Change Waste / Recyclables system into "Waste (Unsorted)" and "Waste" + "Recyclables" + "Biomass"
Right now Waste is considered to be free of Recyclables already and the settlements buildings take care of the split or Reclyclables are not getting out of Waste at all and end up being dumped or burned.
The production chain could look like this:
Waste (Unsorted) -> Waste (Sorted) [this would be a lower number, much like using bio mass collection reduces the amount of Waste generated already), Recyclables, Bio Mass
And from there the current system can take over. However, this would give some incentive of dumping waste early game into areas where you can access it later (although Bio mass might have composted by then) and dig for a little loot of the past.
Importing Waste via contracts might be a profitable business then, since we could have an industrial branch dealing with other island's Waste and run our own Power Grid as well as material demands by it. Islands could also start with a waste mountain left over by prior settlers which opens up as a potential ressource in mid game.