean-up is part of a slew of lucrative wins in the company’s portfolio, and a sign the Gulf’s big-talking green policies are translating into hard cash for local firms.
“We think we’re going to be a billion-dollar company by 2015,” Sukkar says, in an interview in the UAE capital where the company has offices.
“We’re very comfortably on our way. We’ve gone from being a single country family-managed business to being a real corporation.”
As the petrol station of the world, the oil-exporting GCC and green policies may appear to be unlikely bedfellows. But the Gulf states have led from the front in recent years with ambitious plans to cut their gas-guzzling ways, pouring money into clean energy projects.
Abu Dhabi was first out of the gate, vowing to generate seven percent of its power from renewable sources such as solar and wind energy by 2020. Kuwait, OPEC’s fifth biggest oil producer, raised the bar in October by promising to wean its population away from state-subsidised power plants and generate ten percent of its electricity from sustainable sources by 2020.
For green companies, then, the region is offering fertile ground for growth and Averda has been among the firms to benefit. The family-owned business has netted contracts to clean beaches in Saudi Arabia, while in Abu Dhabi a trio of its boats scoop debris from the emirate’s coastline. In Beirut, the firm played a key role in the post-war clean-up after a 34-day battle with Israel in 2006 devastated the city’s infrastructure. The five-year contract, worth some $30m year-on-year, saw Averda face one of its toughest challenges yet.
“It took us a very long time to take the scars away,” Sukkar admits. “When you take over [a city’s contract], you wouldn’t expect to see that level of massacre.
“I would say you could tell the difference within a month and it took about six months to a year to complete. We knew it was going to be very difficult and very challenging.”
But big-spending state contracts aren’t, alone, enough to commercialise the waste management industry. For that, you need regulation. While the Gulf states may talk a good game on green policies, little of this has trickled down into solid legislation. Unlike those in Europe, firms aren’t forced to price the cost of recycling into their balance sheets and there are few perks to sweeten the cost of ‘greening’ their business. As a result, waste is still largely seen by corporates as an expensive problem rather than a potential resource.
“Regulation tends to offset cost,” says Sukkar. “When regulation says you have to do something, it doesn’t matter how much it costs. We don’t have that here so every [recycling] step has to make sense financially.”
In the UK, for example, electronic goods retailers must fund a portion of the cost of recycling products such as televisions and DVD players. Businesses often factor this into their price tags, passing the pinch on to the consumer.
“There’s a system there, so there is a lot of money flushing around,” Sukkar explains. “Here, if we find a TV, we have to make sure that the recycling content of that actually pays for recycling it. And at the moment, it doesn’t. But it all starts with regulation.”
The bulk of Averda’s own business comes from waste collection, a high-volume, low margin model that “to do well, you have to do a lot of,” Sukkar says ruefully. “This is not a big money business. It’s a low-margin business.”
The recession hasn’t helped matters, taking — as it has — the wind out of green energy’s sales. Worldwide, investment in pricey renewable energy initiatives has dwindled in the wake of the financial crisis as companies and governments looked to rein in costs.
In the Middle East, this has been exacerbated by a wave of political unrest that has toppled rulers in Egypt, Tunisia and Libya. Many Gulf governments have pushed green issues down their agendas in favour of funnelling cash into social spending plans aimed at keeping the Arab Spring from their door. The UAE, for example, has vowed to spend $1.6bn on overhauling living standards in its northern emirates, necessitating cut-backs in its green ambitions. Abu Dhabi’s renewable energy company Masdar, the jewel in the crown of the emirate’s clean energy plans, slashed its staff count by nine percent in November and pushed back the launch of its carbon-neutral city to 2015.
In neighbouring Saudi Arabia, the world’s largest crude exporter, concern is primarily focused on how climate policies may trim oil income, the backbone of its economy. For the green energy sector, Sukkar admits, it’s been a tough twelve months.
“The environment industry has been affected by the uncertainty and instability in the region,” he says. “It has not been an easy year in terms of planning and implementation as well as for introducing new initiatives and expanding into new markets.”
While there is still enthusiasm for green policies, Averda has also noticed a new wariness about putting cash behind them. “There still remains uncertainty within certain segments of the market,” Sukkar explains. “For example, the public sector where there appears to be a reluctance to commit to large-scale municipal solid waste management projects.”
Part of the problem is that green technologies — from recycling plants to solar panels — are often hugely expensive and hard to implement. Overhauling an incinerator, or a recycling plant, for example, comes at a cost of millions of dollars and — as Sukkar notes — it’s “not like throwing away a phone and saying, ‘let me get a new one’. These plants are massive.”
The slow pace of change is not helping to move the green industry on, he says.
“We like technology, technology is moving, yes. But not at the pace that it needs to be to keep up with the aspirations of the people. It’s glacial.”
So what’s the answer? Sukkar is pinning his hopes in part on capturing the attention of the next generation, to make recycling second-nature for the region’s youth. Averda in November unveiled the Gulf’s first reverse vending machine in the UAE, a device that sorts and accepts empty drink cans and then returns points to the user. The points can then be redeemed at certain retail outlets. The company hopes the machine will become a regular feature of the region’s malls, supermarkets and universities.
“Recycling needs a kick in this part of the world and we think this could be just the kick that it needs to at least get people to start thinking,” he says. “It gives you a solution or recycling and it gives you an incentive to do it.
“We are very passionate about moving the business from being a collection system to being a recycling-led industry. But not enough infrastructure exists for people. If we can create avenues for people to [recycle], then they will do it.”For all the latest business news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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