The sortation sector plays a crucial role in the waste management and recycling industry, focusing on the segregation of waste materials for recycling and disposal. This sector is vital for efficient resource management, aiding in the recovery of valuable materials, reducing landfill waste, and supporting environmental sustainability. Sortation facilities, commonly known as Material Recovery Facilities (MRF) can be classified in terms of input, and nature of processing. Clean MRFs receive clean, or source separated waste and are usually established in communities where a high degree of segregation at source is implemented. Dirty MRFs receive non-source separated waste and are more common worldwide. MRFs can be fully manual, semi-automated, or fully automated. Advanced sortation technologies, including automated sorting lines, optical sorters, and AI-driven systems, are adopted in high-income countries to improve the efficacy and accuracy of waste sorting and are increasing considered in low-middle income countries where robust waste collection infrastructure already exists.

In low-middle income countries, particularly in areas proximate to established recycling centres and where waste collection services are in place, there is potential for the emergence of specialized low technology waste sortation enterprises. These businesses, often operating as intermediaries, bridge the gap between informal waste collectors and formal recycling facilities. The process typically involves multiple stages of intermediation, where each level contributes to the bulking, sorting, and cleaning of materials, gradually preparing them for recycling. Despite their crucial role in integrating the informal sector into the recycling chain, these aggregators often face constraints in terms of scalability and operational efficiency, particularly when considering the scale of municipal-level waste management requirements. In addition since municipalities in low-middle income countries tend not to engage in recycling, these intermediaries are often not integrated within solid waste planning.

Costs and revenue model

Main costs centres in the sortation sector include the acquisition and maintenance of sorting technology, labour costs, facility operation, and logistics. Investment in sorting machinery can represent a significant portion of the capital expenditure particularly in high income countries where automation is prevalent due to high labour costs. In semi-automated systems, sorting machinery includes conveyor belts and industrial balers. Advanced sorting machinery in fully automated systems include optical sorters, infrared scanners, and robotics. Most long-term financial analyses conducted in high income countries show that predominantly mechanised sortation is more cost-effective than manual sorting at large scales of operations because of high labour cost. Investment decision in this sector should carefully consider local labour costs and the quantity and quality of the incoming waste stream.

Recent and ongoing developments in AI, while promising, have not yet achieved widespread scalability. Labour intensive semi-automated systems, prevalent in low-middle income countries often achieve higher output quality then in fully automated MRFs. Lower labor costs in these regions make human-operated sortation systems not only financially feasible but also operationally advantageous.

The primary revenue stream comes from the sale of sorted recyclables to processors and manufacturers. Additional revenue may be generated from service fees charged to municipalities or private companies for waste processing. Some advanced sortation facilities in high income countries also provide waste data analytics and consulting services, offering municipalities and private sector insights into waste composition and recycling efficiencies.

Market development

The sortation sector in high income countries has witnessed a shift towards automation and digitalization. Technologies such as AI, machine learning, and robotic sorting are more prevalent, increasing the efficiency and accuracy of sorting while reducing labour costs. Examples of companies making considerable advancements in this area include: Grey Parrot (UK-based AI computer vision systems for sorting facilities providing waste analytics to increase recycling rates and introduce accountability in the waste value chain); AMP Robotics (US-based company whore robotics system automates the identification and sorting of recyclables from mixed material streams); Zen Robotics (Finnish supplier of intelligent sorting robots for the waste industry).

The increasing focus on sustainability and circular economy principles is driving the demand for more effective and advanced sortation solutions, creating opportunities for innovation and market growth.

Recent trends indicate adoption of automated sortation technologies in low and high middle income countries including in Latin America. For example TOMRA, a Norwegian collection and sortation equipment manufacturer, has partnered with Ecoparque Pernambuco, a sortation plant in Recife, Brazil, to supply advanced sortation equipment.

For advanced automated sortation solutions, established recycling industry actors are already actively investing in advance technologies, looking to improve operational efficiency. In addition, large scale collection systems with stable feedstock can also invest to vertically integrate their operations and unlock values through operational synergies.

Large scale advanced sortation infrastructure projects can meet the criteria necessary for concessional capital deployment through blended finance interventions.

For manual and semi-automated sortation solutions, evidence in low-middle income countries suggests the sector is highly fragmented operating on a smaller scale. Such aggregator businesses often act as middlemen between informal collection systems and recyclers. The sector is ripe for change as technological advances and improvement in waste regulation can improve the operational performance as well as the safety and environmental standards of these largely unregulated operations.

In emerging markets collection and sortation systems could receive some support in the form of philanthropic or government grants, ODA. Technical assistance is often used to provide technical expertise to the local stakeholders to increase recycling, build economically sustainable programs, creating new jobs and reducing the harmful impact of mismanaged waste on public health.

Under specific enabling conditions, development finance (DFI / MDB) can also play a role in the financing of waste sortation systems. Development finance institutions often provide favourable payment terms, which can help mitigate issues related to low expected return on investments and long payback periods.

• Market Volatility: The value of recyclables is subject to market fluctuations, posing a risk to the fiscal predictability of sortation operations.

• Collection Infrastructure Dependency: Large-scale, bankable sortation infrastructure is contingent on comprehensive and mature collection operations, often a limiting factor.

• Investment Viability: The interdependence on upstream collection systems makes standalone sortation investments challenging.

• Automated System Economics: In low-to-middle-income countries, the cost-effectiveness of automated sortation systems is often undermined by lower labor costs, affecting their economic viability.