The primary goals of reverse logistics are to maximise value and minimise waste, however a significant volume of returns still end up in landfill – meaning both a loss in value and a creation of additional waste.

In this article, we'll explore the negative impact of sending retail returns to landfill, the reasons behind this practice, and the role auctions can play in reducing waste. We'll also discuss ways to measure success from diverting returns from landfill in terms of the carbon reduction achieved.

Here are the areas covered:

The Relationship between Reverse Logistics and Landfill

The Negative Impact of Sending Returns to Landfill

Why are Retail Returns still going to Landfill?

Methods to Divert Returns from Landfill

How are Auctions Effective in Diverting Returns from Landfill?

Measuring the CO2 Benefit of Diverting Returns from Landfill

Case Study: Calculating the Carbon Saving from a UK Auction

Conclusion

The Relationship between Reverse Logistics and Landfill

The primary goals of reverse logistics are to maximize value and minimize waste. Unfortunately, a significant number of returns still end up in landfills.

In 2020 alone, 5.8 billion lbs (2.6 billion kg) of returns went to landfill in the US, according to a report by Optoro and Environmental Capital Group.

Another report by The Ellen MacArthur Foundation and The Circular Fibres Initiative states that every second, one garbage truck worth of textiles is landfilled or burned.

Consumers are increasingly concerned about sustainability and expect retailers to adopt environmentally friendly practices, so any methods to decrease the volume of returns going to landfill deserves attention.

The Negative Impact of Sending Returns to Landfill

So, what is the problem with items going to landfill?

Sending retail returns to landfills significantly contributes to environmental degradation, including the release of greenhouse gases (GHGs), soil contamination, and habitat destruction. Some items are also sent for 'energy recovery' by burning them in energy-from-waste (EfW) power stations. However, this practice is generally perceived as negatively as landfilling, given the associated carbon emissions and renewable energy alternatives.

In addition, there is a substantial brand and reputation impact when items end up in landfills or are used for energy recovery. Numerous articles have reported companies engaging in these practices, such as:

• Fashion brands' clothing found in landfills in Ghana
• Plastic waste from multiple retailers discovered in Turkey
• Unsold stock and returns being burned in power stations in Denmark and the UK.

There is also lost value when an item goes to landfill – sending an item for disposal generally has a negative cost, while selling or recycling an item generates income.

Why are Retail Returns still going to Landfill?

If we recognise the negative environmental impact of sending retail returns to landfill, and it costs companies to do it, why does it still happen?

Assessing and categorizing returns can be a costly and time consuming activity, with some sources estimating the cost of a return at around $10-30 per item, including transportation  and processing. At a certain volume, there may not even be an opportunity for an item to be assessed for resale.

If all combined reuse or resale channels are unable to resell or donate an equal volume of returns being received, products will end up in landfill.

Given the seasonal variation and unpredictable nature of returns, this is likely to happen at least once during a year for many, if not all, retailers.

Methods to Divert Returns from Landfill

How can we reduce the amount of returns going to landfill?

We can look at two key stages – before the return, and after the return.

Before the Return

Focusing on reducing the likelihood of a return can be highly beneficial and should be the first focus of all companies. Strategies include ensuring accurate and complete product information, timely delivery, high quality customer support, clear return policies and consistent product quality.

After the Return

Once a return is received, the priority shifts to routing items through the most appropriate channels by sorting, reprocessing, and diverting them for restocking, repair, resale or return to vendor as required.

As the channels progress from restocking to landfill, the value declines. Therefore, every effort should be made to resell items for the highest possible value. When extracting value from an item is no longer possible, the risk of it going to landfill is at its highest.

Although there are several opportunities to reduce the flow of goods to landfill both before and after a return takes place, this requires intervention at every touchpoint, resources for each activity, and a readily available channel to receive retail returns. Seasonal variation may also put pressure on even the most well-resourced process.

Given that many methods of reducing the volume of returns require significant investment and time to implement, this article focuses on quicker ways to make an almost immediate impact on avoiding landfill for retail returns.

One method that can be implemented quickly and result in a significant reduction of items flowing to landfill is the use of auctions.

How are Auctions Effective in Diverting Returns from Landfill?

Auctions provide an efficient way for companies to increase the volume of retail returns they sell. Many companies find that effective marketing and automated processes can help them find buyers for retail returns that might otherwise end up in landfill.

Auctions are a date-certain, time-specific method of closing a sale for the best value in a competitive buying market.

Auctions offer several benefits that make them effective in diverting retail returns from landfill while maximising value:

1. Expanded Reach: Auctions can provide access to a broad range of buyers, including resellers, wholesalers, and even end consumers. This increased reach maximizes the chances of finding a buyer for returned items.
2. Dynamic Pricing: Auctions allow for dynamic pricing, enabling items to be sold at the highest price the market will bear. This pricing mechanism can make it economically viable to sell returned items that might not be worth reselling through traditional channels. We have seen multiple occasions where items considered waste have sold for a significant amount through an auction channel.
3. Large Volumes: Auctions are an efficient way to dispose of large volumes of retail returns quickly, which can be crucial during peak return seasons or when warehouse space is limited. We’ve seen enormous volumes moved through auctions by our clients on a continuing basis.
4. Control: An auction channel should have the option to set specific terms and conditions (on a lot by lot basis if required), restrict the regions for resale, designate whether the auction will be public or by invitation only, and provide data analytics to assess and revise the resale strategy. If the auction channel is your own, you also avoid competing with other businesses assets and having to openly share pricing data.

Getting the Best from an Auction Process

To make the most of an auction process, it's important to focus not only on maximizing the sale price but also on minimizing the impact on your core business and avoiding potential channel conflicts. Here are some tips to help you achieve the best results:

1. Set reasonable starting prices and reserve prices (if any).
2. Promote your auction to attract more bidders and create competitive bidding.
3. Implement strict payment requirements and credit card authentication to minimize non-paying bidders.
4. Include specific restrictions in your terms to control where items can be resold, and tailor these restrictions to individual lots if necessary.
5. Ensure your auctions have features such as anti-sniping delays, staggered closing and absentee bidding – all features that ensure maximum value is achieved.
6. Consider the optimum lot size – while you can create huge individual lots with thousands of items in them (and you may need to during seasonal peaks), data shows that smaller packages of items can achieve higher resale value,
7. Most importantly – measure, review the data, and revise your approach to optimise both value and throughput.

Measuring the CO2 Benefit of Diverting Returns from Landfill

OK, so you've successfully implemented strategies to reduce the volume of goods going to landfill. Now, how do you measure this success and incorporate it into your ESG reports?

By diverting returns from landfill and enabling their reuse, you achieve two benefits:

1. Eliminate the negative impact of sending items to landfill.
2. Reduce the need for manufacturing new items, along with the associated raw materials and carbon emissions.

To measure the impact of selling retail returns in terms of carbon avoidance, consider the following methods:

1. Spend-Based Emissions

A spend-based emissions factor allows us to quantify the emissions associated with goods or services based on their financial value. For example, the greenhouse gas emissions associated with purchasing $100 of clothing. Using these, we can assess the carbon benefits of reselling returned goods by considering the financial value of products that have been diverted from landfill.

Below is a summary of the steps taken when using spend-based emissions factors:

1. Calculate the financial value of the returned goods that have been resold, taking into account any inflation adjustments.
2. Determine the average emissions factor per unit of currency for the product category (e.g., kg CO₂e per $ spent).
3. Multiply the financial value by the emissions factor to estimate the total carbon emissions avoided.

This method provides a straightforward approach to measuring the carbon benefits of reselling returned goods and is one of the quickest solutions to achieve this. However, it may not capture the full environmental impact of a product, as it relies on average industry wide emissions factors and does not account for variations in product manufacturing or materials.

Additionally, it also assumes that there is a linear correlation between cost of goods and the associated emissions with manufacturing and using it. For example, using this methodology, a cotton jumper costing $10 would have less associated emissions than a cotton jumper costing $100, yet the reason for the price difference may be based on the brand rather than the manufacturing processes that go into creating the two products.

1. Lifecycle Assessment (LCA)

Lifecycle assessment (LCA) is a more comprehensive method for quantifying the carbon benefits of reselling returned goods. LCA evaluates the environmental impact of a product throughout its entire lifecycle, from raw material extraction to disposal. This approach considers the carbon emissions avoided from both the elimination of landfill disposal and the reduced need for manufacturing new products.

Conducting an LCA includes steps such as:

1. Identify the relevant lifecycle stages for the product category, such as raw material extraction, manufacturing, transportation, use, and disposal.
2. Collect data on the environmental impacts associated with each lifecycle stage, focusing on carbon emissions.
3. Calculate the total carbon emissions for the product's lifecycle, taking into account any differences in emissions based on manufacturing processes or materials.
4. Compare the emissions associated with reselling the returned goods to the emissions of producing new products or disposing of them in landfill.

By quantifying the carbon benefits of reselling returned goods through LCA, retailers and consumers can gain a deeper understanding of the environmental impact of their reverse logistics processes. This information can help inform decision-making and drive improvements in sustainability performance, ultimately contributing to reduced emissions.

Ultimately LCA is a more accurate method of quantifying the emissions associated with a product (and therefore the potential savings from reselling this), however due to the complexity of the process, it can be time consuming.

Case Study: Calculating the Carbon Saving from a UK Auction

In 2022, Bidpath and MyCarbon assessed the greenhouse gas (GHG) emissions for 15 categories of audio-visual equipment sold at auction by the industrial auction company CA Global Partners between 2020 and 2022. The goal was to understand the carbon emissions avoided by buying second-hand items instead of new ones.

The report set out to achieve five principles of reporting as follows:

• transparency
• relevance
• accuracy
• consistency
• completeness

The emissions factors used were spend-based, assigning GHG emissions to a product based on its cost. Emissions factors were researched by identifying relevant product categories and corresponding factors from the UK's BEIS in 2019. MyCarbon adjusted the factors for inflation using the Consumer Price Index to ensure data from 2019 was relevant to 2022.

Spend-based emissions factors assign emissions based on a product's cost but don't consider the technology used, which can impact the accuracy of the report. For these reasons, we have utilised this measurement for larger 'baskets' of assets, rather than individual items.

We also applied a reducer to the carbon associated with the items because they were second hand; in short, a second-hand item will have a shorter life and therefore should not receive the equivalent carbon measure of a brand-new item.

Using the methodology above, we were able to report the amount of carbon saved because of a single auction, shown in figure 1.

Figure 1: The carbon saving from a UK auction

Conclusion

While two of the key aims of reverse logistics are to maximise value and minimise waste, the ongoing practice of returns going to landfill means we are falling behind on both these aims.

Auctions offer an effective way to reduce the number of items ending up in landfills while  maximising value, by allowing a higher throughout of assets, competitive bidding to achieve the optimum price and allowing for control over all aspects of the sale process.

Auctions are most effective when the lot sizes are optimised (usually smaller), lots have low or no reserves, auctions are promoted to a wider audience and the auction platform contains key features like anti-sniping technology that ensure maximum value is achieved.

Companies should also look at measuring, reporting and celebrating the successes they achieve from diverting assets from landfill through auctions. By using a spend-based emissions approach or a lifecycle assessment (LCA), it is possible to quantify the amount of carbon that has been saved by diverting items from landfill.

Are you ready to take steps towards reducing your retail returns' impact on the environment? Embrace auctions as a quick and effective way of diverting assets from landfill, and use the tools above to tell everyone about your success!

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RLA Members can access the recent presentation BidPath gave on this topic on June 8, 2023 at the RLA Recycling & Sustainability Committee Meeting:  https://rla.org/committee-meeting/history?committee_id=5

https://bidpath.com/

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Dan Main, Director at Bidpath, Inc.
**Dan Main dmain@bidpath.com is a director at Bidpath, we provide white label auction platforms for retailers, manufacturers and auctioneers. Dan has worked closely with retailers, manufacturers, government agencies and financial institutions over the last 18 years to help evaluate surplus assets and design and implement strategies to optimise their resale. He has helped find new homes for items as diverse as military Humvees, the microphone used to record The Queen’s Christmas Day message, and $10 million of audio-visual equipment. He lives in in Cornwall, UK with his wife Salena and 1000 house plants.   **James Cuomo james.cuomo@mycarbon.co.uk is the Lead LCA consultant at MyCarbon- a sustainability consultancy specialising in the calculation, reduction, and offsetting of carbon footprints, supporting clients on their journey to net-zero. MyCarbon work with clients across all industries, drawing on the scientific and engineering expertise of our team so that they can always create pragmatic and actionable plans for every business and their specific needs.