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Faber Halbertsma Group maintains faith in the effectiveness of the circular model

13 May, 2019 | published at 09:10 CET

Some believe the circular system is merely a fad, but not the Faber Halbertsma Group, as it has been successfully operating a circular system for pallets and crates for more than 20 years.

If it is up to the company’s CEO, Ingrid Faber, it will not end there, as she believes this model could be easily rolled out for other packaging products, as long as they are standardised.

Faber Halbertsma Group produces and repairs tens of millions of pallets each year, but there are no pallets to be seen at the Eindhoven location, where the interview is conducted. There are, however, lots of desks where employees are busily contacting customers all over Europe

Faber Halbertsma Group, a family-owned business, already had a long history as a packaging supplier by the time the company, led by Kees Faber, introduced its circular system in 1997.

The firm always retains ownership of the pallets it supplies to customers within the circular system, which mean they are collected, sorted and, where necessary, repaired for reuse after transportation.

The reason behind this innovative approach was new German legislation which was being introduced at the time which obliged all producers, which therefore included Faber Halbertsma’s customers, to take back all of the packaging it used on its products they supplied to the market. The firm immediately saw that pallet pooling could be a new future-proof business model.

Ingrid Faber said: “The raw material – wood – makes up 75 per cent of the cost of a new pallet. You don’t have this cost if you reuse the pallet.”

The move from a linear to a circular model was a brave decision from the company, but one which Kees Faber described as the most “exciting decision” he had ever made. It did, however, demand a high level of initial investment and it was not known how long it would take for this pallet rental service to turn a profit.

Tipping Point

Ingrid Faber took over from her father as head of the business in 2006, but she already had a seat on the board of directors.

She said: “Depending on the distance, it could be very expensive to rent out pallets and pick them up on location. We knew it would only be possible to start saving on our costs once our network had become larger.”

It took several years to reach that tipping point, and Ingrid admits the rental business was in the red for a long time because they had not reached the economy of scale they needed.

She said: “I remember us saying to one another during a meeting; ‘We’re going to give ourselves another year to make this business model profitable, otherwise we’re going to have to stop’”.

A year later and the plug had still not been pulled, but it took another three years for the system to become profitable.

Ingrid Faber added: “We simply believed in the business model and could not imagine that it could not be made profitable. In retrospect, it’s obvious we could have tackled some things differently to make it profitable sooner but just like every other start-up, we also had to learn certain things.

"We learnt that we had to collect the pallets as quickly as possible, because you start losing those pallets much sooner, even if you wait two weeks."

Realism

The CEO does not believe that everything in a company revolves around a desire for sustainability. She said initiatives can only truly be sustainable if they also yield positive and profitable results and if that isn’t the case then any project will have to come to an end.

This is exactly what happened when Faber Halbertsma developed a pallet made of recycled paper which resulted in it winning a 'Green Companies' award from De Telegraaf newspaper.

Ingrid said: “We really believed in the paper pallet but we couldn’t get that pallet for the same price as a wooden pallet. The raw materials were not expensive but the glue and process of sticking the various components together were. Our customers were also not prepared to pay more for this paper version so it disappeared from our portfolio. It’s an example of a sustainable solution that simply wasn’t viable.

“The same thing could have happened with the pooling system. It’s a fine balance between giving a development a longer chance to reach maturity while at the same time being realistic enough to be prepared to stop something if it’s not profitable.”

Local Matchmaking

Over time the circular pooling system really took off, with takeovers in France and in Germany contributing significantly to is success.

Ingrid Faber continued: “Our real product is no longer the pallets we deliver, but rather that circular model underlying it.

“This could be expanded into other packaging products. The only condition is that it’s a reusable product, and a condition for reusability is that it’s standard.” By standard, Ingrid means it can be used by several companies or an entire industry shares the same dimensions across the board.)

Faber Halbertsma took another important step at the beginning of the year with the acquisition of German company vPOOL, which supplied reusable crates for the food sector and meat processing industry. Ingrid said they already had meat crates on a small scale but this acquisition allowed them to expand what it offered.

She said scale is essential because the more customers there are in a pool, the better the working combinations the company can make.

Circular Transition

Not everyone is up to speed with the transition to a circular economy yet and Ingrid doubts whether the sustainability of a circular model is playing a huge role in customer’s decisions yet.

“The pallet industry is just as much a price driven market as any other,” said Ingrid. “If the use of wood from sustainably-managed forests is more expensive, the customer is often not willing to pay the higher price.

“Our objective is to use FCS and PEFC certified wood. These Chain of Custody certificates indicate the wood comes from sustainably-managed forests.”

The concept of sustainability is sometimes debatable. Both sides of the road on the way to the firm’s Eindhoven office are lined with the trunks of pruned poplar trees. Ingrid said while it is highly sustainable to reuse local residual wood, and they would make great pallets, this wood is not formally certified so Faber Halbertsma cannot use it.

There are still many contradictions in what is being strived for in the circular economy and the practical reality of things. For Ingrid, packaging legislation is an example of this, as it does not allow for the reuse of packaging.

A total of 20 million new pallets are introduced to the market in the Netherlands every year. If half is reused without repair and the other half is repaired or the wood is ground down and recycled, then the recycling target for wood would be achieved. But a pooling company recycles at least 70 per cent of the pallets and less than 30 per cent is repaired. This means that the pooling company fails to meet the legal requirements, because at least 45 per cent of the material must be recycled according to those rules. In other words: reuse is not recognised in these regulations while it is in actually the very foundation of the circular economy.

Ingrid understands the regulations are intended to prevent packaging waste from ending up in landfill or damaging the environment but argues in favour of a different system.

She said: “What I would like to see is that if you have a demonstrable circular system which can be verified, then you fall outside the packaging regulations.”

Although this is not yet the case, it has not stopped Ingrid Faber from keeping her focus on the circular system.

“My father expanded the family business internationally and I see it as my role to continue to build on the circular system.”