The environment watchdog has banned another recycling company in Melbourne’s north from accepting waste over fears that large stockpiles could catch fire and contaminate waterways.

Coolaroo firm Phoenix Environmental Group was slapped with the ban for accumulating large piles of construction and demolition waste.

Phoenix Environmental Group's Coolaroo plant.

The crackdown is the latest blow for Victoria's beleagured recycling system. Phoenix Environmental Group has now received two notices over its refusal to comply with safety standards.

Environment Protection Authority taskforce manager Danny Childs said the company had failed to take “reasonable steps” to properly manage flammable recycling and waste materials.