2. BIOCYCLE APRIL 2011
I
N the U.S. today, increasing de-
mand for quality compost and en-
gineered soils from a growing spec-
trum of users cannot be met with
the current processing capacity.
Developing the infrastructure of
the composting industry to meet
these growing market needs will require
significant financial investment along
with the continued support of local,
state and federal government.
As discussed in Part 1 of this article se-
ries (see “Stand-Alone Industry Code For
Composting,” December 2010), estab-
lishing a stand-alone industry code for
composting within the North American
Industry Classification System (NAICS)
is an important step in facilitating in-
dustry growth. Quantifying and tracking
the sector’s economic contributions (e.g.,
revenue and employment) through
stand-alone NAICS coverage will pro-
vide information critical to educating in-
vestors, municipalities and policy-mak-
ers on its significance and potential.
Requests for changes to the NAICS
code are submitted to the Economic
Classification Policy Committee
(ECPC), which reviews and research-
es proposed changes before making of-
ficial recommendations to the Office of
Management and Budget (OMB). A
request for a stand-alone NAICS code
for composting must set forth: 1) evi-
dence that the composting industry is
substantial enough to warrant the
costs associated with its tracking and
reporting; and 2) a recommendation
on where within the NAICS code the
industry should reside.
The process of gathering economic
data and preparing a formal proposal to
the ECPC will be described in further
detail in Part 3 of this article series,
which will put forward an industry ac-
tion plan and timeline. The goal of Part
2 is to provide a foundation for an in-
dustry-wide discussion and debate on
the important question of where within
NAICS composting should reside.
DIVERSE INDUSTRY
The composting industry provides
both products and services. At the front
end, composting is an important dispos-
al and treatment service to local com-
munities for recycling organic matter.
On the back end, composters manufac-
ture nutrient-rich soil amendments,
which are essential ingredients for im-
proved soils, healthy plants and green
and sustainable landscapes.
As a result of this diversification,
composting appears within several
NAICS codes (although never on a
stand-alone basis), such as those men-
tioned in Part 1 of this article series:
325311 Nitrogenous Fertilizer Manu-
facturing, 325314 Fertilizer (Mixing
Only) Manufacturing, 562219 Other
Nonhazardous Waste Treatment and
Disposal, among others. This diversi-
fication also means that a new stand-
alone composting code could sit with-
in a variety of economic sectors. The
three considered in this article in-
clude: 56 Waste Management, 31-33
Manufacturing and 11 Agriculture.
ESTABLISHING EVALUATION CRITERIA
To understand the implications (both
benefits and disadvantages) of classifi-
cation within a sector, we conducted in-
dependent research as well as inter-
views with industry leaders and
experts (e.g., composting facility own-
Where does the
composting
industry belong
within the North
American Industry
Classification
System? Article
examines the
options, analyzes
alternatives using
a common set of
criteria and makes
a preliminary
recommendation.
Part II
Andrew C. Kessler,
Amy McCrae Kessler
and Cara Unterkofler

3. BIOCYCLE APRIL 2011
ers and operators, industry consul-
tants, representatives from the ECPC,
EPA, state regulators). To provide con-
sistency, each sector was evaluated on
the basis of five criteria.
Primary Business Activity Fit:
NAICS groups establishments into in-
dustries according to similarity in the
processes used to produce goods or ser-
vices. While the NAICS website specif-
ically states, “Ideally, the primary busi-
ness activity of an establishment is
determined by relative share of produc-
tion costs and/or capital investment,” it
also acknowledges that in practice, oth-
er variables such as revenue, value of
shipments or employment are used as
proxies. This criterion is meant to mea-
sure how well a sector fits with the pri-
mary business activity of a typical com-
posting facility.
Consistency With NAICS Frame-
work: As stated in Part 1, the OMB at-
tempts to maintain time series conti-
nuity and cross-border consistency to
ensure that trends can be identified
and analyzed over time and across
country lines. The purpose of this cri-
terion is to evaluate how consistent a
proposed new stand-alone NAICS
code is to this objective.
Industry Positioning: Where the in-
dustry is positioned can influence how
composting is viewed by key stakehold-
ers. Affiliation with public policy themes
and goals with significant long-term mo-
mentum could be advantageous. This
criterion is meant to measure how bene-
ficial being classified within a particular
sector could be to the industry from an
image and branding perspective.
Consistency With Regulatory Percep-
tions: While NAICS was developed and
is maintained for statistical purposes, it
is frequently used for various adminis-
trative, regulatory, contracting, taxa-
tion and other nonstatistical purposes.
This criterion is meant to measure how
consistent a proposed new stand-alone
NAICS code is with how composting is
currently perceived and treated by reg-
ulators — as well as what regulatory im-
plications might result from the cre-
ation of a new stand-alone code.
Consistency With International Clas-
sification Schemes: This criterion is
meant to measure how consistent a pro-
posed new stand-alone NAICS code for
composting is with existing interna-
tional classification schemes (e.g., the
UN International Standard Industrial
Classification System (ISIC), the Euro-
pean industry standard classification
system, etc.).
THE ANALYSIS
Results of our analysis by those five
factors is graphically depicted in Fig-
ure 1, as well as discussed in this sec-
tion by the three sectors evaluated:
Waste Management, Manufacturing
And Agriculture.
Waste Management
Composters provide an important dis-
posal and treatment service for discard-
ed organic matter, including portions of
the MSW stream, biosolids, agricultural
waste and industrial organic by-prod-
ucts and waste streams. In exchange for
these disposal services, composters
charge gate fees, which can and often do
represent a significant portion of a com-
poster’s overall revenues. Some com-
posters are vertically integrated and
also provide hauling and carting ser-
vices directly to waste generators for the
organic fraction of their waste stream.
Therefore, when evaluating what
should be considered the primary busi-
ness activity of composters, the disposal
service (including in many cases the
pick up and transportation aspect) must
be considered.
From a NAICS consistency perspec-
tive, composting is currently mentioned
within the Waste Management sector as
part of 562219 Other Nonhazardous
Waste Treatment and Disposal, “...the
combined activity of collecting and/or
hauling of nonhazardous waste materi-
als within a local area and operating
wastetreatmentordisposalfacilities(ex-
cept landfills, combustors, incinerators
and sewer systems, or sewage treatment
facilities). Compost dumps are included
in this industry.” However, providing
disposal services for the purpose of sourc-
ingfeedstockisnotinandofitselfthepri-
mary objective of a compost facility. The
primary objective is to take these raw
materials and convert them into compost
and soil amendments. For this reason,
composting is also currently recognized
and referenced within the manufactur-
ing sector of NAICS.
From an industry positioning per-
spective, there appear to be few benefits
associated with being categorized with-
in the Waste Management sector. First,
it would seem advantageous for the
composting industry to avoid being
grouped with other waste disposal facil-
ities (e.g., landfills and incinerators)
that are commonly met with strong “not
in my back yard” opposition. While man-
aging waste sustainably is becoming
more of a concern to policymakers, even
traditional waste management compa-
nies strive to deemphasize their waste
disposal activities by emphasizing other
aspects of their businesses such as re-
source recovery services.
Because composters handle regulated
materials (e.g., putrescible waste,
biosolids) their activities are permitted
through state and local solid waste man-
agement or environmental authorities.
Accordingly, it is not surprising that in-
teraction with regulators is primarily
associated with that part of a com-
poster’s operations. However, at some
point in the compost manufacturing
process, the materials no longer possess
the characteristics that caused them to
be regulated in the first place. The front-
end regulation of a composter’s activi-
ties, therefore, should not necessarily
determine where within NAICS the
composting sector should reside.
This sentiment was echoed by a num-
ber of regulators we interviewed, in-
cluding Stephanie Busch, Environmen-
tal Program Manager for Georgia’s
Environmental Protection Division.
“Agencies regulate solid waste handling
at compost operations to ensure the pro-
tection of the air, water and land,” said
Busch. “While compost operations pro-
cess solid waste, this does not necessar-
ily mean that Waste Management is the
appropriate category from a NAICS per-
spective. NAICS groups businesses by
the products they produce or the ser-
vices they provide, not on how they han-
dle the raw materials that are used in
their processes. Compost operations
produce a valuable product — I believe
the classification code should reflect the
manufacturing process and products
produced.”
From the standpoint of consistency
with international standards, placement
of composting within the Waste Man-
agement sector does appear to fit rea-
sonably well with several important in-
ternational classification schemes. For
example, within ISIC, composting is
prominently mentioned under ISIC
94339 Disposal of Non-Hazardous Waste
Figure 1. Summary of analysis of possible NAICS sectors for composting industry

4. BIOCYCLE APRIL 2011
By Means of Composting; although com-
posting is also mentioned under ISIC
34654 Excreta of Animals Useful for Ma-
nure/Fertilizer and Fuel Preparation
and ISIC 34659 Fertilizers Not Else-
where Classified. The United Kingdom’s
Standard Industrial Classification of
Economic Activities (UKSIC) classifies
waste from agriculture, horticulture,
aquaculture, forestry, hunting and fish-
ing, food preparation and processing as
“waste” and therefore, composting facil-
ities are considered waste disposal and
treatment facilities. The same is true for
other European countries.
Manufacturing
If the primary business activity of an
establishment is determined by relative
share of production costs and/or capital
investment, then Manufacturing very
accurately captures what composting
does — produces engineered soils and
soil amendments. “Composters create
product in the same way that TV manu-
facturers create TV sets,” explains Craig
Coker, a Principal in the firm of Coker
Composting & Consulting in Roanoke,
Virginia. “They obtain all the parts nec-
essary for a TV (the frame, glass, special
bulbs) and then create a TV and sell it.
The only difference is that composters’
raw materials are considered ‘waste’ by
others and for that reason, composting
has been historically thought of as a
waste management solution.”
From a NAICS consistency perspec-
tive, a new stand-alone code under the
Manufacturing sector would be a very
good fit. Currently, composting is per-
haps best captured within NAICS
325314 Fertilizer (Mixing Only) Manu-
facturing. A stand-alone code for com-
posting within the Manufacturing sec-
tor, therefore, would not represent a
material change in its current position.
Indeed, it may be as simple as consoli-
dating references to composting into a
new code within the Manufacturing sec-
tor. In addition, based on our discus-
sions with John Murphy, the Chairman
of ECPC, we believe that ECPC consid-
ers composting as more appropriately
classified within Manufacturing than
any other sector.
From an industry positioning per-
spective, being associated with the
Manufacturing sector offers the op-
portunity for the composting industry
to associate itself with a broadly sup-
ported public policy objective — en-
couraging and supporting manufac-
turing in the U.S. “Positioning
composting as a manufacturing indus-
try is attractive to politicians on either
side of the aisle, and manufacturing
and jobs are important in any eco-
nomic or political climate,” notes Mau-
reen Walsh, Director of Federal Gov-
ernment Relations at the lobbying
firm ML Strategies, LLC. “It’s a posi-
tion with strong momentum that is
likely to grow on a sustainable basis
going forward.”
While interaction with regulators is
primarily associated with the handling
of regulated feedstocks, additional regu-
latory interaction related to the finished
product is required depending upon a
composter’s product objectives (e.g.,
seeking fertilizer or organic certifica-
tion). Based on our discussions with
both compost manufacturers and regu-
lators, establishing a stand-alone com-
posting code within the Manufacturing
sector could help minimize situations
where composters are pulled into more
onerous waste management compliance
requirements than necessary.
From the standpoint of consistency
with international standards, placement
of composting within the Manufacturing
sector is less common than placement
within the Waste Management sector.
However, composting is categorized
within the Manufacturing sector by the
Australian and New Zealand Standard
Industrial Classification (ANZSIC).
ADVANCING COMPOSTING, ORGANICS RECYCLING
AND RENEWABLE ENERGY
419 State Avenue, Emmaus, PA 18049-3097
610-967-4135 • www.biocycle.net
Reprinted From:
April, 2011

5. Agriculture
Given the importance of compost to
water conservation and soil fertility,
categorizing composting within the
Agriculture sector may seem like a
good fit. However, when evaluating the
fit within the context of primary busi-
ness activity, such classification be-
comes difficult to justify. Although
farms increasingly use engineered
soils and soil amendments, composters
are not typically in the business of
growing food, and farming is only one
of many users of compost. Commercial
composters are, instead, in the busi-
ness of manufacturing an important
product that can enhance soil fertility.
From a NAICS consistency perspec-
tive, composting is currently not men-
tioned within the Agriculture sector.
The closest reference to composting
within the Agriculture sector is NAICS
1151 Support Activities for Crop Pro-
duction. However, compost is a product
used to prepare soil for crop production
not an activity in itself such as “plant-
ing and cultivating.”
From an industry positioning per-
spective, classification under the Agri-
culture sector could be beneficial to
the industry in that Agriculture typi-
cally receives strong political and eco-
nomic support.
In the eyes of regulators, the connec-
tion between composting and agricul-
ture is generally limited to on-farm
composting operations. These are often
relatively small volume operations and
accordingly less regulated.
From the standpoint of consistency
with other international standards, we
were unable to find any examples
where composting was classified under
Agriculture.
PRELIMINARY RECOMMENDATION
Based on our analysis and the crite-
ria used to evaluate the classification
options, we believe that a stand-alone
NAICS code for composting should re-
side within the Manufacturing sector
for the following reasons:
• Best represents the primary busi-
ness activity of composting.
• Composting is already well repre-
sented within the Manufacturing sec-
tor — it just needs to be placed into a
stand-alone code.
• Offers an opportunity for the com-
posting sector to be affiliated with a
strong and popular public policy
theme.
• Could yield regulatory treatment
benefits over the long-term.
• Has precedent within other inter-
national industry code schemes.
The purpose of this analysis is to
stimulate debate and discussion.
Stand-alone industry code recognition
would be an important positive devel-
opment for the composting industry
and proper placement within the code
will optimize the benefits.
Having discussed the importance of a
stand-alone code in Part 1 and where
within the code composting should reside
in Part 2, we will establish a road map to
NAICS recognition in Part 3. This road
map will include a suggested action plan,
timeline and process for facilitating par-
ticipation of all industry stakeholders.
We will also estimate the financial cost
associated with this undertaking and
suggest ways for the industry to fund
this important objective. Ⅵ
Andrew C. Kessler (andrew.kessler@
turningearthllc.com) is a Managing Di-
rector and Founding Member of Turning
Earth, LLC, an organics recycling com-
pany focused on producing biogas, com-
post and sustainable agriculture. Amy
McCrae Kessler (amy.kessler@turning
earthllc.com) is General Counsel and
Founding Member of Turning Earth,
LLC. Cara Unterkofler, formerly with
Closed Loop Environmental Solutions in
Australia, is now seeking opportunities in
the D.C. Metro area.
BIOCYCLE APRIL 2011