An email obtained by the GMB trade union claims to show that Veolia - a private company which handles waste management for the council - has been diverting tonnes of recyclable rubbish away from household waste recycle centres to the company's own ERF incinerator.
The union indicated the firm may have introduced the policy because they have in the past struggled to get fuel to power their plant.
But doing this, they claimed, has contributed to increased pollution, led to Sheffield's recycling rate plummeting and could have led to staff missing out on bonus payments for failing to meet recycling targets.
Veolia has denied the claims and stressed they haven’t instructed any contractors to divert recyclable waste to their incinerator.
But the row rumbled on this week as the GMB said it has received dozens of reports from Veolia workers claiming skips at recycling centres are left full, meaning the overflow skips fill up quicker.
The union said these overflow skips are then sent to the incinerator plant.
The GMB and Sheffield's Liberal Democrats have now called on Veolia to release their waste flow data to clear up the matter.
Peter Davies, GMB senior organiser, said: “Of course it’s easy for Veolia to play about with words and claim they have not instructed their contractor’s to divert waste.
“They don’t have to ‘instruct’ anyone because they have a total monopoly on waste management in the Sheffield.
“If they decide to starve recycle sites of recycling skips in order to fill their overflow skips which then go to the incinerator, then that’s entirely their management choice.
“If that incinerator has to switch to gas due to a lack of fuel it’s Veolia who have to foot the bill, and we know they are struggling for materials so this is a clear conflict of interest. It makes Sheffield recycling an easy target for profiteering."
The GMB will question councillors about the issue at the next full council meeting, and they have been supported in their calls for openness by the city's Lib Dem leader Shaffaq Mohammed.
He said: "The people of Sheffield need to know that when they take the time to sort out their recycling in good faith that it is actually going to be recycled."
The union said last week that a leaked email from one Veolia senior manager to another appears to contain information about a graph that 'demonstrates that increasing ERF diversion tonnes every year for each site contributed directly to the year on year reduction to the recycling rate.'
The union said the figures, which are not attached to the leaked email, go back to 2011.
Veolia has previously applied to take in 50, 000 tonnes of residual waste from neighbouring councils for its incinerator amid concerns about a decline in the amount of waste it was receiving from kerbside collections.
Government figures released in 2014 showed Sheffield has one of the worst recycling rates in England with just above 30 per cent of the city’s rubbish being recycled. The city didn't fare much better in 2015/16, with just 31.69 per cent recycled.
The GMB claimed Veolia’s 'deliberate' waste diversion policy has led to a number of waste sites missing recycling targets, which has in turn led to staff missing out on bonus pay.
But Philip Gilmour, regional director for Veolia, last week said the claims are "false and entirely incorrect."
He added: "Veolia has not instructed any of the Sheffield HWRC contractors to dispose of recyclable material. I have reviewed the ‘leaked’ email that the GMB reference too and there is no such instruction in that email either."
A Sheffield Council spokesperson said: “We support Veolia in sending waste that cannot be recycled to the Energy Recovery Facility wherever possible so that some value is realised from the waste rather than sending it to landfill."
In January councillors voted to end the contract with Veolia 19 years early due to 'frustrations with the lack of savings being made'. The current contract, reportedly valued at Â£1.3 billion when signed in 2001, will continue until April 2018 by which time the authority hopes to have a new waste services provider in place.