CUTTING EDGE BUSINESS

Jennifer Holmes

THE COUNTRY'S HEIGHTENED security concerns are not limited to airports and borders. The theft of personal information in the form of records being stored by companies has businesses looking for ways to protect their integrity and customers. And this increased demand to destroy financial records, e-mails, computers and other data is creating business opportunities in the solid waste industry.

An estimated 9.3 million Americans were victims of identity theft in 2004, accounting for annual fraud costs of $52.6 billion and making identity theft the fastest-growing form of consumer fraud in the United States. The solution being implemented by most companies to prevent that type of problem is document destruction. Several states, such as Texas, Arkansas and New Jersey, have passed laws within the past few months to make shredding mandatory; companies not already shredding will comply or face stiff fines. For example, the Texas code signed into law in June states that all businesses must shred or otherwise destroy documents being disposed of that contain any personal information, or face a civil penalty of $500 per record — a hefty fine for hospitals or other institutions that maintain thousands of records.

Waste disposal companies willing to learn the document shredding business and provide top notch customer service can capitalize on the increasing demand to regularly shred sensitive information. “[Our] membership has tripled in the last five years,” says Bob Johnson, executive director of the Phoenix-based National Association of Information Destruction Inc. (NAID). “Mature companies are reporting a 20 percent annual sales growth,” he adds.

Of all NAID member companies, Johnson says that roughly one-third are solely shredding companies, and half are capable of both recycling and shredding. As the document destruction business continues to expand, NAID is heavily involved in attempting to pass legislation that will help document destruction companies become an integral part of best business practices.

On June 1, 2005, the Federal Trade Commission (FTC) implemented its Fair and Accurate Credit Transactions Act (FACTA), requiring any person or business that operates under the FTC's jurisdiction to destroy all discarded personal information contained in or derived from a credit report. However, Johnson says that while that is a good start, FACTA does not completely address all consumers' needs.

NAID is helping to push a second-generation law that would require the destruction of all personal information — Social Security numbers, driver's licenses, financial account information — by schools, businesses or any organizations that keep records that could be used for identity theft.

“There were 22 different bills between the House and Senate last month, but one is slowly emerging,” Johnson says. “The Senate has revised it several times, but I think we can expect something before the end of August [2005].”

If and when the law passes the Senate, the FTC will have a year to determine the rules companies must follow, making summer 2006 the time when the document destruction industry could really take off. While the new law will pre-empt all state legislation, more state laws likely will be passed within the next year, helping to maintain the steady growth in this burgeoning segment of the industry. Johnson says that consistent document destruction standards are needed and reinforces that idea noting that the only way to maintain security is to shred everything, all the time and in the same way.

Destruction Behemoth

Toronto-based mobile document-destruction company Shred-It has benefited from its consistent shredding service. Founded in 1988 by President and CEO Greg Brophy, the once-small business that had its first truck built and designed by Brophy now operates 900 shredding trucks, providing on-site document destruction service to more than 150,000 clients worldwide. In addition, the company boasts 130 branches on five continents including North America, South America, Asia, Africa and Europe. In the past five years, the company has added nearly 40 branches and shows no signs of slowing.

“It's a fascinating industry because global identity theft is the fastest growing crime and companies are looking to document destruction to protect their customers, suppliers and trade secrets,” says Bonnie Shettler, vice president of marketing. “Organizations need to make sure sensitive information doesn't fall into the wrong hands. We help guarantee that doesn't happen.”

As a measure of market demand, company sales have increased 60 percent, year over year, since 1988. Some of Shred-It's clients include bank branches, hospitals, police forces, universities and international security agencies that require shredding state secrets and destroying files. In total volume for 2004, Shettler says the company recycled enough shredded tonnage to produce the equivalent of 9 million trees.

The company services its clients using an in-truck shredder to destroy files, documents, court cases and counterfeit materials, as well as cardboard, paper clips, CDs and diskettes. Customers place documents into different sized bins and, during pickup, are invited to watch the shredding. After the documents are destroyed, the material goes to their recycling facilities where it is baled and delivered to recycling mills. The company then gives its clients a Certification of Destruction as proof of compliance.

Keeping up with the quickly growing business is one of the biggest challenges the company faces. “We are striving to stay ahead of the growth curve, and it's tough,” Shettler says. “The global economy is growing at such a quick pace, we are getting literally thousands of new customers per week.”

Most of these new customers are referrals from other clients. Yet in the race to keep up with increased demand for its services, Shettler says the company strives for a 95 percent satisfaction rate. For companies looking to come into the industry, catering to the customer is essential, she says.

“Customer service excellence is absolutely sacred,” Shettler says. “That is why we take such care in our hiring, to make sure that we choose people that understand the company values.” After all, “the customer service representatives that drive our trucks are the face of the company,” she adds.

Capitalizing on Opportunity

Gardena, Calif.-based Document Destruction Inc. (DDI) agrees that catering to the customer is essential to growing a document destruction business. Company President John Newman has more than 39 years invested in the industry and has seen business ebb and flow with economic and political changes.

“During the aerospace boom of the ‘80s, we couldn't take on any new customers we were so busy,” he says. “We were working 20-hour days and could barely keep up. Then, it was like they turned a faucet off overnight.”

Today, the company shreds approximately 200 tons per month in its mobile units and Gardena plant, and has a client list that includes the local bureau of the FBI, as well as several Indian casinos — all acquired by word-of-mouth and local advertising efforts, according to Newman.

DDI also offers a service called Document Express to homeowners who would like to destroy information either from current or past businesses. The company gives those customers two or three boxes for the documents, and after on-site or in-plant shredding, DDI bales the paper then sends everything to a recycling plant where they repulp the paper for re-use.

DDI also acts as an intermediary for companies looking to dispose of items such as cosmetics, liquid waste and batteries. The company provides the collection service and taps a list of vendors it has worked with to assist in destruction and disposal. Newman has found a new growth area for his business, destroying computers, printers and other outdated machinery that businesses do not want resold or reused. After disposing of the electronic waste, the company provides a certificate of destruction for shredding and can give its clients pictures and videos of crushing the materials as further evidence for their files.

“Companies are sort of in an educational state now,” Newman says referring to the fact that many of his customers are still learning about the regulations and determining what document destruction services they need. “People now are just starting to realize that they need to comply, and our biggest challenge is getting people aware.”

One of the most important ways a document destruction company can help in that education process — and potentially build a customer base — is by showing a commitment to protecting the customer. As companies start to comply with the law, they will look to the relationships they have formed and look for a shredding vendor that promises secured destruction.

Slow and Steady

Because the document destruction business has experienced slow but steady growth, brothers Craig and Joel Litman are well suited for an enterprise that requires endurance. Craig, a long-distance cyclist, and Joel, a marathoner, operate a document destruction operation. Initially, the pair formed Texas Recycling/Surplus, a recycling company, in the early 1980s.

The original company had a shredding division, but because of the increased demand for that service, the two expanded in 2003 and created a subsidiary, called Action Shred. The company offers on- and off-site shredding, providing its clients with a written certification and the opportunity to witness their materials' destruction.

“We're taking baby steps,” says Joel Litman, Action Shred's co-owner and president. “Some dynamics are different than recycling, and we realize it's going to take some time.”

Barely two years old, the Dallas-based operations cover an approximately 100-mile radius in the North Dallas area. The company's client list includes law firms, large corporations, mom-and-pop outfits, defunct businesses and retirees looking to discard old personal and business documents.

While the volume the company shreds varies from month to month, it has a built-in advantage of having a recycling partner, rather than using a third-party vendor to recycle the pulp. “If the customer wants to shred it, we shred it,” Joel says, “but we give them [other destruction] options.”

Like others firms in the document destruction industry, the company depends on its reputation as well as a combination of word of mouth, its Web site and mailings to attract business. It has been challenging to convince people to shred in the increasingly competitive market, Joel says.

“Shredding companies are pushing it, but it's not like a seatbelt law that affects the entire community,” he says. “They either don't know or are just becoming compliant.”

To help grow their business, the Litmans say they have joined NAID. Business is expected to surge in the coming years, they say, but they are realistic that the company must offer a consistent quality of service as they grow.

When getting into the document destruction business, “expect to crawl before you walk,” Joel says. “Expect to walk before you run.”

Jennifer Holmes is a Waste Age contributing writer based in Chicago.