The Shredded Paper Chase

Document destruction is a fast-growing—but distinctly different—niche market for paper recyclers. Here’s a look at the challenges and opportunities posed by paper shredding.

By Robert L. Reid

Dave Powelson, president of Tri-R Systems Corp. (Denver), has a simple message for his fellow scrap paper processors: “You can either learn how to shred, or you can lose business.”
   That’s what Powelson told attendees at this year’s Paper Recycling Conference & Trade Show in Atlanta in a session about the growth of document destruction. Shredding documents “is simply something your customers will have to do,” Powelson explained, pointing to the growing awareness of identity theft, recent privacy laws such as the Health Information Portability and Accountability Act and Graham-Leach-Bliley, and the upcoming Fair and Accurate Credit Transaction Act. Each of these laws expands the types of confidential documents that businesses of all sizes now need to destroy.
   The push to destroy documents rather than recycle them “will erode your current business if you’re doing any office recycling,” Powelson warned. He explained that “we’re seeing a big trend that [generators] who used to recycle and used to shred
now are switching to all shredding” because they don’t want their employees making decisions about which documents should or should not be treated confidentially. Instead, many firms are deciding that “most of the material today in an office is confidential,” Powelson concluded.

Security, Not Recycling
As document destruction grows—from a roughly $500-million-a-year business in 1999 to more than $1.5 billion today, according to estimates from the National Association for Information Destruction (NAID) (Phoenix)—more and more traditional paper recyclers are following Powelson’s advice and adding shredding to their list of services. Currently, about one-third of NAID’s 430 members are both shredders and paper recyclers, says Robert Johnson, executive director. While some firms like Tri-R have been shredding office paper and other material for decades, nearly half of NAID’s members have been in business fewer than three years, Johnson says.
   Though most of the paper being shredded ultimately ends up in the recycling stream, paper processors who also shred stress one critical point about their two services: the shredding business is not the recycling business. Instead, security is the key concern in paper shredding.
   “Although shredding and recycling look very similar, they’re really poles apart,” says Mike Tingle, former president of Tri-R Shredding, a Tri-R Systems division, and Dataguard USA L.L.C., a Tri-R subsidiary that offers various document destruction services beyond shredding.
   “Recycling is about reducing waste,” Tingle says, adding that “there are environmental issues.” On the shredding side, he says somewhat tongue-in-cheek, “we don’t really care about the planet, we don’t care about keeping things out of the landfill—we care about security. It’s all about security—we’re an extension of the customer’s security.”
The greatest challenge for a recycler, Tingle says, is to “understand that the material he handled yesterday as nonconfidential, nonproprietary, nonrestricted, nonsensitive is now all of those things” if it’s being collected for document destruction rather than recycling.
   Moreover, accepting confidential material for destruction requires recyclers to change the way they do business, ranging from the amounts of material collected and how they derive their shredding revenue to where and how certain work is performed, how the processor/shredder hires and supervises employees for this work, and even how the vehicles used to collect confidential documents are operated.

A Separate Place
Keeping the confidential material separate from the regular recovered paper is absolutely essential, processor/ shredders note. For instance, Document Destruction and Recycling Services (DDRS) (Cedar Rapids, Iowa) is a subsidiary of recovered paper processor City Carton Recycling Inc. (Iowa City, Iowa). To maintain that required separation, one of DDRS’s three shredding operations is located in a separate and secure part of a City Carton facility, another is housed in its own building on a City Carton campus, while the third is located 120 miles from the nearest City Carton site, explains Chris Ockenfels, DDRS general manager and incoming president of NAID for the 2005-2006 term.
   Many processor/shredders use keypad lock systems to secure their separate shredding operations, especially for NAID’s certification program (all the processor/shredders interviewed for this article are either NAID-certified or NAID members considering certification). A keypad lock is one of the security enhancements E.L. Harvey & Sons Inc. (Westborough, Mass.) plans to make as it pursues certification, says Ben Harvey, one of the firm’s owners. Other features that distinguish a shredder from a traditional paper recycling operation include alarms and security cameras that run 24 hours a day, with videotapes of material being shredded stored for long periods.
   At Macon Iron & Paper Stock Co. Inc. (Macon, Ga.), the special locks and other security devices protecting the document destruction area mean that “by the time you get in there, our alarm’s going to go off and we’re going to catch you,” says Evan Koplin, vice president.
   Collecting confidential office paper is also quite different from collecting regular office fiber. In some cases, recyclers operate mobile shredding trucks that destroy the customer’s documents right there at the customer’s site. Other times they gather the confidential material and haul it back to their plant for destruction. 
   Though mobile shredding is a large part of the overall document destruction industry—Robert Johnson estimates that as much as 70 percent of shredders offer both mobile and in-plant services—the traditional paper recyclers contacted for this article either didn’t operate mobile trucks or such trucks represented a small part of their business. 
   At Tri-R Shredding, for instance, mobile shredding accounts for about 6 percent of its total document destruction. But it will always be one of the firm’s services, company officials say, in part because it meets the needs of specific customers who are willing to pay the higher costs associated with mobile work. Plus, mobile shredding offers new customers a good introduction to the world of document destruction, though they often later opt for the less-expensive in-plant approach.
   When office paper is collected, a single driver can often handle the job, Tingle says. To ensure security, however, shredder trucks often use two-person crews, one to collect the bins and the other to watch over the truck that contains the confidential material. The bins, which are themselves secured, must also be collected in a different manner. Like office paper recycling, document destruction often involves collecting small quantities of fiber in multiple small bins or containers. The person collecting recovered fiber can “pick up four or five containers, put them on the back dock, then go and get two or three more and bring them down, then put all of them on the truck at one time,” notes Evan Koplin. “But for secure destruction, that material comes out of that building and must be put in the truck and locked in the truck before you go get the other containers.”
   In one case, Tri-R received an angry phone call from a customer because a driver had left a bin of confidential material unattended for one and a half minutes—a time frame that might not matter at all when collecting recyclables but which prompted Tri-R to retrain all of its document destruction drivers.

Equipment and Workforce Issues
Processor/shredders tend to use separate crews and separate trucks to collect confidential material and recyclables and will usually provide the two services on separate days as well, in part due to the on-demand need for shredding. The trucks can range from regular recycling vehicles that can be locked to mobile shredding vehicles to “collection-only” trucks that compact and commingle confidential information from various customers in onboard containers that are then unloaded at the shredder’s plant.
   Even the return trip for a truck carrying confidential material can differ from that of a recycling truck. While a recycling truck will seek the most efficient route possible, a document destruction truck might take different routes each time to make it more difficult for someone to follow, says Mike Tingle.
   And while processor/shredder trucks don’t need to carry armed guards with them, customers sometimes do send armed guards to oversee the destruction of confidential material—such as when Tri-R shredded about $1 trillion worth of counterfeit German bearer bonds for the U.S. Justice and Customs departments. In that case, Tri-R shredded several hundred pounds of bonds at a time, then let the guards climb into the truck to mix up the shredded paper before continuing with more shredding. 
   Employees who drive document destruction trucks or work in the secured shredding area will have their backgrounds checked for criminal history or credit problems, and they’ll undergo drug testing. Though these employees are often dedicated specifically for document destruction work, many firms will also have at least a handful of employees qualified to work in either their recycling or shredding operations to meet spikes in demand for either service. Tri-R even hired a security director to help select employees and respond if a confidentiality problem arises. In addition to adding special locks and security cameras or purchasing special vehicles, a paper recycler who adds in-plant document destruction services will need to buy at least a shredder and, most likely, a separate baler to maintain the secure environment. At Tri-R, a conveyor moving at about 90 feet a minute whisks confidential records into a shredder that chops up some 20,000 pounds an hour. 
   In another switch from recycling, most processor/shredders do not sort the material by grade before sending it to the shredder. Instead, they manage only a quick check for potentially dangerous items. One firm, for example, found gallon-sized jugs of oven cleaner in a load while another suffered equipment damage when a customer somehow put steel bolts in envelopes in with its confidential papers. Given the inability to sort through the office paper, processor/shredders know they have to chop up things like plastic and three-ring binders or metal clips, with some using magnets to remove the metal prior to baling. 
   City Carton’s DDRS shreds documents to industry-standard sizes of roughly 5/8 inch on a continuous strip or sends the material through a grinder with a two-inch screen. The resulting bales contain the equivalent of 30,000 sheets of shredded paper, often from various customers, “so you’ve got 30,000 jigsaw puzzles all mixed together,” Chris Ockenfels says.
   At The Newark Group Inc. (Cranford, N.J.), which provides processing/shredding services and operates recycled paperboard mills, customers can even take their confidential documents directly to a Newark mill and toss them straight into the pulpers, eliminating the intermediate stages, notes Johnny Gold, senior vice president of The Newark Group’s Recycled Fibers Division.

Value and Adding Customers
Processor/shredders charge for the destruction services they offer, just as many processors charge for collecting small quantities in office recycling programs. But in document destruction, the value of this fiber is secondary to the customer’s need to destroy the information on the material. Indeed, 68 percent of document destruction firms say that scrap paper sales account for less than 20 percent of their revenue, said David Friedman of Friedman Recycling (Phoenix) at the Atlanta paper recycling conference. 
   Though that shift away from fiber value can seem strange to a recycler, it also offers a few benefits. As Ben Harvey notes, in a definite understatement, “it’s certainly a little different ... having the customer calling and saying, ‘I’ve got this row of filing cabinets that I need shredded, can you get a truck over here right now?’” By contrast, in office recycling programs, the recycler often has to convince a potential customer that he should reduce his waste stream because it’s good for business and good for the environment.
   Various processor/shredders say they started shredding as a way to keep existing office paper customers who also needed documents shredded. Many of these recyclers also say that offering document destruction has helped them expand business to new customers. In particular, Macon Iron & Paper Stock found that a number of its industrial metal accounts—which previously had shown no interest in recycled paper programs—now realize they need to destroy their confidential documents. So they turned to Macon Iron for this value-added service. “They had a level of comfort with us,” says Evan Koplin. “They knew they could trust us, so it worked out well.”
   At E.L. Harvey, some of the paper now being shredded was probably just shifted over from recycling programs, Ben Harvey assumes, though he adds that “a lot of material [now being shredded] was going into a waste stream, not a recycling stream.” So the overall volume of paper being recovered has likely increased. 
   Some, like processor/shredder David Friedman, predict that traditional office paper recycling programs will disappear within the next decade or so, replaced by comprehensive shredding programs. While that scenario has yet to be proved, ISRI’s Paper Stock Industries (PSI) Chapter is planning to discuss a possible “shredded office fiber” grade and other shredding-related grade changes at future meetings, notes Ralph Simon, vice president of fiber supply and marketing for SP Recycling Corp. (Atlanta).
   If shredding does someday dominate the collection of office fiber, how might that affect the paper industry’s goal of increasing paper recovery to 55 percent by 2012, given that many see office paper as one of the great underused sources of new fiber?
   The American Forest & Paper Association (AF&PA) (Washington, D.C.) sees two possible futures: Since too much office paper is currently being thrown out rather than recycled, increased shredding could save much of that good fiber from ending up in landfills. On the other hand, shredding could lose recoverable fiber because shredded paper can pose a health and safety issue for some paper mills and their employees who might breathe in the paper dust created when paper is shredded. Moreover, depending on the size or length of the shredded pieces, the fibers could become useless due to mechanical shortening by the shredding process.
   The Newark Group certainly sees shredding as a good way to find more fiber. That was the main reason the company got into the niche, Johnny Gold says. Though The Newark Group stresses the secure nature of its document destruction services as much as any other paper shredder, the firm keeps its eyes on the ultimate prize of clean bales of recovered fiber. To that end, the company collects only paper documents—no microfiche, cassette tapes, or other potential contaminants that some processor/shredders accept and destroy, either with their paper or separately.
   “We’re in the paper document destruction business,” Gold emphasizes, with some of the shredded fiber used internally by Newark’s paperboard mills and some suitable for sale to deinking mills. 

Mill Reports 
When Mike Tingle entered the document destruction business with his own firm 11 years ago, he had to pay to dispose of shredded paper. Then his first big mill customer simply agreed to take the shredded paper for free. “Now, there’s huge competition for shredded paper—everybody wants shredded paper!” he declares.
   Tingle is definitely an industry cheerleader, but his enthusiasm is supported by the other processor/shredders contacted for this article, all of whom say that nearly every pound of the documents they destroy ends up in the recycling stream. Only occasionally will a customer’s paper be so contaminated that it has to be landfilled. 
   For a number of mills, the reception this shredded fiber receives ranges from equally enthusiastic to cautiously receptive. At Fox River Paper Co. (De Pere, Wis.), for instance, shredded paper has risen from about 20 percent of the fiber used to make the mill’s deinked market pulp a decade ago to almost 70 percent today, says Roy Geigel, vice president.
   “Whether it’s chopped, hogged, one-quarter shred, one-inch shred ... we can use it all,” Geigel told the Atlanta paper recycling conference, noting that his facility has invested some $40 million in screening and cleaning equipment to remove potential contaminants. Geigel does need to know, however, how the shredded fiber was processed, such as whether it was sorted at all or whether it came from a mobile shredder or in-plant system. 
   Shredded bales are more square than their unshredded counterparts, Geigel added, which enables Fox River to fit more in a trailer. Moreover, he noted a “belief” by some in the industry that shredded fiber pulps faster in hydrapulpers, reducing energy costs and allowing faster throughput.
   At the same time, other mills worry that shredded fiber can float in a pulper rather than getting pulped, that carbonless paper in an office bale can bleed out unwanted colors, that big slugs of plastic contaminants can clog the screens in batch pulpers. Stickies, deep, beater-dyed colors used in some office documents, as well as the brown file folders or OCC that get commingled with office paper also cause trouble for certain mills. Even the size of shreds can be an issue, both in having long enough fibers to use in papermaking and in housekeeping or worker health concerns if the material is ground to roughly powder form. One firm—a recycler, not a mill—even had workers get sick when a load of shredded paper contained obsolete pharmaceuticals that spread through the air.
   Then there’s the question of yield, given the uncertain amounts of plastic, steel, and other nonfiber items that can contaminate a bale of shredded office paper.
   These concerns don’t prevent mills from taking shredded paper, but such issues can make consumers picky about who can send them shredded fiber, says John Selman, operations manager for Abitibi Recycling (Houston), which supplies fiber to its newsprint-making parent Abitibi Consolidated. Abitibi, for instance, will take shredded paper only from suppliers it knows well and watches closely, Selman explains. 
   At another consuming mill, simply sending out the company’s specs can be enough to convince certain shredders that they can’t meet its quality expectations, a mill buyer explains. If the supplier thinks it can produce a clean enough bale, this mill might first examine digital pictures of the proposed material, visit the shredder’s facility (if possible), and ultimately even run a trial load. 
   A third consumer notes that an individual mill’s cleaning equipment and the cost of landfilling the waste collected by those screens are critical factors in determining whether the site will use shredded fiber, says David Knight, director of fiber procurement for SCA Tissue North America (Neenah, Wis.). Currently, two of SCA Tissue North America’s six mills use shredded paper, with greater use expected in the future. 
Echoing many in the industry—on both the consuming and supplying sides—Knight explains, “As fiber supply changes, everybody has to change along with it.” The growing use of shredded office paper “is a change that’s going to happen,” he concludes. 

Robert L. Reid is managing editor of Scrap.