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Investment Thesis

Figure 1: 5-year Return of WM (Black) & the S&P 500 (Green)

We are recommending a ​BUY ​on Waste Management (NYSE:WM) with an $88.00 target price
representing an 8% upside from the current stock price of $81.52 on June 29th, 2018. We
believe Waste Management is a fundamentally strong long-term company with a strong
competitive advantage, is shareholder friendly, and is resilient during economic downturn. We
believe the market is mispricing the stock due to uncertainties surrounding its recycling business
due to new Chinese regulations on recycling. We believe these uncertainties that have caused
the stock to drop approximately 10% from its peak in 2018 signal a great entry point for a great
long-term investment.

Stock Screens and Finding Waste Management

When looking for the next company to research to be added to the portfolio, we considered
several different criterion. We wanted a company that made it through our initial screens, traded
at a fair value, had strong ESG practices, and was less sensitive to economic downturn. When
running our screen, WM fit 4/5 stated criterion:
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Factor Waste Management APMP Target Industry Average

ROE 35.90% Above Industry 16%

5-yr EPS Growth 26.7% Over 15% N/A

Dividend Yield 2.28% Over 1.5% 1.5%

Debt/Equity 1.65x Under 0.5x 1.1x

Current P/E 17.6x Under Industry 18x

Table 1:APMP Stock Screens

The only cause for concern was the high debt/equity ratio. We took a deeper dive into Waste
Management’s balance sheet.

Ratio 2017 2018

Current Ratio 85% 80%

Interest Coverage 6.10x 7.26x

CFO/Debt 7.6% 8.1%

Table 2: Leverage Ratios

In total, Waste Management holds $9.9 billion in debt on its balance sheet, a high number they
have held for a long-time. Another concern is they also fall slightly below a prudent level of
solvency by not holding enough assets to fully service its debt. However, they have a very
comfortable debt service coverage ratio over 7x. Because WM operates in a very stable, mature
industry, they can often issue more debt rather than equity to bring down their cost of capital.
This is often the case with large cap companies. Because of WM’s stable free cash flow and
steady operating environment, we don’t see the leverage as a growing concern for the time
being.

Macroeconomic Fundamentals
With monetary policy tightening and inflation heating up in the US, it appears we are late in the
economic cycle. Being long-term focused, we wanted to identify a company that could sustain a
downturn with the elevated risks present in the US. Waste Management’s core business is tied
to the disposal of garbage; an industry that may stagnate during a downturn, but will not be
going anywhere any time soon. In assessing how to find a strong, defensive stock, we came
across the paper “Corporate Conundrums: How companies and investors should respond to a
rising rate environment” by Goldman Sachs. The two major conclusions made in this paper are
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that industrial and financial stocks are predicted to be the strongest performers going into
2018-2019, and they showed that historically companies that invest in R&D and capex when
rates are rising tend to outperform the market. Waste Management appears to be a strong
candidate as they fall in the industrials sector and have been investing strongly in growth capex.
More specifically, WM has been investing into creative new ways to utilize garbage. In 2017,
they invested $1.5 billion of capex into research into harnessing landfill gas to power homes and
convert it into fuel to use in for their fleet.

Company Overview
Waste Management (NYSE: WM) is North America’s leading provider of comprehensive waste
disposal and environmental services. WM partners with residential, commercial, industrial, and
municipal customers to provide comprehensive waste management from disposal to collection
while concurrently using the waste as a renewable energy source. WM currently operates 244
solid waste landfills and 5 hazardous waste landfills around the US and Canada.

Figure 2: Waste Management North American Operations

Source: Waste Management Presentation - March 6, 2018

Revenue is recognized from fees

charged for ​collection​​, ​transfer​​,
disposal​​, ​recycling​​, r​esource
recovery​​, and ​sale of commodities
from their gas-to-energy operations.
To put it simply, Waste Management
collects waste from homes and
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businesses across North America and creates new and innovative ways to reuse it. For
example, it will take all the recycling it receives and collects, compacts it into cubes to be resold
abroad. It will collect fees all along the way from picking up the recycling, taking the recycling off
the hands of other businesses, and finally the selling the product to China.

Figure 4: Revenue Breakdown

REVENUE STREAM BUSINESS EXPLANATION

● WM provides steel containers that can be lifted mechanically – reducing the number
of operator required per container to one
Commercial Collection
● Typically, a three-year service agreement with fees influenced by frequency, type,
and other market factors

● 3-8 year contracts are granted by municipality or homeowners’ association

Residential Collection
● Individual monthly subscription for households

● 244 solid waste landfills and five secure hazardous waste landfills in North America
Landfill ● Business activities include excavation, construction of liners, continuous spreading
and compacting of waste, covering of waste with earth

● 305 transfer stations in North America where solid waste is consolidated and
Transfer
compacted to reduce volume

● Collect recyclable materials (i.e. paper, cardboard, metals, plastics, glass,

Materials Processing construction and demolition materials) and direct materials to one of 90 material
recovery facility to be processed and recovered for resale

Recycling Commodities ● Market and resell recycling commodities processed in the facilities globally

Recycling Brokerage
● Manage and market third parties’ recyclable materials
Services
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Strategic Business
● Centralized customer service for billing and management of accounts
Solutions

● Construction and remediation services

Energy and ● Disposal of fly ash, residue from combustion of coal and other fuel stocks
Environmental Services ● In-plant services
● Specialized disposal services for oil and gas exploration and production operations

Table 3: Complex Revenue Breakdown

Competitive Advantage
Contractually Locked-In Clients
Waste Management operates in a highly regulated, mature, capital-intensive industry.
Companies wishing to enter the market would require negotiations and contracts with the local
government. There is also a revolving timeline at which these negotiations can take place as
WM’s service duration can be anywhere from 1 month subscription to 8 year long contracts.
Therefore, Waste Management can comfortably operate with little threat of new entrants in the
market.
Economies of Scale
As at December 2017, WM owns or operates 244 solid waste landfills and five secure
hazardous waste landfills. These landfill must meet federal/state/provincial/local regulations
every step of its existence. In addition to the landfills, WM owns or operates 305 transfer station,
90 Material Recovery Facilities that contribute to WM’s margins. Each types of facility is integral
to the overall processing steps and WM is able to leverage its wide network for greater reach.
Some of these facilities are also lent out to third parties.

WM has a market cap $35B, with the two

closest competitors, Republic Services (NYSE:
RSG) and Waste Connections (NYSE: WCN)
having market caps of $22B and $19B
respectively. The size and scalability allows
them to enjoy higher economies of scale,
stronger margins, and investment into future growth.

Return on Equity
The strongest advantage WM offers is how far ahead they are of the competition in terms of
return on equity. In 2018, WM saw an ROE of 34%, which is amongst the 95th percentile of the
industry. Whereas its two biggest competitors don’t even come close, with RSG and WCN
coming in at 16% and 8% respectively. Combine this with their low cost of capital, Waste
Management creates a great deal of value for shareholders.

Industry Overview
According to Save On Energy, the average American throws away approximately 4.4 pounds of
waste a every single day, which is approximately 1,606 pounds a year. The latest US population
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consensus stated that approximately 326.751 million people live in the US. So per year, the US
produces about 254 million tons of waste. To put this into perspective, if you lined up the
garbage it would reach 60.9 billion ft., long enough to reach the moon and back 25 times. To
make matters more interesting, a study conducted by the World Bank said the world is on pace
to produce 3x more waste annually by the year 2100. Where does this leave Waste
Management? On the frontlines of fighting this problem for North America. As a WM
shareholder, this is definitely not a bad problem to be on the forefront of.

US Waste Management Industry

Macroeconomic Factors
The waste industry is driven through the macroeconomic environment and is made attractive
through several compounding factors. Direct correlations exist between revenues with
consumer spending and construction starts. All else equal, as economic activity picks up, waste
generation also accelerates.

Figure 6 (left): Fed Funds Rate vs. WM Revenue (% Change)

Figure 7 (right): Construction Starts vs. WM Revenue (% Change)
Source: US Federal Reserve, US Census Bureau, WM Annual Report

Another primary driver is global commodity prices, as a portion of WM’s business involves
reselling plastic on the global markets. Falls in revenues in 2015 are a function of commodities
crashing and slower economic economic activity in Western Canada.

2008 Financial Crisis Performance

The 2008 global financial crisis was one of the worst economic crises in recent memory. It
serves as a great case study to see how WM can handle severe downturn. Waste Management
stock had fallen from $37 in mid 2008, to a low of $26 in mid 2009. The stock has made a swift
recovery and powered ahead to $80/share led by the US economy. During the most turbulent
periods, WM had still maintained an EPS around $2.00/share, grew dividends, and generated
over $1 billion in free cash flow every year quite comfortably. While one of the worst periods for
the US economy, WM showed no signs of financial struggle.
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Factor 2006 2007 2008 2009 2010 2011

Diluted 2.10 2.23 2.21 2.02 1.98 2.04

EPS

Dividends $0.88 $0.96 $1.08 $1.16 $1.26 $1.36

FCF $1.4B $1.5B $1.46B $1.21B $1.21B $1.19B

Table 4: Financial Crisis Performance

Unsustainable Landfill Model
There is little question that the current landfill model used within the waste disposal industry is
not a long term solution. Landfills are not only one of the most common waste management
options, they are arguably the most problematic. They release methane and carbon dioxide,
leech liquids that can contaminate underground water sources and soil, and naturally, require
incredibly large amounts of space. Eventually, these open pits will reach their capacity. Then
what? With an ever-increasing population, firms must come up with an innovative solution to
redirecting the amount of trash that is channeled towards these landfills.

Trend Towards Sustainable Waste Disposal

There is a shifting focus towards the reduction of landfills, complemented by government
regulations to reduce GHG emissions. Changing consumer dynamics coupled with even tighter
industry regulations means that firms wanting to remain competitive will have to further diversify
their business offerings into more than just solid waste disposal. Complementary business
segments that cater to sustainable waste management would allow firms for increased vertical
integration, differentiation, and cost savings. Adoption of advanced waste treatment facilities
such as recycling, incineration, composting, and anaerobic digestion will further complement a
firm's business outlook and better their competitive positioning. This shifting focus on
environmental well-being involves avoiding initial waste generation through sustainable
community and business practices, recovering materials and energy from waste into usable
products, and to treat any inevitable waste in the least damaging way for society.

Porter’s Five Forces

Threat of New Entrants: Low
● The US waste management industry is a capital-intensive business that is subject to
various government regulations (ie. RCRA, environmental regulations, long-term
municipality contracts)
● Companies looking to enter the playing field must not only negotiate contracts with local
and federal governments, but they would also require an extensive amount capital to
reach economies of scale
● New firms would have to obtain the right to specific assets, such as ownership of landfills
and the sewage systems to dispose of waste
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● These strong barriers to entry deter new entrants from encroaching on Waste
Management’s market share and largely eliminate the threat of technological change

Threat of Substitutes: Medium

● There is virtually no substitute for the disposal of solid waste; on a global scale, we are
on pace to be producing three times as much garbage per year by the year 2100
● Countries and municipalities have the ability to provide waste collection services but this
has been on a declining trend as local governments look to cut costs
● There is a growing trend towards more sustainable avenues of waste disposal; WM has
been integrating alternative disposal methods, recycling services, and a ‘zero
waste-to-landfill’ program for numerous years

Bargaining Power of Customers: Low

● On an individual consumer level, regional and municipal contracts tend to limit buyers’
options to just one or two waste operators
● Some companies, industries, and residences are choosing to develop the infrastructure
to deal with their own waste rather than to contract out; this route requires a significant
capital investment and is a relatively minimal threat

Bargaining Power of Suppliers: Low

● Waste Management’s suppliers are made up of machinery and truck manufacturers,
plastics and container companies, and other similar third-parties; they largely provide
undifferentiated products and give waste collection companies significant negotiation
power

Industry Rivalry: Moderate

● The solid waste industry in the US is made up of a small number of large players; Waste
Management, Republic Services, Waste Connections, and Stericycle, with the former
two occupying the majority of the market
● Firms operating in the solid waste industry must effectively secure contracts in order to
ensure continued presence in a specific region; this involves staying on top of
technological advances, the trend towards sustainable waste management, and
maintaining a competitive advantage over their direct competitors
● When operating within a such highly regulated industry, well-established firms with
scalable operations are able to overcome these regulatory barriers much more easily

SWOT Analysis
Strengths
● Largest and most operationally efficient waste management company in North America;
strengths the barrier to entry for new companies, as it’s a highly capital-intensive industry
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● Specialized pick-up lines for medical waste, hazardous waste, etc.

● Strong network of operations and capital-centric portfolio made up of collections
operations, transfer stations, active landfill disposal sites, waste-to-energy projects, and
landfill-to-gas sites

Weaknesses
● An unsustainable landfill model and the push towards greener waste management will
force WM to rethink its service portfolio and pivot from their current model

Opportunities
● Trend towards sustainable waste disposal providing insight into a new area of waste
management and future opportunities for research
● Constant demand for new ways to recycle and reuse waste; current US processing
capacities falls far below national demand

Threats
● New companies emerging in the recycling and green energy sector
● Waste disposal is a highly regulated industry; different laws in international countries
make it very difficult and expensive to enter global markets
● Many ever-changing government regulations within North America
● The unpredictable price and supply of fuel; fuel is needed to manage the company’s
collections and transfer trucks and can be affected by geopolitical developments, OPEC,
supply and demand for oil and gas, and environmental concerns

Financials and Valuation

Discounted Cash Flow Valuation
Revenue Breakdown
Revenue is broken down into 5 items and is generated through fees charged upon service.

Collection (64%):​ ​Picking up and transporting waste and recyclables to a transfer station for
commercial, industrial, and residential customers. Commercial and industrial customers are
typically obtained through negotiating 3-year service contracts with the underlying business.
Residential revenue recognition is negotiated through 3-8 year service contracts with the
underlying governing body.

Landfill (23%):​ Landfills are the primary depositor for solid waste in North America. WM owns
the largest landfill operation in North America with 249 total across the US and Canada.
Revenues are collected as third parties deposit waste at WM’s landfills
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Transfer (11%):​ Transfers include transfer stations where waste is taken to a landfill. As landfills
are located far away from urban city centres, an increasing demand for third parties to drop
waste at a transfer station to be taken to a landfill. WM currently operates 305 transfer stations.

Recycling (10%):​ Recycling includes collecting recyclable materials from customers,

repackaging, and selling them on the global commodity market. They also provide a recycling
brokerage service where WM will market recyclable materials for third parties, for a fee.

Other (12%):​ Other includes a variety of different streams including selling of landfill gas,
consultant services, and other specialized services.

Forecasting Revenue

Table 5: Pro forma Revenue Forecast

Overall, we are approximating an approximate 3.5% revenue growth going forward. Collection
revenues have remained the most constant with the highest growth rates coming out of
recycling and landfill. We are forecasting a temporary slowdown in China due to China’s recent
restrictions on the amount of material flowing into the country. This should only have an impact
on recycling revenues, as the repacked recyclables are primarily sold to China. We are also
forecasting continued improvements in margins going forward as management has done a great
job in cost cutting and improving efficiency lately.

Weighted Average Cost of Capital

Cost of Debt of ​2.7% ​was calculated through taking the weighted average of interest payments
outstanding multiplied by one minus the current US corporate tax rate of 21%.

Cost of Equity of ​6.6% ​was calculated using the capital asset pricing model. Using the US
10-year government bond yield of 2.9%, a beta of 0.68, and market risk premium of 5.5%. The
market risk premium was obtained through a 2018 KPMG study on the US.

WACC = 5.79%
With a ROE of 34% and an approximate cost of capital of 5.79%, Waste Management creates a
very large return for shareholders. This enabled them to initiate a share repurchase program in
2017 where they returned $1.5 billion to shareholders through share buybacks and dividend
increases.
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We assumed a long-term growth rate of ​2%. ​This was based on the predicted long-term real
GDP growth rates of both the US and Canada, as Waste Management’s revenue is closely tied
to both these economies. The forecast was from the Bank of Canada (see appendix).

Implying these assumptions, we arrive at a target price of $88.01/share.

Bear Case
We assume a long-term struggle in recycling revenue’s falling at 2% per year. Organic revenue
in all other segments grows at 2%. Return = ​-9%​​ Price = ​$74.23

Bull Case

Recycling revenues struggle in short-term, but compliance quickly aligns with China’s new
standards and makes a quick recovery. Organic revenues reach 4% in all other areas.
Return = ​17% ​Price = ​$95

Comparative Companies
The waste industry in the United States and Canada is dominated by 3 major players - Waste
Management, Waste Connections, and Republic Services. The next largest players fall below
$5 billion in market capitalization. Waste Management is the largest company, leads in
efficiency and profitability, offers the highest dividend yield, and is trading at par with the market
(17x is the market P/E). Also, they trade below the S&P 500 Shiller P/E ratio of 24x. We believe
this is a fair value considering how far ahead they are of their closest competitors. We also
conducted a comparable companies valuation (see appendix C), but thought it was an
inaccurate valuation based on the volatility and differences between the 3 companies currently.

WM WCN RSG WM
comparison

Stock Price $82.03 $75.30 $68.30 N/A

($USD)

Market Cap $35B $19B $22B Above

Current P/E 17.6x 34x 17x Below

EV/EBITDA 11.1x 16x 11x Below

EPS $4.64 $2.57 $3.94 Above

ROE 36% 8% 16% Above

Div Yield 2.28% 0.74% 2% Above

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Figure 8: Historical P/E Ratio vs. Stock Price

Entry Point
Currently, the stock has fallen slightly during 2018 despite remaining profitable, improving
margins, and paying back massively to shareholders. WM has been under pressure from
investors and fallen due to its high leverage in their recycling business to China. Compared to
the last 5-years, WM is actually trading well below their average valuation. We think this is a
strong entry point for a great stock. We believe the recycling fears are being overblown as
recycling only counts for 10% of total revenues. A lot of growth still exists in its other business
lines even in the worst case scenario.

Risk Factors
Legal Risks
Sales can depend on Waste Management obtaining contracts with the municipal government.
Some municipalities choose to create their own waste disposal service and remove private
entities. This can create pressure for WM as these municipalities can obtain cheaper financing
and lower prices due to the tax advantages they receive. Government regulation is heavy in the
waste disposal business. WM’s operations, especially their landfills, are subject to heavy
scrutiny. It is important for WM to maintain strong ESG policies as it has a direct affect on its
day-to-day operations.
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Economic Risks
WM’s operations are directly affected by economic activity outside of their control including
interest rates, consumer confidence, and access to capital markets. A slow economy results in
lower consumer spending and less waste created. Because fixed costs are high, a sudden
slowdown could significantly harm profitability.

Technological Risks
Growing pressure exists globally for firms to innovate and find new ways to reduce and reuse
waste. Companies are investing heavily into research that takes away from day-to-day
operations to address these issues. Waste Management must stay on-top of the technological
curve to ensure long-term success.

Financing Risk

Waste Management relies heavily on debt to finance its operations. Therefore, it’s important
they maintain stable free cash flows and a strong credit rating to keep costs of financing at a
competitive level. In 2018, they were successful in getting a credit rating upgrade from Moody’s
to Baa1 from Baa2. Moody’s stated further ratings increases could come if WM continues to
operate at this level.

Recycling Threat from China

In late 2017, China announced a plan to fight pollution that included cutting back on waste
imports, including mills that process foreign materials. This has put pressure on the recycling
industry in the US as China is the biggest buyers of reusable material worldwide. We believe
this Waste Management can recover well from this problem. In the short-term, recycling revenue
can be expected to fall. However, the problem isn’t the material, it’s that waste being mixed with
recycling causes harm to the environment. Waste Management has been investing in machines
to better sort materials, worked closely with Chinese officials, and been looking at systems to
encourage/discourage consumers from mixing recyclables with waste.

ESG Analysis
Through using our ESG Performance Report (see Appendix D) as a framework, we analyzed
Waste Management’s environmental, social, and governance standards. A moderate area of
risk was determined to be that of toxic waste emissions, and the associated stringent
regulations; all other company policies and practices were in line with industry norms.

Environment

Waste Management releases a comprehensive Sustainability Report every two years, along
with supplementary updated data annually. The report discloses measurable metrics regarding
target emissions reductions, renewable energy goals, and the operation of their landfills. In
2007, the company set target sustainability targets to be achieved in the year 2020. Each year
WM provides updates on the progress towards these goals, where certain processes need to be
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refined, and if certain goals need to be reframed based on changes to how they operate. Over
the years, WM pivoted it’s initial goal to measure the success of their recycling services in terms
of the weight of recyclables managed, to instead reporting recycling metrics to the measurement
of GHG emissions and energy savings. This change is a result of the increasing complexity of
recyclable materials being generated by American consumers; what was previously largely
paper-based output is now mostly made up of very complex plastics and various other
materials. All changes made in how WM reports their sustainability goals is consistent with the
US EPA’s Sustainable Materials Management program.

Waste Management has developed an Environmental Management Program (EMP) that aims
to achieve superior environmental performance. The EMP has specialized teams that deal with
environmental protection, groundwater protection, environmental engineering, emissions
management, and laboratory testing; these teams are built to ensure compliance with
environmental rules and regulations, enhancing communities where WM operates, and
protecting the environment.

Social

Within WM’s sustainability report, they outline their annual health and safety performance and
formal safety policy, ‘Mission to Zero’ that aims to eradicate all accidents and injuries through
knowledge building and coaching. WM provides a comprehensive safety training and skills
development program, covering all employees, including contractors and part-time workers.
They also track and disclose injury rates, vehicle accidents, and use monthly trend data to
identify areas that may require additional focus. WM falls short on specific best practices such
as linking health and safety metrics to executive pay and setting specific improvement targets.

WM also has a ‘Community’ section within their Sustainability Report, outlining the initiatives
they take on to enhance the environment, promote education, and improve surrounding
communities. The company has a large property portfolio of which unused plots of land are
leased out to farmers or turned into conservation sites to protect pollinators.

Governance

Waste Management upholds satisfactory performance regarding measures of board

independence and compensation, transparency of governance, and executive compensation
(reference Appendix). The company has a public policy regarding their corporate governance
guidelines and ethical standards; these tie into their commitment in putting shareholder interest
first. Executive pay is centered around performance. The company's long-term incentive (LTI)
program has two parts: PSUs, making up 80% of the award, and stock options, comprising 20%
of the award. The company does have female and minority representation on their board but
employs no formal policy in identifying director nominees.

Controversies
In the late 90’s Waste Management was discovered to have staged a massive fraud from the
years 1992 to 1997. With help from its auditor Arthur Andersen, the company's CEO and
executive team were able to alter their financial book records in order to meet high earnings
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targets. The fraud came to light after WM appointed a new CEO in 1997, who ordered a review
of their financial records. As a result, WM was forced to restate its earnings for that five-year
period by $1.7 billion - the largest restatement in corporate history at the time.

The corporation now thrives on an organizational culture built around superior customer service
and high ethical standards. WM has also instituted numerous policies and guidelines to direct
audit procedures, build a foundation for the health and wellbeing of their employees, and ensure
ethical and compliant behaviour at the highest levels of their corporate structure.

Recommendation
Waste Management has performed extraordinarily well in the last two years, seeing great
improvements in organic revenue growth and reaching an EBITDA margin over 30%. We
believe the market disruption caused by trade policy has reduced the stocks price to a strong
valuation. We believe WM will continue to thrive going forward, lead by robust growth from both
commercial and industrial waste volumes, as well as favorable economic conditions. The current
entry point is a rare opportunity to buy a great company at a fair value.
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Appendix A
Bank of Canada Economic Growth Predictions

Table 8: April 2018 Canadian Monetary Policy Report Global GDP Forecast
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Table 9: April 2018 Canadian Monetary Policy Report Canadian GDP Forecast

Appendix B
Financial Statement Model & DCF
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Figure 9: Financial Model

Appendix C
Comparable Companies Analysis
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Appendix D
ESG Performance Report
We recommend that the Portfolio Managers (“PMs”) continue their research on Waste
Management (“NYSE:WM”) based on its scoring of 39/55 within the ESG Performance Report.

ESG Performance Analysis

Environmental
Score Question

4/5 Does the company violate any national environmental laws in the jurisdictions in which
it operates?

No. Waste Management operates in a highly regulated industry and abides by all
national laws in the jurisdictions in which they operate. No material scandals in terms
of their environmental impact were identified during our research; WM has a more
robust management system in place than its peers and is believed to have the
capacity to be setting more ambitious improvement targets.

3/5 Does the company have a public policy which addresses their commitment to
environmental stewardship?

Yes; Waste Management does produce a sustainability report; released every two
years with supplementary and updated data being provided yearly

● Who has oversight of the policy?

Waste Management’s Environmental Department.

● How often is their impact assessessed?

Every two years; in off years, they update key data and content to the most recent full
year.

● Is it implemented into company operations?

Yes; WM is North America’s largest residential recycler and integrates product life
cycle management into its business operations. The report outlines different
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advancing technologies that are being used to reduce waste, the metrics of their
expanding recycling programs, GHG emissions resulting from operations, and safe
treatment and disposal options.

4/5 Is the company transparent about its environmental impact?

Waste Management does disclose metrics related to their environmental impact such
as tons of recyclables managed, fleet emissions, water-based energy production,
GHG emissions, and wildlife protection programs.

4/5 Are there any apparent environmental risks that could negatively affect the company’s
operations, reputation, or financial stance?

Operating mainly in North America, Waste Management faces very strict regulations in
relation to toxic emissions and solid waste management. Regulations can vary by
jurisdiction and are ever-changing, forcing companies operating in the space to
consistently adapt their procedures and disclosure methods. Managing toxic waste
emissions and staying in line with regulations does pose a risk to WM’s business; the
company does have an extensive system in pace to deal with these regulations and
far outpaces its peers and conducts frequent compliance audits across all locations of
operations, significantly minimizing this risk.

Social
Score Question

3/5 Do operations appear to abide by the ​UN Guiding Principles on Business and
Human Rights?​

Yes, Waste Management abides by the ​UN Guiding Principles on Business and
Human Rights.​

4/5 Does the company have a public policy which addresses their commitment to
respecting the health and safety of its employees?

Waste Management has a formal safety policy, ‘Mission to Zero’ that aims to
eradicate all accidents and injuries through knowledge building and coaching.
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● Who has oversight of the policy?

Not specified.

● How often is their impact assessessed?

A public review of their safety performance is released annually, as a part of their

Sustainability Report.

● Is it implemented into company operations?

WM provides a comprehensive safety training and skills development program,

covering all employees, including contractors and part-time workers. They also track
and disclose injury rates, vehicle accidents, and use monthly trend data to identify
areas that may require additional focus. WM falls short on specific best practices
such as linking health and safety metrics to executive pay and setting specific
improvement targets.

4/5 Is the company transparent about its Social impact?

Yes, WM has a ‘Community’ section within their Sustainability Report, outlining the
many initiatives they take on to enhance the environment, promote education, and
improve surrounding communities.

Governance
Score Question

4/5 Is the executive compensation structure aligned with shareholder interests?

WM’s proposed executive compensation structure is reviewed and voted on at the

annual meeting of stockholders. A majority of executive compensation is linked to
company performance through annual cash incentive performance criteria and
long-term equity based incentives. In 2017, around 86% of compensation for the
President and CEO was performance based, while approximately 77% of
compensation for other executives was performance based.

4/5 Is the board structured in a manner which enables all directors to act and engage in
the best interest of shareholders?
 WASTE
University of Victoria APMP MANAGEMENT
EQUITY REPORT

WM’s board is structured in a manner which ensures its directors act in the best
interest of shareholders. The company requires that all independent directors be
economically tied to the company’s success, and are subject to WM’s Stock
Ownership Guidelines.

● What is the board’s level of independence?

Nine out of ten members on Waste Management’s Board of Directors are

independent as defined by the NYSE, including the Chairman of the Board. The
tenth, and non-independent, member is WM’s CEO.

● What does board compensation look like?

Board compensation is reasonable; their stock and option awards make up

approximately half of each directors compensation. Additionally, the amount of their
salary compensation is congruent with average industry practices.

3/5 Is it transparent about its governance practices?

Yes, Waste Management has a Governance Code of Conduct and Corporate

Governance Guidelines which are publicly available, and also publishes a
Management Proxy Circular on an annual basis.

2/5 What is the representation of women and minorities at the Board and Executive
level?

Two board members are women and two visible minorities; these metrics are below
industry standards. WM does not have a formal policy with regard to weighting
diversity in identifying director nominees.
 WASTE
University of Victoria APMP MANAGEMENT
EQUITY REPORT

Sources:

http://www.worldbank.org/en/news/feature/2013/10/30/global-waste-on-pace-to-triple

https://www.saveonenergy.com/land-of-waste/
Bank of Canada

EDGAR

Bloomberg