Waste reduction rate

The waste reduction rate measures whether an organisation is preventing waste at source. Because it compares waste generated for an equivalent level of activity, it distinguishes process improvement from an apparent reduction caused merely by producing less.

When to use it

• Answer the performance question: “To what extent are we minimising the amount of waste we generate?”
• Monitor the corporate-social-responsibility perspective.
• Evaluate material-efficiency projects by product, line, site or supply chain.
• Translate environmental improvement into avoided material, processing and disposal cost.

Origins

Waste-reduction measurement draws on pollution prevention, material-efficiency accounting and lean production. Environmental policy later formalised a waste hierarchy that places prevention above reuse, recycling, recovery and disposal. The KPI therefore focuses on waste not created, using a stable baseline and an activity-normalised comparison.

What it is

Perspective: Corporate social responsibility perspective.

Key performance question: To what extent are we minimising the amount of waste we generate?

In manufacturing, raw material may represent around 60% of cost. Waste also carries hidden costs: purchasing, handling, processing time, lost capacity, storage, cleaning and disposal. Reducing it can improve margin and environmental performance simultaneously.

Waste expert Robin Kent illustrated the leverage with a business earning a gross margin of 7%: cutting waste cost by 1% can have the same profit effect as increasing turnover by more than 14%. The relationship depends on the company’s actual margin and cost structure, but it shows why waste deserves financial as well as environmental attention.

How to use it

Measurement

Define the waste stream and the output unit. Compare waste per equivalent unit of production, service, revenue or another relevant activity measure between a baseline and current period.

Data collection method