Ray of Hope

Ray of Hope

The following has been excerpted from the October 2004 issue of The Green Business Letter.



It may well have been “The Spear Heard ‘Round the World” -- the “spear in the chest” Ray Anderson says he felt in 1994, when he recognized that his company was a “plunderer of the Earth,” as he later put it. Since then, Anderson -- founder and chairman of Interface, Inc., a floor covering manufacturer based in Atlanta -- has traversed the globe, preaching the gospel of sustainability, while pursuing an ambitious effort to transform Interface’s products, processes, and business models to reflect his newfound commitment.

Interface is by no means the only carpet company to embrace a strong environmental ethic. Its competitors -- Collins & Aikman and Shaw Industries, for example -- also have innovated around the sustainability theme, creating new products and takeback systems designed to “close the loop” by turning old carpet into new. But Anderson’s company, more than the others, has put itself in the limelight -- and subjected itself to scrutiny.

We decided to take advantage of the 10th anniversary of Anderson’s spear-in-the-chest epiphany to catch up with him and take stock of the past decade’s ups and downs.

Q: How do you look at this past decade in terms of this journey you’ve been on?

A:
It’s been the most exciting in my life. We feel like we’re reinventing the system and that’s fun. We’ve been through the toughest business cycle in our history and we’ve survived, thanks to sustainability and commitment we’ve made in this direction. I don’t think we would have made it otherwise.

Q: I want to get to that. Let’s start with taking stock in where you are. You’ve set a bunch of goals. How is that going? How are you measuring success?

A:
We’ve got a number of metrics we are tracking very carefully, one of which is total greenhouse gases produced by the global company, and that fi gure is down from our baseline of 1996. It’s down in absolute tonnage 46%. Our use of renewable energy is 12% of the total amount and its headed towards 100%. Nonrenewable energy has been reduced 30% against the same baseline of 1996.

We got water usage down 27% for the whole company. We’ve shut down a third of our smokestacks, 47% of our effluent pipes, by basically obviating them through process changes. We’ve planted 45,000 trees to offset 68 million passenger miles in commercial airplanes, and our North American carpet business, a $500 million business, will be climate-neutral by the end of this year.

Q: That’s the environmental leg of the stool. How about economic and social sides?

A:
The economic leg -- as I said, we wouldn’t be here if we hadn’t taken this direction. The marketplace in which we operate declined fully 30%, peak to trough, over a five-year period, and it’s only just now bottoming out. Imagine if tax revenues dropped 30% -- what that would do to the United States of America. Imagine what it would do to your city to lose 30% of its revenue? We’ve actually gained market share in that decline and that has come about because of better products and market support -- the goodwill of the marketplace based on what we’re doing. And better products have come about because our product design people have taken to biomimicry in a big way. We’re getting products out of that part of the development process that we never would have dreamed of.

Q: Are those products in the marketplace?

A:
Absolutely. In our carpet tile business to date, I think probably close to 40% of sales are based on products derived from the biomimicry thought process. There’s a whole family of products -- 29 or 30 products -- that constitutes close to 40% of our business today.

Q: What aspect of biology are they mimicking?

A:
Our product designer asked his design team to go into the forest, spend a day and figure out nature’s design principles. How would nature design a floor covering? It finally dawned on them that if you look at the forest floor, there are no two things alike. No two sticks, no two stones, no two leaves, no two anything alike.

So you got this sort of chaotic mix of diversity and you can pick up a rock here and drop it there and you can’t tell you’ve changed a thing. They came back to the studio and designed carpet tiles where the design in the face of the carpet tile, no two tiles were alike. We introduced that product -- we called it Entropy, for obvious reasons: disorder -- and in a year and a half it became the bestselling product in our line, faster than any other product ever has.

Q: To what do you attribute that sales ramp?

A:
The unique design properties of the product. For example, you can pick up a tile and move it and you can’t tell that you’ve moved it. You can replace a damaged tile and you can’t tell you’ve changed a thing. Ordinarily, with carpet tiles you would see the sore-thumb effect when you move or replace a tile. But with this product you can’t find the new tile in the field of existing tiles, which now enables you to actually rotate the tiles on the floor the way you would the tires on your car. That extends the useful life of the product and reduces the added stock requirements, the extras the user has to keep on hand for his replacement process.

The installers love it. They put it in very quickly with practically no waste, and the user ten years from now can order up the same product and not have to worry about a different dye lot. The dye lots are mergeable. You put them on the floor together and you can’t tell where one ends and the other begins.

Q: Is this a classic case where a sustainable product succeeds not because it’s “sustainable,” but because it’s a better product?

A:
It’s a better product. And then you introduce recycled content, solar energy, and all of those into the making of the product and you’ve got a reduced footprint at the same time you’ve got a better, more appealing product. And it also comes climate-neutral.

Q: You talked about how the sustainability commitment kept you going through tough times partly because of the support of the community.

A:
Sustainability is now the brand for Interface. What’s in a brand? Well, everything is in a brand and for a company there’s hardly anything more important than than its reputation, which is all rolled up and contained in the brand. And sustainability is now a brand and that’s recognized in the marketplace and there is a predisposition on the part of lots and lots of designers that deal with us because of that. People just want to do the right thing and they can figure out what it is.

Q: So explain how support from the community kept you going when things dropped 30%?

A:
We can probably point to at least 20% of our sales where we know we got the business because of the sustainability commitment. It might have been the recycled content, it might have been the fact that it is solar-made, it could have been any one of a hundred different specific reasons, but all of those are under the umbrella of sustainability. I think there’s probably at least another 20% of the business that you cannot point to a specific reason other than overall goodwill. It’s what companies spend millions in advertising to create and for us it’s happening just because we’re doing this stuff. We’re doing it in a credible, measurable, and transparent way. You can go to our Web site and find 400 pages on what we’re doing and that translates into credibility, and credibility translates into goodwill and support, particularly from the interior design and architectural community.

Q: When I look at what you’ve done over the decade and your inarguable levels of success, I’m struck by how few followers you have. If this is so great, why isn’t everybody doing it?

A:
If anybody’s looking at Interface they couldn’t tell it was good from our financial results. The marketplace, the financial situation within our industry, has obscured the real progress that we’ve made. But as we come out of this mess that we’ve been in, and it is recovering finally, the evidence is going to be there clear and apparent for anybody that cares to look. It’s a better way to make a better product.

If I had to try and put my finger on it, I would say that if the CEO doesn’t take the lead it won’t happen.

You think about why is one CEO different from other? You realize that there are three basic types of CEOs: Those who have founded their companies, those who inherited their companies, and those who are hired to run their companies. Far and away the preponderance is that third category -- CEOs hired to run the company. And the average tenure is maybe ten years and long-range planning is maybe five years and there is very little sense of legacy in that CEO, who’s hired to maximize shareholder value and then be on his way.

I think it’s probably among founders and sometimes inheritors that this sense of legacy is really important, as it is for me: I’m a founder. And that’s part of the reason it is such a different paradigm. The CEO with his nose to grindstone -- a limited horizon, a short-range planning horizon -- is just not going to go through the trouble; this is hard stuff. And until the marketplace pulls it through it’s just not going to happen.

That’s one of the uniquenesses about Interface. We’re in a marketplace that has accepted and even demanded what we are doing. It was the interior designers and architects who were asking us ten years ago, “What’s your company doing for the environment?” That’s what set us on this path of trying to get answers to that question.

Q: A lot of people argue that companies aren’t more profitable because they’re being sustainable, it’s that they can afford to do the sustainability thing because they’re profitable. Have you’ve disproved that?

A:
Yes. Our costs have gone down not up because of sustainability. The waste elimination effort alone has saved us at least $231 million. I guess its more than that -- that was at the end of 2003. Close to $250 million over these nine-plus years, and that more than paid for all the rest of R&D, the capital investments, process changes and everything that we’ve done on the other six faces of sustainability. All of that has more than been paid for on the waste savings alone.

So we have made money from Day One in terms of driving down costs. And you couple that with products that are better than they’ve ever been and the goodwill of the marketplace, and the growing demand for environmentally responsible products -- the USGBC in its LEED certification process is proof-positive that the demand is increasing -- and you’ve got a lot of good things working.

Q: What’s keeping you excited these days?

A:
What excites me is that the marketplace is really waking up. The green building movement is phenomenal and I know you’re keeping up with that. LEED registrations are being filed in exponentially growing numbers and that’s just a reflection of what’s happening in the marketplace in a larger sense. The power is with the people, and when the people say “This is what we want,” you’ll have corporate America and the corporate world wake up. We are being asked by more and more companies, “How are you doing this?” That’s good news because not only are they interested in doing it for themselves, but they become customers and that’s our marketplace -- the corporate world. The educational community, higher education in particular, gets it, and a big part of the green building movement is concentrated in higher education and in government.

Agenda 21, coming out of Rio, said from the beginning that it would happen at the municipal level before it happened at the national level for the United States, and it’s true.

So we’re just salivating here to get this marketplace to hurry up and recover in an overall sense because we will emerge with a bigger share, without a doubt. And if you check our stock price it’s gone from 22 to 2. That’s the bad news, but it’s back to 8 now, so that’s the good news.

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Copyright 2004 The Green Business Letter, all rights reserved. Reprinted with permission.