TerraCycle Collects Plastic Waste. Does It Really Get Recycled?

The company promises to make use of plastic garbage that almost no one else wants to touch, and its founder, Tom Szaky, is really stressed out right now

By Leslie Kaufman

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"I’m, like, really freaking out."

It's a late night in April, and Tom Szaky, the founder and chief executive officer of TerraCycle Inc., is on my video screen. His mussed shoulder-length hair is spilling over a zip-up hoodie. Unusually, he's in supplicant mode.

Szaky is normally a dazzling salesman. He's ubiquitous on the conference circuit and on YouTube. He's even featured on a TV series available through Apple. The company's financial documents boast, "TerraCycle is covered in the press every day, averaging over 50 placements daily." Then there are the awards. In 2021, TerraCycle was named both one of Time100's most influential companies and one of Fast Company's most innovative. Szaky was named person of the year in Bioplastics Magazine.

The sparkling adulation is all the more impressive because he's built his fame from trash. More specifically, on promising to recycle items others have given up as pure junk—among them cigarette butts and dirty diapers. He positions himself as a man who can innovate his way out of a plastic bag. Sort of Silicon Valley meets your dumpster.

More from Bloomberg Green's Big Plastic series: • A Plastic Bag's 2,000-Mile Journey Shows the Messy Truth About Recycling• West Africa Is Drowning in Plastic. Who Is Responsible?

In recent years, as consumers have become increasingly worried about plastic waste in oceans, companies that produce the stuff have found a haven in TerraCycle and its "sponsored waste" program. For a fee, TerraCycle arranges for items that are not conventionally recycled, such as laminated juice pouches or discarded water filters, to be collected (either at a drop point or by mail) and turned into something else.

In return, companies that sell plastic products get to add a label saying the items are recyclable by TerraCycle, which has moral as well as marketing value. TerraCycle boasts that brands return to them because of "increased customer loyalty, higher revenue and/or greater market share."

"I don't know if we would recover. And in the end, we could be potentially canceled after 20 years of slaving away"

Last year, TerraCycle earned $71 million in revenue, according to the company, largely by winning over some of America's biggest corporations, including Clorox, Nestlé, and Walmart. Bloomberg LP, where I work, is also a client. Snack wrappers from our offices are collected and sent to TerraCycle for recycling.

Over Zoom, Szaky is uncharacteristically panicked. It turns out that independent documentary producers in Europe have tracked 20-plus bales of chip packets and cat food pouches that TerraCycle said it was recycling in the UK to Bulgaria. Szaky has an explanation: Human error at a third-party processing facility put the bales on the wrong truck.

Still, he worries that this finding will scare some corporate partners into ending their relationship with his company. "If you’re a brand, you’re just going to cancel and be done, right?" His voice is rising under the stress. "I don't know if we would recover. And in the end, we could be potentially canceled after 20 years of slaving away."

He starts cajoling me to write a different kind of story. "If your piece is positive or balanced in any way, I could send it out and say, ‘Here is what real journalism is.’ " It's a persuasive mix of flattery and neediness. What Szaky doesn't know at the moment is that I’m on the trail of my own trackers.

In January, curious about TerraCycle's claims that it was recycling 100% of what is the lowest-grade plastic trash, I placed traceable tags in three items: a wrapper for an individual serving of Turkish dried apricots (from the Bloomberg pantry), a pouch full of Gerber probiotic oatmeal and banana baby food (returned through a mail-in program that Gerber paid for), and a UPS package with bubble wrap (returned through a kitchen waste recycling box I purchased for $113 from TerraCycle as a concerned individual). The tiny devices allowed me to follow the location of the trash.

The night Szaky reaches me, I am in Illinois on a chase that will lead to the dirty heart of America's plastic reprocessing facilities and raise questions about the very meaning of recycling.

"Oh easy, easy," Szaky says, when I first press him, back in March, on how his company can recycle 100% of the plastics it collects. "You can't recycle a pen today—not because it's not recyclable, but because it costs more to collect and process this than this is worth."

He then draws a classic supply and demand curve, followed by another graph showing that supply for garbage is infinite and demand is negative. "No economics textbook ever talks about negative demand, yet that is what our waste stream is. You have to pay someone to cart it away."

We are in TerraCycle's cavernous headquarters in Trenton, N.J. The office is decorated in trash chic, with floors covered in discarded AstroTurf and light fixture coverings made from coffee capsules and film reels. Szaky's desk is in the middle of the floor, partitioned from other workspaces only by a curtain of plastic bottles. But there are no other employees around. It is a vast ghost dumpster.

Szaky founded TerraCycle as a Princeton undergraduate in 2002. At the beginning, it sold worm excrement as an organic alternative to fertilizer, recycling used soda bottles to package it. He dropped out and headquartered the new company in Trenton to, as he puts it, "better the local economy."

In time, he became more interested in the plastic bottles than the worm poo. He reasoned he could get over the negative demand obstacle if he could persuade corporations or even individuals to pay for what it would cost to make that pen into a new product. He could make money and also teach the consumer public an important lesson about the true expense of their trash.

Marian Chertow, a professor of industrial environmental management at Yale and TerraCycle board member since 2018, is typical of the many experts who applaud Szaky. She explained in an email that TerraCycle is doing everything in its power to get plastic producers to consider the real costs of the waste from cradle to grave and to take some financial responsibility for it. "I have not seen this level of innovation anywhere else."

For much of its existence, TerraCycle's revenue was less than $20 million. But then about five years ago, as concerns about plastic clogging oceans became widespread, many big companies such as L’Oréal SA and Colgate-Palmolive Co. made significant sustainability pledges to use more recycled plastic. All of a sudden, TerraCycle seemed to be many corporations’ answer to how they were going to meet extremely ambitious goals.

And it wasn't just companies. Individuals and institutions were getting into the act. The company says that 75% of US public K-12 schools have some sort of TerraCycle collection program.

But critics see TerraCycle's model as having a serious drawback. "Mail-back and drop-off programs enable companies to spend a tiny budget to greenwash badly designed products as recyclable instead of making major investments to implement reuse systems or redesign for mainstream recycling," says Jan Dell, an independent chemical engineer who sued TerraCycle last year for false advertising. (The suit was settled last year, and TerraCycle agreed to change the language of recycling programs to reflect limits.) "Cheap, false solutions such as this are used instead of innovative designs and are a major barrier to progress, not a bridge," she says.

There's a long history of corporations, and especially plastic makers, touting their products as recyclable to prevent regulation and public backlash. Many plastic items in the grocery store have a set of three arrows forming a triangle with a number in the middle—but it's not a recycling symbol. It's a resin stamp indicating roughly the type of plastic it is. The petrochemical industry created it to make consumers think the item is recyclable.

At the end of April, California Attorney General Rob Bonta announced a major investigation into the role of fossil fuel and petrochemical industries in causing the plastic pollution crisis, saying they had worked "to deceive the public, perpetuating a myth that recycling can solve the plastics crisis. The truth is, the vast majority of plastic cannot be recycled." (Exxon, which is named in the suit, called it "meritless." The American Chemistry Council, which is as close to an industry group as there is, attributed the following statement to Joshua Baca, vice president of plastics: "We strongly disagree with the portrayal of our industry by Attorney General Bonta.")

A recent Greenpeace report showed that most plastic product recycling claims by corporations fall flat. The report cited estimates that total U.S. plastic recycling is declining from 8.7% in 2018 to about 5 to 6% in 2021.

Szaky is very aware of this criticism of plastic recycling and that some people see him as helping big corporations greenwash. And so he always includes in his conversations and public presentations an acknowledgment that the only way to get less plastic waste is to produce less plastic in the first place. To prove the point, in recent years his company has invested (and lost) millions to introduce Loop, reusable packaging for big brands. For example, TerraCycle helped develop a stainless steel reusable ice cream container for Häagen-Dazs, which Nestlé owns.

For now, though, corporate partnerships remain the bulk of TerraCycle's income, and so Szaky still does a little magic show with each tour. It goes like this: He produces a hard-to-recycle product, such as a cigarette butt. He then shows a plastic baggie with all the component parts separated and explains that the paper goes to paper recycling, the tobacco to compost, and the plastic can be turned into pellets or flakes.

Most of the plastic flakes coming out will be so contaminated that they can be used for very little—certainly nothing food- or drink-related. But Szaky can promise never to burn or landfill the plastic he collects by doing something that's known in the business as "downcycling." He sells (or sometimes even gives away) his contaminated flakes to the few manufacturers that can use them, usually as an additive to new plastic products. It might, for example, go into the squishy material of a playground surface or maybe outdoor furniture.

There is a very small market for such contaminated plastics, says Julia Attwood, head of sustainable materials for BloombergNEF, a clean energy research group—which is why other solutions are needed. "The real solution is in design. That's why there's a big push to homogenize the kind of plastic that you’re looking at," she says. "And also to just use biodegradable material. I mean, why can't a fly swatter just be bamboo?"

There's one other big catch: TerraCycle doesn't do any of the plastic recycling itself. The reprocessing operation is contracted out to third-party facilities. And until 2021, TerraCycle never had that work audited by an independent firm. (Before that, it did financial audits only, saying no audit process for the recycling existed so it had to create one.) Once a company signs a contract, TerraCycle says, its corporate customers are welcome to do their own audit. Some do. Many don't.

I contacted some of the largest brands that worked with TerraCycle and asked if they had ever performed an independent audit. Mostly the response was stony silence. Walmart spokesperson Tricia Moriarty, for example, stopped returning emails in May. Lauren Rubbo, corporate communication manager for Nestlé, which owns Gerber, declined to answer questions about whether the company did or didn't audit. And then there were a few such as Amy Butler, head of sustainability for contact-lens maker Bausch & Lomb, who said frankly, "We don't audit the process. The expectation is that TerraCycle is managing the program on our behalf."

I press TerraCycle to connect me with some of their recyclers. In April, the company introduces me to Sunil Bagaria, the president of GDB International Inc., a company that does plastic recycling and exporting. Bagaria invites me down to GDB's factory in New Brunswick, N.J.

He explains that the company does mostly sorting for TerraCycle, but also some recycling. "They have a single flexible packaging stream where we get garment bags, we get laundry bags, we get grocery bags," he says. "We will convert it into pellets in our facility," he says.

This will become a point of contention. Months later, both Bagaria and Szaky will say I misunderstood and that GDB only sorts for TerraCycle.

"When we started to receive those boxes we were like, ‘Holy shit, what is this?’ "

What's not in dispute is that GDB has a healthy business taking thousands of tons of waste from Walmart and other places. When they get plastic wrap or film, they melt it in large vats and extrude it into little plastic pellets. These pellets are then used as the building blocks for manufacturers of all sorts of plastic products.

Bagaria's tour around his factory starts in the sorting area where six women speaking Spanish painstakingly pick through TerraCycle boxes containing mixed trash. The waste here comes from individuals and schools. The women separate soft plastics from hard plastics, clothes from toys. "When we started to receive those boxes we were like, ‘Holy shit, what is this?’ " Bagaria says.

Yet even after sorting, the piles contain a motley array of goods that aren't easily classifiable. One bale contains an electrified fly swatter, a corkboard with a plastic frame, a rubberized collapsing kitchen sieve, and a Lubriderm lotion bottle. What will happen to all these mixed bales that Bagaria himself was shocked by? He shrugs. He doesn't really know. It's not his problem.

We amble through the rest of the building. It's filled with thousands of TerraCycle bales, sometimes piled 25 feet high and stretching way back to the end of the warehouse. Some have been here so long that Bagaria says with earnestness that he may start charging for storage.

In a later interview, Szaky says a lot of his sorters and processors are charging him for storage. "We have to build up enough volume to justify a recycling," Szaky says. For some items, such as capsules for coffee machines, there's enough volume to recycle every day. But about 20% of the material that TerraCycle collects annually, Szaky says, can sit a lot longer, for months or even years. Storage costs money, so Szaky says he has every incentive to move it out fast.

GDB's arrangement is significant to the TerraCycle story because there's often a relationship between plastic recycling and plastic exporting. In many cases, plastic processors own both an export business and a recycling business, and in some cases, these businesses can share the same physical property.

GDB also exports trash. Last year it sent at least 10,000 bales of plastic scrap, or about 30 million pounds, overseas. It's almost impossible to know what happens to plastic once it's overseas. Is it recycled? Dumped? Burned? It could be any of the above. (After I ask GDB this question later, in mid-September, Bagaria says, "We do not sell to any company until we are convinced that the recycling is done in an environmentally compliant manner.")

In a subsequent interview, I ask Szaky how he ensures that the kind of mix-up that occurred in Bulgaria—where what he says was misclassified trash got sent abroad—doesn't happen again with facilities such as GDB's. He says he writes tough contracts with the companies and immediately ends relationships with anyone who violates them. He's also adding controls, such as including his own trackers on pallets of waste. In the end, Szaky concedes, it's not possible to get "risk to an absolute zero."

At the end of our tour, Bagaria brings me to the back of his factory, where an enormous machine is melting plastic wrap and spitting out steam and plastic fluff that he says will be shipped to a manufacturer and repurposed as garbage bags. He says 60% to 70% of a nearby plastic bale will get recycled here.

"There is no such system as 100% perfect coming in and 100% perfect coming out. Even in our system," he says.

Months later, after denying that he currently recycles for TerraCycle, Bagaria tells me that actually he could get close to a 100% yield—if he were paid more. If he recycled TerraCycle materials, it would produce a lower-quality plastic that would fetch a lower resale price, and he’d have to be paid more to make up the difference.

My UPS wrapper, one of the pieces of trash I was tracking, sends out a signal in April: It's at GDB. It arrived after four months of sitting in a facility in Pennsylvania. Did it get sorted here? Recycled? Sent abroad? In August it pings again—still at GDB—and then it goes silent.

For four months, my trackers in the apricot wrapper and the Gerber baby food pouch had sat at a warehouse that's owned by two companies run by Devang Patel and his family in Bloomington, Ill. TerraCycle recently hired Bureau Veritas, an independent supply chain auditor, to develop a model for recyclers and analyze every facility. When I speak to the auditor, he specifically mentions a visit to the recycling facility: It passed.

He doesn't mention that the city of Bloomington has sued the two companies over their dealings with TerraCycle. In 2019, TerraCycle teamed up with Walmart to recycle car seats. That merger brought tens of thousands of the seats here. Bell International LLC and Akshar Plastic Inc. let them pile up around the grounds of the factory, which stretches four city blocks, until they were 20 feet high. Neighbors complained of rodent infestation. First the city filed a lawsuit saying the trash was a public nuisance. In January it followed with a public violation notice asking for recycling to cease at the shared warehouse.

After months of waiting, I’m not sure what's really happening to my trash in those warehouses. Then suddenly, in late April, both the tags indicate that my two wrappers have left Bell's warehouses.

The Gerber garbage doesn't get far. It crosses town to the address of a trash transfer station. Then it stops. My apricot wrapper is on a truck headed out of town. Two hours later it's also stopped. This time it's at a landfill in Pontiac, Ill., about 60 miles north.

When this happens, I jump on a plane to verify that my recycling is in the dump. On the night Szaky called in April for our late-night heart-to-heart, I was already in Bloomington. I’d just returned from scouting both the landfill and the transfer point. In both cases the trackers are buried and inaccessible.

I didn't see how I could follow my garbage further, so I made a trip to Akshar's headquarters. The vast low-lying brick building is surrounded by a chain-link fence and yard. The car seats from Walmart are gone, but there are also trash bins. One holds a huge package of plastic-wrapped cigarettes and loose Brita water filters. (TerraCycle recycles both items.)

After knocking on the front door, I’m let in to a tiny office, and soon Patel himself arrives to give me a tour. He adamantly denies anything went to landfill. The case of cigarettes is in the trash bin out front only because the wrapping broke and the cigarettes needed to be temporarily stored, he says, so they wouldn't spill all over the ground. My trackers must have been pulled out by a magnet on their sorting lines that separate metals from plastics. Metals are sold to companies that specialize in recycling them.

Yet, like so much in the plastics recycling world, the explanation only raises more questions. When I visit the factory I’m given a demonstration of how they recycle foil pouches for products such as pet food. At that time, none of the items are run through the machine with a magnet. And even if the tags were lifted by magnet, why didn't they go to metal recycling instead of the landfill?

After I return from the trip, I go back to Szaky and ask him about the violations and the magnet. He doesn't dispute any of the violation notices, but he also argues that they aren't particularly serious. The car seats situation resulted when 10 times as many seats were brought in for recycling than were anticipated, he says, but it has since been resolved.

The rest of the violations, Szaky argues, are "administrative in nature" and "not an issue of Akshar operating any aspect of its business illegally. If any of these items do not resolve favorably with the city, then Akshar would have to cease performing the affected functions for TerraCycle."

Szaky also has an explanation for my metal tag. Gerber doesn't pay to recycle any metal because it's not part of the product. It would be assumed that any metal found in the baby food pouches was an accidental contaminant. Akshar would have just thrown that metal in the trash.

This explanation also doesn't track for me because metal, unlike plastic, has an actual resale market, so it would make more sense if Akshar was going to go to the trouble of pulling it out to resell it.

I email Rubbo at Nestlé one more time to inform them that I found the tracker in the trash and to discuss TerraCycle's explanation. Again I get no answer. But I realize at this point that the answer will never be definitive.

In any case, Szaky is getting philosophical with me again, and in his frustration, I think I get a glimmer of the greater truth that his company is helping us all avoid.

"Recycling is getting beaten up, like I’ve never seen an industry be beaten up," he says, unable to hide his exasperation. "Consumers are voting for all of this shit by buying it. Right? But NGOs say you can't blame the consumer. OK."

He doesn't actually sound as if he's OK with it, though: "On the other side, these companies have made these massive reuse commitments that they’re going to have a very hard time meeting come 2025." His words are coming in a torrent now. "The easiest industry to blame is recycling." —With Daniela Sirtori-Cortina

This is the third article in a Bloomberg Green series investigating the global plastic industry and the plastic waste crisis.

(Updates with new study in 24th paragraph. A previous version corrected where bales of TerraCycle recyclables traveled.)