Pioneering the Circular Economy: Small and Medium-Sized Recycling Enterprises in Finland, 1945–1995

Abstract

This article examines small and medium-sized scrap and wastepaper enterprises in Finland. They operated in the margins of the nation’s industrial economy during the twentieth century but pioneered many of the business models and practices that, in the last few decades, have become crucial elements of the circular economy. We study why and how they tried to develop profitable business models, and why some succeeded while others failed. We give particular attention to the business environment where they operated and argue that legislation, values, purchasing cartels, and other outside factors had a crucial impact on their profitability. We base our analysis partly on published company histories and other earlier research and partly on interviews and the extensive and usually open collections of business archives. Those sources provide us with the often-lacking inside view of small and medium-sized enterprises in the circular economy business and show how determined these companies were to defend their interests.

In this article, we study a group of small and medium-sized enterprises (SMEs) that operated in the margins of the Finnish industrial economy from the Second World War to the 1990s. The companies, though doing ecologically valuable work, received little recognition from contemporaries. Earlier research on similar companies in other countries has underlined the marginalization of small players in the sector, but our central argument is that small Finnish companies were eager to defend their interests and determined to fight back.¹ Despite their marginalization, they had agency, and often also the ability to build successful business models. Succeeding, or even making a decent living, in this sector was not easy, and hence, we explore the context in which they operated.

The companies of interest collected and reused paper, metal, and other materials. We give particular attention to scrap and wastepaper companies because metals and paper were the largest items in such material flows. Our research indicates that the marginalization of SMEs seriously weakened their ability to expand business operations and, hence, to also circulate waste and recycled material. Yet, some companies did succeed in creating innovative and successful business models.

Currently, sustainability is a popular topic in business history.² Though the circular economy and sustainability are relatively new concepts, they have a long and mostly unknown history in the business world.³ Circular economy as a concept is, according to Fernando Largo Jiménez, “one of the results of the evolution of the concept of sustainability within the current capitalist framework.”⁴ On the basis of the prior work done by several researchers, we define the circular economy as a business model that reduces environmentally harmful virgin raw material extract. It does so by salvaging, processing, and recycling both industrial and consumer waste materials to be reused as raw material for several different industries for a more sustainable production process. Ideally, there would be no waste, only raw materials.⁵

Scholars have rarely studied the evolution of the sector in Finland from an explicitly business history perspective.⁶ There are, however, a few important studies on Finnish public policies and regulations pertaining to the waste and recycling sector, and some of them shed limited light also on business actors.⁷ According to Henry Nygård, during the 1920s the “waste processing strategy” (jätteen jalostamisstrategia) in Finland changed to a “garbage handling strategy” (roskankäsittelystrategia) and, in decades after the Second World War, to systematic destruction via a “waste incineration strategy” (jätteenpolttostrategia).⁸ However, Nygård emphasizes that the idea of recycling or utilizing the waste was never completely abandoned. Our research supports this conclusion: What we now describe as a circular economy business model was already in place in Finland in the early twentieth century and even during the later linear “take, make, discard” economy model and “throwaway societies.”⁹

As several scholars have underlined, business history has much to offer current efforts to promote sustainability. First, since many businesses have polluted the world, they also must play a big role in saving it.¹⁰ In recent years, the business sector itself has become increasingly interested in “green” business strategies. Second, existing research on the history of waste and recycling has focused on the role of public authorities, with less research having been done on companies and entrepreneurs.¹¹ Third, business historians are particularly skilled at studying companies’ strategies, actions, and development from the inside.

Not surprisingly, business historians have become increasingly interested in environmental issues, the origins of the circular economy, and “green entrepreneurship.”¹² Yet, Ann-Kristin Bergquist has argued that business historians have “only revealed the tip of an iceberg.”¹³ Similarly, Chad Denton and Heike Weber argue in a new article that “business history is just beginning to explore waste history as a research field.”¹⁴

Business historians have faced obstacles, though. Early waste companies were often relatively small, unknown, and short-lived, and hence, their archives have not often survived, forcing many historians to utilize mainly nonbusiness sources.¹⁵ While such sources are useful, they do not often reveal what happens within the company, behind closed doors, where managers make strategic decisions—or where entrepreneurs simply try to make living and feed their family.

In contrast, as a result of our earlier research, we already have access to many relevant corporate sources as well as a pool of people to interview.¹⁶ The sources provide us with an inside view on how people tried to build a business in challenging conditions.

The waste sector included numerous hidden and forgotten figures, often because they were already in marginal positions at the time when they operated. International scholarship shows that early entrepreneurs in the waste sector were often immigrants, minorities, or other people with few options, who entered an unglamorous field with low barriers of entry.¹⁷ This factor has also been recognized in business history literature, but their own voices are seldom heard. Rather, it has been more common to look at the macro level, or else to analyze government policies, thereby looking at marginalized actors from a top-down perspective.¹⁸ In comparison, we, with the help of our rich sources, can look at the actors from below and analyze how such marginalized individuals viewed their own position.

The Finnish case can prove interesting for international scholarship in other ways as well. Context is always important in business history research but particularly so in waste collection and utilization research because governments and municipalities have often regulated such activities or even taken care of them.¹⁹ Hence, we need studies on recycling and reuse in different national contexts if we want to build a more general international understanding of how this business sector has evolved. In this article, we focus on the period 1945–1995, when the Finnish economy, including the demand for raw materials and waste flows, was growing quite rapidly. We excluded from our analysis the years of the Second World War, which was an exceptional period and would deserve more detailed treatment elsewhere. In 1995, Finland became a member of the European Union (EU). This led to major changes in Finnish legislation and the business environment, and the full range of resulting issues can likewise not be covered in this article.

Finland had plentiful timber resources and some mineral ores, but it was otherwise dependent on imports. Postwar reconstruction and the lack of domestic raw materials and foreign currencies created shortages and encouraged companies and authorities to collect and utilize waste material. Ecological motives played only a small role. This was not exceptional. Geoffrey Jones has called these kinds of business models “accidental sustainability” and argued, “In the matter of waste, reduce/reuse/recycle was a business model before it became a green mantra.”²⁰ In a recent article, Chad Denton and Heike Weber have cautioned that use of accidental sustainability as a concept “may be misleading, in particular when we consider the miserable living conditions of the scavengers and waste pickers.”²¹

Thus, we ask the following questions: Why did some Finns enter such a marginalized business as waste and recycling in the twentieth century? What roadblocks did they encounter, and how did they try to overcome them? How did they build business models that were both profitable and sustainable? We base our analysis partly on published commissioned company histories and other research and partly on interviews, business archives, statistics, and published documents. We have conducted more than fifty interviews with business actors, some of their family members, and several government officials. Most of the interviews had been done for our earlier research projects, but we have secured the right to utilize them also for future research.

Several scholars have in recent years underlined the usefulness of oral history for business history. Interviews can help scholars fill in gaps that written and other sources failed to cover and shed light on values, relationships, experiences, beliefs, and even particularly sensitive topics. At the same time, they can show us how narratives are born or created.²² As Robert Crawford and Matthew Bailey have stated, “stories simultaneously reconstruct the past as they document it.”²³

It must be acknowledged that interviews are naturally quite subjective. We have therefore utilized source criticism, as is typical in all historical research, but the subjective nature of some of our information is actually quite illuminating. The interviews provide us with information on marginalized actors’ self-image and their views of the business possibilities, constraints, and environment. In a way, we are giving them a voice.

In the following section, we analyze how waste and recycling businesses emerged as part of a modern business field in the early twentieth-century Finland. The next two sections focus mainly on business constraints. Our choice to do so is the result of our research findings. The interviews, commissioned histories, and archival sources revealed that the problems specific to recycling and reuse industries, in particular their poor image, a lack of understanding by society and government, and tensions between SMEs and the large manufacturing companies, played a prominent role in the development of SMEs. In the third section, we look at the links between SMEs and wider society, in particular the role of image and regulatory issues, while in the fourth section, we look at the often tense links between businesses in a sector that, as we will show, soon became cartelized. It was not all misery, though, and certainly not endlessly so: By the end of the twentieth century, some SMEs had managed to grow and succeed, and outsiders had also begun to recognize waste and recycling as an attractive business sector. We look at these business strategies in the fifth section. The final section contains the conclusions of our article.

The Origins and Growth of the Finnish Waste and Recycling Businesses

The modern Finnish waste and recycling business began to emerge in the latter part of nineteenth century. To estimate the quantity of the scrap businesses and how they expanded throughout Finland, we have reviewed an extensive number of different sources with information on trading and industrial activities. Table 1 presents the conclusions as well as a list of the main sources. We cannot be entirely sure, though, that we have identified all the SMEs in the field: No statistics can give us an exact figure. The numbers presented in the table represent the estimated minimum number of scrap businesses. We are, however, fairly confident that we have identified most of them.

Table 1 Minimum Number of Scrap Businesses in Finland, 1900–1990

Sources: The Finnish Scrap Dealers’ Association’s (FSDA) archive: Lists of Members 1940–1990; The National Library of Finland: Business Calendars 1925–1941, Finnish Trade and Industry Calendars 1910, 1915, 1917, 1929, 1933, Address and Professional Calendars of Different Cities 1886–1944, The Business Register Magazine 1922–1939, 1940–1942; The Statistical Office, Official Statistics of Finland, Calculation of Businesses 1953, Business Register 1970, 1978.

Table 2 Use of Scrap and Wastepaper in Finland, 1900–1980 (in Tons)

Sources: Official Statistics of Finland, Industrial Statistics 1900–1980.

It is even more difficult to calculate the number of paper collectors. Our investigation of newspaper articles, trade registers, and other primary sources suggests that collecting wastepaper was usually a side business for scrap dealers, rag collectors, and other companies. After the Second World War, the sector expanded; our rough estimate is that, by the 1970s, approximately 140 companies were collecting paper, but only about 40 of them did so as the main part of their business.²⁴

In the early twentieth century, many scrap companies in Finland were owned by Jews and Russian immigrants.²⁵ After the Second World War, a new group of entrepreneurs entered the waste salvage business: Approximately 400,000 Finns were evacuated people from Karelia, a region that Finland lost to the Soviet Union. They were resettled in other parts of Finland, but they had to also find some way to provide for themselves. Many found opportunities as scrap dealers. Some of the companies they established are still operating. Indeed, our sources reveal that industry insiders even later recalled that the majority of scrap businesses were run by the Karelian evacuees in the 1950s and 1960s.²⁶

The end of the war also created new business opportunities for companies interested in recycling military items, which governments no longer needed.²⁷ In Lapland, the Finnish troops fought against their former German allies in 1944–1945 to forcibly remove them from the country, a condition of the peace treaty that Finland had signed with the Soviet Union. Scrap dealers from all over Finland travelled to Lapland to collect their share. Some had realized the possibilities of scrap dealing while serving in the army.²⁸

Most of the SMEs in the Finnish waste business were family businesses that often employed both parents. Many women successfully continued the family business after the death of their husbands and employed their children, too. Children of the entrepreneurs have often practically “grown up in the scrap yard.” Today, a number of successful waste and recycling enterprises in Finland are operated by the third- or fourth-generation descendants of the original founders.²⁹ As in Sweden, their business was often based on “superior personal knowledge about metal contents and qualities.”³⁰

Business and Society: Image and Governmental Regulations

Up to the 1990s, negative public image was a major problem for the secondary raw material business. Our interviewees and commissioned histories often highlighted the difficulties that the SMEs faced because of the “dirty” reputation of the business or officials’ lack of knowledge. It was, for instance, difficult to find suitable business premises close to urban centers and good transportation routes. In one case, an entrepreneur was offered an industrial plot “in the middle of a swamp,” many miles away from the city. The company eventually left the city.³¹

Some companies did find good premises but then had to relocate. More than half of all scrap businesses had for decades rented cheap plots from the state railways. In the 1980s, the state railways raised the rents by as much as a thousandfold, which jeopardized especially the operations of smaller companies. Most of them had to relocate, which was a massive and time-consuming project.³²

Urbanization was another problem. Companies often operated in industrial areas originally constructed further away from the suburbs. As the cities grew, new housing developments approached industrial areas. Controversies between scrap dealers and their new neighbors, as well as rising rents in such growth areas, forced many companies to relocate. Complaints could also slow down the granting or renewal of environmental permits.³³ Since scrapyards and the yards of wastepaper companies were not pleasant to look at, the complaints were understandable. For an untrained eye, the piles of scrap and paper could look like garbage, not valuable raw material. Naturally, the companies also differed in terms of how well the yards were organized and their level of cleanliness.³⁴

The media often portrayed the scrap business and entrepreneurs in a negative light. For instance, movies showed scrap dealers as villains, and newspapers reported on thefts perpetrated by scrap dealers. Entrepreneurs in the sector were quite conscious of this negative image of them as “dirty thieves” who could not be trusted—or alternatively as “wealthy thieves”—since many entrepreneurs did succeed and started to expand and develop their scrap businesses during “the golden decades” from the end of the 1950s to the 1970s. Many had experienced a sense of resentment and shame in childhood, and even in the 1980s many could still recall that being the son or daughter of a scrap dealer led to bullying at school.³⁵

The image of scrap dealers was slightly different during the times of war and reconstruction, when recycled raw materials were in great need and the issues related to waste management became crucial for the nation’s survival.³⁶ In the US, for instance, during the depression years of the 1930s, scrap dealers were “grudgingly respected,” and during the years of Second World War attitudes toward the processing of waste materials took another positive turn. However, this positive change was “a temporary virtue,” as Carl Zimring has put it.³⁷ Similarly, during the post–Second World War years, when Finland had to pay heavy war reparations in goods to the Soviet Union, scrap dealers could feel proud of their role in securing the necessary raw material resources for production. Nevertheless, the general public’s view of the business and the people engaged in it did not permanently change. There was some truth behind the negative image, too. A few dishonest actors every now and then did buy or sell scrap that they might have known was stolen, or they avoided paying taxes, which resulted in a great deal of negative publicity for the whole profession.³⁸

Regulation was another major problem for SMEs engaged in the recycling business, although especially from the 1990s onward, it also began to create new attractive business opportunities. In the interwar years, few laws or regulations applied specifically to the scrap or waste businesses. However, legislation demanded that business operations in general should not harm people’s health and living environment.³⁹ Beginning in the 1930s, and continuing until the mid-1990s, the government also regulated exports of scrap metal to protect the domestic raw material supply.⁴⁰

Regulation could also create new business opportunities, though. From the 1950s onward, the growing number of used cars created an environmental problem in Finland and Sweden: In both countries, the number of cars tripled between the mid-1950s and mid-1960s. Soon, people began abandoning old cars in forests and lakes, with some even ending up in landfills. The Finnish Scrap Dealers’ Association (FSDA) recognized a business opportunity and quickly became involved in efforts to introduce new legislation. The first Finnish Scrap Vehicle Act came into force in 1975. While waiting for the legislation to come into force, scrap businesses had already begun inventing ways to deal with scrap cars. The quite small company Tilkepaja (Häti Ky) was at the forefront of such efforts, but the largest investments were made by the biggest Finnish scrap company, Kuusakoski, in the early 1970s.⁴¹

After the 1978 Waste Management Act—also referred to as the “Shit Act,” offering a hint of the negative attitudes toward it—entered into force in 1979, awareness of a company’s environmental impact started to slowly increase among SMEs. Every company had to adhere to a waste management plan approved by government environmental officials. However, authorities implemented the law and future legislation differently in various cities and municipalities. Some were stricter than others. Entrepreneurs found such a situation annoying and damaging to their business.⁴²

The 1978 law made municipalities responsible for waste management.⁴³ Municipalities gradually began establishing their own waste companies, especially in the early 1990s. They sometimes competed with the private firms traditionally responsible for handling materials suitable for profitable recycling. For example, wastepaper had been collected efficiently on a commercial, producer responsibility–like basis for decades. Therefore, and even more so when the plans for producer responsibility laws began emerging in the 1990s and when a new 1993 waste management law broadened municipalities’ responsibilities beyond just the urban site plan area to include the entire municipality, wastepaper companies felt that municipal waste companies were trying to “take over” their business. This led to questions about just who owns the waste. However, at this point the forest industry–owned wastepaper intermediary Paperinkeräys Oy and smaller wastepaper companies, which otherwise were often on difficult terms with one another, united against the municipalization of wastepaper recovery.⁴⁴ In this sense, the Finnish system, and atmosphere, seems to differ from, for instance, the Swedish one, where, according to Bergquist, Lindmark, and Petrusenko, a “symbiotic business network that involved the paper industry, recycling firms and municipalities thus cocreated the infrastructure” for large-scale paper recycling in the 1970s.⁴⁵

The same phenomenon and questions about the ownership of waste occurred in the scrap business. The municipal waste companies argued that scrap collected from the surrounding region was automatically their property. On one occasion, a CEO of a municipal waste company visited a private scrap business and uttered, in apparent surprise, “So this is where all the scrap belonging to us is stored.” On at least one occasion, an entrepreneur in the wastepaper business ended up selling their business to a larger enterprise partly because of the threat of municipalization.⁴⁶

The slowly increasing levels of enthusiasm for recycling in society gave the waste and recycling businesses a long-awaited chance to change their traditional problematic image. However, the change in attitudes also led to gradually tightening regulations. The Environmental Permit Act of 1992 required every actor in the waste business to apply for an environmental permit. New waste management laws introduced in 1993 were the first ones to explicitly refer to the idea of sustainable development.⁴⁷

In many countries, new environmental legislation created business opportunities for companies offering recycling services.⁴⁸ The same process can be seen in Finland. It followed the example of other countries, especially Germany and Sweden, in drafting new environmental legislation. The crucial change came when Finland joined the European Union in 1995. EU regulations, and the new Finnish national legislation based on it, stipulated that producers are responsible for the waste, thus creating new opportunities for companies that could offer such services. Even though following the regulations often proved costly and required additional investment, many entrepreneurs began to also see the new laws as offering them a chance to gain a competitive advantage.⁴⁹

Business-to-Business Relations in the Waste and Recycling Sector

As discussed in the previous section, government regulations often hindered the activities of Finnish SMEs in the waste business, but by the end of the twentieth century, regulations had also begun to create new business opportunities. In a recent article, Ann-Kristin Bergquist et al. argue that “the development of recycling in Sweden was characterized by a dynamic interrelation of three groups of actors: traditional scrap firms, large manufacturing companies, and municipalities, which were partly forced by government regulation to take action.”⁵⁰ Yet, as we will show below, relations between big manufacturing companies and the small companies supplying them with recycled material were more adversarial in Finland than in neighboring Sweden, and hence, positive interactions and processes emerged more slowly. The bargaining position of large companies, in particular those working in the country’s main export sector, pulp and paper, was strong. Finnish legislative attempts to regulate competition were toothless and did not stop cartelization, and the political influence of major companies in the “land of forest industry,” as historian Markku Kuisma has called it, was substantial.⁵¹ These factors probably made them less willing to compromise with their smaller business partners.

Finnish wastepaper was very much desired in Europe because of its high quality, but in Finland the factory engineers often had a somewhat negative attitude toward it as a raw material. This was due to the massive virgin forest resources that Finland possessed. In the 1980s, wastepaper accounted for only approximately 5% of all raw materials used by the Finnish paper industry. However, the wastepaper intermediary company Paperinkeräys Oy, owned by the paper industry, had already declared at the end of the 1960s that “wastepaper salvage is a form of nature conservation.” Finally, due to increasing demands from the environmental movement beginning in the 1970s, the Finnish paper industry began to talk about wastepaper as an important part of their raw material pool.⁵²

Yet, wastepaper was mainly used in one specific sector of the paper industry, carton (or board) production. The most important user was the Pankakoski factory, owned then by the forest industry giant Enso-Gutzeit Oy. It had been utilizing wastepaper since the 1940s, but the use of it increased as a result of investments made in the 1970s and 1980s. By the 1990s, 80% of the factory’s raw material was wastepaper (including waste cardboard). Wastepaper salvage in Finland had been increasing steadily and significantly in the decades following the Second World War. The possibilities for using the raw material diversified, but the markets continued to be volatile, which caused uncertainty for the suppliers of wastepaper, as was the case in many other European countries as well.⁵³

Ironically, an even bigger problem than market volatility was the lack of competition. The Finnish paper industry was heavily cartelized, probably more so than in any other country. When the country had gained its independence and lost previously important Russian markets in 1917, paper producers had set up export cartels to break into Western markets.⁵⁴ They cooperated in many ways in the domestic markets as well, including in the acquisition of raw materials, both new and recycled. Cartelization was indeed a normal feature of the Finnish economy, and although the country introduced the first law regulating competition in the 1950s, it did not ban the formation of cartels, allowing them to operate relatively freely until the late 1980s and even early 1990s.⁵⁵ As we will show below, this led to a situation where both the manufacturing companies that used recycled materials and the SMEs that collected them formed cartel-like structures. However, as we will also demonstrate, the SMEs did recognize that even those earlier relaxed laws provided them with some weapons that they could use against larger companies.

Wastepaper was a case in point. For a long time, there was only one operator through which the SMEs could sell their wastepaper to the paper industry. This operator was called Jätekeskus Oy (founded in 1943), later Paperinkeräys Oy, which held practically a monopoly in wastepaper markets.⁵⁶ It was owned by the Finnish forestry industry giants, and its primary duty was to meet the wastepaper needs of its owners at the best possible prices.⁵⁷ For the paper industry, the system was rational and cost-effective since the company benefitted from economies of scale and limited competition. Paperinkeräys was “like a spider with its web,” controlling collection and offering the raw material to the industry on a plate.⁵⁸

The SMEs that collected the wastepaper were less enthusiastic. Their relations with Paperinkeräys were often cool or even openly hostile. The bargaining position of the SMEs was weak because they had, in practice, only one customer that could for the most part dictate the prices. This embittered the SMEs, but it also significantly lowered their possibilities to conduct successful business. Many of them were also unable to export on their own.⁵⁹

Especially in the 1970s, SMEs found themselves involved in many difficult negotiations. The salvaging of wastepaper in Finland was becoming a more profitable business, but at the same time one of the oldest carton producers and wastepaper users, Tampella’s factory in Inkeroinen, decided to shut down two of its three carton manufacturing machines.⁶⁰ The paper industry’s soft tissue manufacturing component was not yet big enough to cover the loss, and the planned investment in a deinking paper mill was still only that, a plan.⁶¹

The situation during the 1970s was occasionally quite difficult for both Paperinkeräys and the SMEs, with their company yards full of wastepaper for which there was not enough demand. Mainly due to all such difficulties, the wastepaper SMEs founded an association of their own, Paperinkerääjät ry, in 1974.⁶² It was a kind of cartel, too, since it was trying to participate in price negotiations.⁶³ To the SMEs’ disappointment, but not necessarily surprisingly, Paperinkeräys was hesitant to negotiate about prices with the association and rather preferred to bargain individually with each SME.⁶⁴

The confrontation between the monopoly and the suppliers led to disputes and to provocative and even quite harsh measures being taken by both sides during those years. In one case, a small wastepaper company that had been a regular raw material supplier to Metsä Tissue’s (former Metsä-Serla Oy) paper factory in Mänttä was suddenly told the factory would no longer use the company’s wastepaper, prompting the entrepreneur to call them and ask whether something was wrong with the quality of the material. The factory engineer assured them that this was not the case, but they had received orders from the monopoly not to buy from the small company. The entrepreneur then called the monopoly, threatening that they would record the conversation and take the recording straight to the competition authority. After a couple of days, the SME was allowed to continue its supplying the paper factory in Mänttä.⁶⁵ In another case, several enraged and frustrated entrepreneurs drove to the edge of a landfill site and dumped their entire precious cargo into the ditch as the press, which they had invited, watched.⁶⁶ This kind of publicity was an effective counterstrike against the paper industry, already being targeted by environmental activists.

Wastepaper SMEs considered the situation unbearable, regardless of such actions. As a result, a few wastepaper companies and persons that had previously been working either for the monopoly or for the paper industry founded Suomen Keräystuote Oy in 1987. Slowly but steadily, the new wholesaler started to act as a counterforce to Paperinkeräys. Especially in its early years, the company faced significant difficulties since Paperinkeräys either prohibited the factories from buying wastepaper from Keräystuote or threatened to cancel its contracts with the SMEs if they used both wholesalers as their intermediaries. In fear of losing their contracts, many wastepaper SMEs did not dare sell their wastepaper through the new wholesaler, even at better prices. The new wholesaler suggested to many SMEs that they store their wastepaper and wait for the paper industry’s need for the raw material to become so acute that the larger factories would be forced to seek buyers despite the threats issued by Paperinkeräys. This strategy, though, was a very risky business that many SMEs simply could not afford.⁶⁷

Several carton and paper factories in Finland also resisted the dictates of the monopoly on general principle, thus giving the new players in the wastepaper markets the chance they so desperately needed.⁶⁸ The factories occasionally bought some paper from Keräystuote, secretly violating the contracts they had made with Paperinkeräys. Why did the factories take the risk? One executive claimed it was “satisfactory and motivating” trying to break the monopoly and buy cheaper raw material behind the backs of the other forest giants. After all, the other large companies were not just their cartel partners but also their competitors. As one factory manager noted, he was responsible for the factory’s production, and thus its profits, and so he based his decisions on those responsibilities. In another factory, the manager was even called and reprimanded by the monopoly. Due to this incident, the manager resigned but still continued to cooperate with the new wholesaler until his last day at work.⁶⁹

The above cases highlight the interesting but complicated net of relationships and bonds between the SMEs that supplied the raw material, the factories that needed the raw material, the monopoly seeking to control the supplies to meet their owners’ needs, and the forest industry giants themselves, who owned both the factories and the wholesaler monopoly. The founding of Keräystuote Oy by persons from all sides of the wastepaper business, and the rebellious factories buying wastepaper secretly, proved that there was a need for change.

During its first years, Keräystuote gained a few good contracts. However, even though the company’s owners collected approximately 30% of all wastepaper in Finland, the market share was only 10% at the beginning of the 1990s. In addition, a great deal of time was spent fighting against Paperinkeräys’s dominant market position from 1988 onward, with Keräystuote taking the matter to the Finnish Competition Authority. The cases also gained Keräystuote the reputation of being a complainer inside the waste business industry.⁷⁰ However, Keräystuote did not really have any other choice. The only way to bring down the cartel or to open the field to more competition was to make the cases public and appeal to a higher authority. A corporate takeover around the mid-2000s by a growing Finnish waste management company named Lassila & Tikanoja Oyj (L&T) changed the whole game. Keräystuote was finally transformed into one of two producer responsibility operators in Finland—the other was founded by Paperinkeräys Oy.⁷¹

Scrap dealers faced the same types of problems as the wastepaper dealers. Yet, scrap dealers were able to keep collecting or at least storing their product and to wait for better market prices. Scrap dealers also had their own operator, Romukeskus Oy, already founded in 1940.⁷² It acted as the SMEs’ representative during the yearly price negotiations with the steel industry’s scrap purchasing cartel, Oy Romurauta Ab.⁷³ In the early 1970s, the world was suffering from the first oil crisis, high inflation, and rising raw materials prices, scrap included. However, the price of Finnish scrap stayed lower. For an ordinary scrap dealer, this meant an increase in business costs but a decrease in margins, leading to the “scrap wars,” long and heated negotiations between the purchase and sales cartels. Scrap dealers finally began a boycott and simply “sat on their piles of scrap,” refusing to sell them at all.

The show of unity, however, only lasted for a few months. Some bigger companies finally made separate agreements directly with the industry, bypassing the joint sales company. Some smaller companies also broke the boycott by supplying scrap to the bigger ones to avoid bankruptcy. Many other SMEs considered this practice dishonest; the actions, no matter how important to the survival of the business, left a deep mistrust in the field for many years.⁷⁴ In Finland, however, large and small businesses already from 1940 onward were part of the same interest association, Suomen Romukauppiaiden Liitto ry (The Finnish Scrap Dealers’ Association), which was very closely connected to Romukeskus Oy. Even after occasional confrontations, businesses of all sizes stayed within the same association, which maintained a balance between large and small companies. In this respect, the Finnish scrap business differed from that in the other Nordic countries.⁷⁵

The scrap war had ended by 1974, when the ten owner companies comprising the purchasing cartel Oy Romurauta Ab decided to terminate their mutual contracts on the basis of the advice of the Competition Authority, but they still kept the company operating as an “information office” for its owners.⁷⁶ The price of scrap almost doubled the next year. Many of the biggest and strongest scrap dealers started to act as wholesalers afterward.⁷⁷ The foundry and steel industry officially dissolved Oy Romurauta Ab in 1977, but it founded a new purchasing cartel, Osuuskunta Teollisuuden Romu (OTR), the same year to handle negotiations in the future. OTR was a cooperative and had members, not owners.⁷⁸

The predominance of cartelization as a way to secure a supply of raw materials and control prices in the waste recycling industry was not unique to Finland. In Sweden, for instance, the same kind of cartel-like organizations, owned by the iron and steel producers, operated in the scrap recycling industry, with the same name as the first Finnish one, Järnbruksförnödenheter.⁷⁹

However, the difference between cartels in the two countries pertained more to the relations between the steel industry and scrap industry, which remained fairly stable in Sweden compared with Finland, where the iron and steel industry had to dissolve their cartel organization three times.⁸⁰ For decades, the Finnish cartels regulated the amount of scrap that one entrepreneur was allowed to supply. Price negotiations were often one-sided and even considered humiliating by the entrepreneurs: “We sat down to drink three cups of coffee, complimenting each other, and then we [the representatives of scrap dealers] left with the price that the OTR had decided [they wanted to pay for our scrap].” Even though OTR operated until the 2010s, its days were numbered long before then. The new generation of scrap dealers in the 1990s were just as rebellious as the previous generations had been. As one of them stated, “If the Soviet Union could collapse, so could the steel industry cartel.”⁸¹

Business Strategies: Adapting, Specializing, and Risk-Taking

Despite all the challenging conditions described above, some small Finnish waste and recycling businesses managed to succeed. In this section, we analyze how they successfully navigated the challenges. In his overview of the history of US small business, Mansel G. Blackford suggests that many of the country’s SMEs have managed to survive by finding niche markets where the big companies did not operate.⁸² In the same way, many Finnish SMEs succeeded by specializing in materials that seemed unattractive to others or by offering particularly flexible recycling services. In the 1970s, entrepreneur Jouni Järvensivu noticed that there were growing amounts of old phone cables in the country. His company collected the cables, burned them to retrieve the copper inside the cables, and then sold the copper to major industrial enterprises. Järvensivu and his colleagues also developed new ways to handle more difficult, or even unhealthy and dangerous, cables. The company went bankrupt during the recession of the early 1990s, but Järvensivu bought all the equipment from the bankruptcy estate and started over again in 1992, calling the company Fincumet Oy. This time the company also acted in the role of a wholesaler; it began to export scrap copper to Sweden and Central Europe and soon had the largest granulation facility in Finland. The business expanded operations to include the sale of other valuable metals. It started exporting to Asia and expanded further by setting up new units and acquiring other businesses.⁸³

Fincumet patented its method of processing phone cables in 1995.⁸⁴ This move suggested that research and development (R&D) could be a way for companies to develop their business. Yet, patenting is rarely mentioned in our source materials, probably because SMEs lack the financial resources to invest in their own R&D work. Rather, they purchase technology from others.⁸⁵ Revealingly, the only traditional Finnish company that had its own research laboratory was Kuusakoski Oy, the biggest player in the field.⁸⁶

The lead acid batteries from cars constituted another dangerous product. The 1978 Waste Management Act decreed that municipalities were responsible for disposing of hazardous waste. Since lead acid batteries were difficult to deal with, most scrap dealers refused to take them, and so they ended up in municipal landfills.⁸⁷ In the early 1980s, one scrap dealer, Juha Keskitalo, decided to make a business out of the existing problem. He began to collect lead acid batteries from around Finland, shipped them to other parts of Europe, where they were dismantled and smelted. To transport such goods, he acquired and repaired a ship salvaged from the bottom of the German river Elbe. In the 1990s, he sold the business to the scrap recycling giant Kuusakoski Oy. He soon regretted the decision, and once the noncompete clause had expired, he acquired a smaller waste battery business called Suomen Akkukeräys Oy and invested in the first battery crusher in the Nordic countries; from then on, lead acid batteries were dismantled in Finland before the lead was shipped to factories in other European countries for smelting and reuse. In the 2010s, the company was run by the second generation and employed the third generation of the family. However, in 2021 the majority of the family company’s shares were sold to a globally trading, fast-growing Finnish scrap business named Eurajoen Romu Oy (Eurajoki Group), founded in western Finland in 1994 by a nineteen-year-old entrepreneur.⁸⁸

Some companies found ways to circumvent the scrap export ban, which was gradually lifted between 1991 and 1995, by processing scrap in such a way that it could be classified as a product. For example, if scrap aluminum was melted into aluminum ingots, then it became a product and could be exported to Asia, where the ingots were used by car manufacturing giants. This is what one of Finland’s oldest scrap companies, Kuusakoski, did. It started with a different name in 1914, as a one-man company, and grew throughout the twentieth century to become an internationally operating, family-owned recycling giant, the largest such company in Northern Europe. The company had started expanding and exporting its products already before the Second World War, when it was still legal to do so. The second generation of the family began investing heavily in technology and the processing of scrap copper and aluminum. Kuusakoski, for example, had already set up research laboratories for metal processing in 1946, and the company was repeatedly able to adapt to changes in the business environment. The example of Kuusakoski as well as that of some other companies shows that the earlier and more heavily the companies had decided to invest in technology and specialize, the more likely they were to grow even bigger. Establishing large crushing plants or cutting stations, for instance, pushed the business dealings of some companies to a whole new level.⁸⁹

When it comes to those companies that remained small or medium-sized enterprises and have managed to stay in business for many generations, the source material revealed several factors behind their persistent success, such as investing without taking risks, being conveniently located near industrial operators, having flexible customer service operations, and engaging in profitable side businesses. For a long time after the Second World War, small companies’ most important suppliers were private small actors, such as plumbers, construction workers, and farmers. Selling new iron and steel (equipment and plate, for example) was an important source of income as well, especially during those times when the prices of scrap were low.⁹⁰ Traditionally, the business began with the entrepreneurs practically using their own “hammer and hands,” as many have put it. Sorting was the key: The more precise the sorting, the better the profits. From the 1950s to the 1970s, most SMEs started investing in different types of basic equipment—mainly trucks, cutters, grabs, scales, and bailing machines—to be able to process and transport more scrap quickly.⁹¹

From the 1980s onward, the Finnish scrap business began to consolidate and internationalize, which occurred in many other Western countries as well.⁹² The reasons for selling out varied from uncertainties in the markets to difficulties in finding a successor from within the entrepreneur’s family. Competition in the field was also fierce. The first wave of acquisitions happened in the 1980s and 1990s, and usually the large company buying the smaller one was Kuusakoski. The old Swedish recycling giant Stena Recycling entered the Finnish market in the 1990s and began to buy old companies and establish new units. Its latest acquisitions have included Encore Ympäristöpalvelut Oy (the former wastepaper monopoly Paperinkeräys Oy) and Tarvasjoen Metalli ja Teräsromu Oy (a scrap business founded in the early 1970s). These days, one rapidly expanding large company is Eurajoki Group. The Finnish company has recently bought many traditional and old SMEs, such as the more than 120-year-old Rautasoini Oy, as well as Järvenpään Romu Oy, founded in the 1930s. All these changes highlight a trend evident in the modern Finnish recycling business since the 1990s: It is increasingly becoming more concentrated.⁹³

In many ways, the 1990s was an end of an era and represented a new beginning in the waste and recycling business. As Markku Raita noted, “Until the 1990s we bought scrap. After that, we sold recycling services. The change in mindset was huge.” The business changed its focus, and the way that others viewed the business changed in the process. A “supplier of raw material” became a “solution provider” almost overnight in a society that began to value and demand recycling at a whole different level than before.⁹⁴

Conclusions

This article has shown that the business activities, which we now see as a part of a circular economy, have a long and largely unknown history in Finland. Throughout the twentieth century, certain entrepreneurs and companies based their business models on recycling and the reuse of materials. In this article, we have focused on those companies that collected and reused paper and metal.

Originally, entrepreneurs saw their decision to enter the waste business as an economically wise move —it was a way to save more expensive virgin raw materials, make money, and support a family. This applied particularly to those who had few options. Many early entrepreneurs came from marginalized groups, such as Jews, immigrants, and evacuated people from Karelia, which Finland lost to the Soviet Union in the Second World War.

The Finnish case shows, as indeed prior scholarship has done as well, that the history of recycling and the reuse of raw materials is a history of people in the margins of society. Yet, the Finnish case encourages us to look in more detail at what this actually meant in practice and at the implications of such marginalization for the business sector, society, and the people themselves. Our sources have given us an insider view of this sector and have revealed the many ways in which marginalization weakened the ability of entrepreneurs and companies to do business. They were not valued by society or the government, and regulators did not necessarily understand the nature of the business. Crucially, they were also in a weak bargaining position with respect to the larger companies that purchased the materials they had collected. Cartelization had a major impact on the business operations of entrepreneurs working in the sector. Manufacturing industries had set up purchasing cartels that dictated prices, and sellers responded by establishing cartels of their own. It was only gradually, with the introduction of new competition legislation, that such activities became illegal. Business historians have shown how extensively European economies were cartelized, and hence, possible cartelization of the waste and recycling sector is a topic that should be explored in other European countries as well.

The fact that the various obstacles encountered by the entrepreneurs stood out so prominently in the interviews as well as in the earlier publications utilizing oral history sources indicates that the obstacles had a long-term psychological impact. Yet, many of the interviewed people were also eager to talk about their successes and ability to survive in challenging conditions. Many spoke with a sense of pride about their day-to-day work as well as acts of resistance and defense. They also, as the wastepaper conflicts and “scrap wars” described above indicate, fought back when encountering prejudice and injustices. Some entrepreneurs, especially in the scrap business, eventually became wealthy during “the golden years” of the 1950s and the 1960s, when the demand for all raw materials, including recycled materials, increased. Some succeeded later as well.

As we have seen, in some respects the waste and recycling business in Finland followed the same development path as in many other European countries: From the 1970s onward, the field experienced gradual technological advances, tightening legislation, and consolidation.

However, before the 1990s, waste businesses were often undervalued collectors of the waste products of other businesses and private persons and the suppliers of secondary raw materials. From the 1990s onward, they began offering highly valued and necessary recycling services. Business developed and concepts changed, but for the entrepreneurs themselves the original idea of the scrap and wastepaper business remained the same as it had for a hundred years: They were the providers of important raw materials for large manufacturing industries.

This article has shown how individual entrepreneurs and companies could find profitable niches or succeed by investing in new technology or, if not, by benefitting from the new business opportunities created by environmental regulations. This had ecological implications, too: The SMEs we have studied believed in the idea that the most effective “recycling [of any material] occurs only if it’s economically profitable.”⁹⁵

Inequality, which this article has highlighted, is still a part of the recycling and reuse business—also on a global scale. Scholars, journalists, and activists have talked, for example, about the export of waste from rich to poor countries.⁹⁶ Poor people are still doing dirty work by collecting and sorting waste. Yet, this article shows that we should also recognize that marginalized individuals and groups have agency, and they can occasionally strengthen their position by adapting to changing circumstances, finding profitable niches, and building coalitions. The Finnish entrepreneurs we studied were not usually valued by the society, but they did value themselves. Historians should increasingly study how the marginalized groups saw themselves and what role they played in the evolution of the recycling and re-use business.