When Terry McDonald wants to expand his organization’s array of social services, he doesn’t need to go to donors. Instead, he can dip into a more reliable revenue source: stacks of discarded mattresses his employees collect at local dumps, recycle, and sell to carpet manufacturers.
McDonald, executive director of the St. Vincent De Paul Society of Lane County, pioneered a waste-to-cash business that allows the nonprofit in Eugene, Ore., to cover more than half of its $51 million budget through income it earns. The earnings help support the largest social-services operation in central Oregon, which serves 80,000 people a year and provides housing for the homeless, job programs for the needy, and aid to veterans, among other programs.
McDonald is such an evangelist for this approach that he formed a separate group, the Cascade Alliance, to help other charities develop revenue sources to free them from dependence on grants and donations.
Cascade Alliance comprises 16 groups as far flung as Florida, Kansas, and Washington. These member-nonprofits commit to generating income to support the services they provide while improving the planet’s health in small ways. In turn, Cascade trains their staff members, provides technical assistance, and helps groups purchase equipment.
You don’t want to depend on one kind of income forever.
Adrienne Farrar Houël leads one of the groups that belong to the alliance, Greater Bridgeport Community Enterprises. A decade ago, Houël heard McDonald give a talk in Hartford, Conn. At the time, she was searching for ways to develop an eco-friendly charity and took detailed notes on one of McDonald’s signature achievements: creating the nation’s first large-scale mattress-recycling operation.
“I wanted to create something that would bring in its own revenue stream while helping the planet,” she says. “I wanted a mechanism that was strong enough to make a profit.”
Houël and McDonald later met in Bridgeport, Conn., where McDonald offered advice on warehouse space and recycling methods, and then in Eugene, where Houël learned how to strip down mattresses to marketable components and scrap. In 2014, Houël opened her own mattress-recycling operation and became the first partner in Cascade Alliance.
Although Houël came to McDonald seeking advice on starting a charity, many groups come to Cascade because they are either financially stressed or looking to expand their services, McDonald says. “We want to be thoughtful about how this all works. So, we mentor groups before and after they become members. Some are faced with the prospect of tanking, but they have the guts to fight their way out of it. We love those people,” he says.
By generating a steady, reliable stream of money, the thinking goes, an organization is better able to expand its programs and plan its future. “Groups are stronger when they don’t have to rely on the unstable nature of grants,” says Bethany Cartledge, director at Cascade.
The alliance doesn’t eschew grants entirely, however. Since 2009, the Robert Wood Johnson Foundation has provided $3 million in grants to Cascade, allowing it to help other nonprofits learn from and replicate at least some of St. Vincent’s success.
Here’s the St. Vincent’s basic formula: generate revenue by pulling items out of the waste stream — everything from books to furniture — and reclaiming, recycling, or reusing them. The organization has programs in appliance recycling, book reclamation, collectibles sales, and electronics reuse. Since the 1980s, when a downturn in the logging industry led to 20 percent unemployment in Oregon, the charity has added 13 thrift stores to its original two.
Business is booming. St. Vincent’s earned $7.3 million from recycling mattresses in 2017 and is now the largest mattress recycler in North America. Several plants in California and Oregon handle 300,000 pieces of bedding per year. It sells cotton and foam from old mattresses to carpet makers and others, recycles the steel, and gets a fee for processing each piece from manufacturers, which are responsible for a mattress throughout its lifetime. The organization reclaims more than 44 million pounds of materials that would otherwise go to landfills each year.
McDonald, who also serves as Cascade’s executive director, now spends a good chunk of his time spreading his gospel around the nation — giving talks to charities, local chambers of commerce, and audiences at Harvard and MIT, among other institutions.
The goal of the alliance is to make the groups self-sufficient as quickly as possible. For example, Houël’s group, Greater Bridgeport Community Enterprises, received $100,000 from Cascade to buy the heavy equipment — bailers, forklifts, scales, and trucks — that a mattress-recycling plant requires. Since opening six years ago, GBCE’s revenue has grown from $500,000 to $825,000 a year; it also has increased the number of mattresses recycled annually from 16,000 to 70,000. That’s enough work to keep 16 to 22 people who are former prisoners employed; the total number of employees fluctuates, depending on the season.
“Cascade Alliance’s expertise and resources allow us to help the environment, maintain our operations, and hire people who often have a hard time finding jobs — a triple bottom line,” Houël says.
Not every group has the capacity to recycle mattresses. So, Cascade encourages groups interested in McDonald’s model to explore which parts of the waste stream might be of most use to them, such as book recycling or computers that can be repaired.
Before accepting nonprofits into the alliance, Cascade’s leaders visit organizations to learn whether they might make a good fit. “We review their culture and management,” Cartledge says. Risk-averse groups are discouraged from joining, and “it’s really important that the board and program leaders are on the same page,” she adds.
Still, member organizations aren’t required to adopt Cascade’s methods. “It’s important that groups learn what can work on their own,” Cartledge says. Once Cascade explains its approach to groups (156 nonprofits have sought advice), it encourages them to fill out a questionnaire to help them devise their own waste-to-cash strategy.
Cartledge and McDonald shared some tips for groups interested in turning dross into dollars or finding other ways to generate income:
Create a feasibility checklist. Cascade Alliance encourages organizations to conduct a study to determine whether they are capable of running a business. For instance, groups interested in mattress recycling need to make sure they’ll have a steady supply of mattresses, have enough warehouse space, and receive high-enough state-mandated fees per mattress to sustain operations. (Cascade recommends a $10-per-mattress minimum.)
Be flexible. Groups should be open to embracing a range of revenue sources, regardless of the business they choose. Those interested in recycling should consider a multitude of reuse businesses — including appliances, books, furniture, thrift stores, and used cars — or even another type of business altogether. Diversifying is critical. “You don’t want to depend on one kind of income forever,” McDonald says. “When we had to shut down our bricks-and-mortar stores during Covid-19, we had some other streams to help us until we can bring those back.”
Treat your earned-income operation like a business. Nonprofits need to think hard about the bottom line — all the time. Groups should immediately start working toward generating revenue, but should also be patient since it may take two years or more to end up in the black. Keep a close eye on market changes, too. Ever-fluctuating markets are the norm in the recycling and reuse business.
Don’t skimp on management. Try to find well-qualified people with some experience running a business, Cartledge says. Don’t expect people returning from prison or others without business experience to step into management jobs — at least not right away.
Create a “full-circle” operation. Any earned-income venture should mirror an organization’s values and support its social-services work in as many ways as possible, including ecologically, financially, politically, and socially.
For groups in the Cascade Alliance, McDonald’s advice has proved invaluable. Diane Cohen, executive director of Finger Lakes ReUse , in Ithaca, N.Y., a Cascade member, says, “The boost that Terry has single-handedly given the industry is heroic.”
