By Tom Randall
Five billion pounds. That’s roughly how much carpet Americans throw away each year, making it one of the bulkiest and least biodegradable ingredients in America’s overflowing landfills.
Interface, the Atlanta-based carpet maker with more than $1 billion in yearly sales, realized in 1994 it was on a collision course with then environment and began a transformation that would earn it influence far beyond its own operations.
Since then, Interface has diverted more than 200 million pounds of waste from landfill for a savings of $433 million. The maker of FLOR-brand carpet squares runs on 30 percent renewable energy and aims to reduce its net impact on the environment to “zero” by 2020. Founder Ray Anderson, a pioneer of sustainable business practices, died in August. I spoke with his successor, Chairman and CEO Daniel Hendrix, about what the company is doing to keep its carpets clean.
Q: Interface’s road to sustainability makes for a good story you can tell your customers, but has it been a good move for the company?
A: Our financials would be not nearly as good as they are today if we had not gone down this road. Our products would be more expensive, our talent base would be less, and engagement would be not as good. We would not have as many sales, first of all. One of our biggest customer bases is the architectural design community, and we've gotten a lot of goodwill around sustainability. Also, any time Interface posts a job, people will take a lesser compensation to come work for Interface, just because of the sustainability and higher purpose.
Q: Tell me about your efforts to include environmental impact metrics on your product labels. How do you determine what to measure and how to measure it?
A: We came out in November 2010 and made a declaration that all our products are going to have environmental product declarations (EPDs). It's almost akin to a nutrition label. You know what's the CO2 of your product, what's the toxicity of your product, what's the water usage of your product and so forth. It's a way to cut through -- I won't call it greenwashing -- but it's a way to cut through all the sustainability jargon that's out there.
Q: And do you think that's something that should be mandated, like nutritional information is mandated on food?
A: Personally, I think the consumer should mandate it. I think that people want to know what a product's doing.
Q: What about your suppliers? You've had to make some significant demands of them and how they did their business, too. How difficult was that, and were there any incentives that were useful?
A: One of the biggest inputs that we have is nylon yarn. We had three big suppliers of nylon yarn, and we went through a process saying, “For us to get to where we want to go and not have any negative impact on the environment, we need to partner with the supply chain. You need to start giving us post-consumer recycled content, and if you don't, we're going to move the business.”
One of our suppliers pretty much refused to go down this road, and so we moved the business to other suppliers. One of them invested a significant amount of money to create 100 percent post-consumer recycled nylon yarn. So the big stick is, we're going to do business with you or not do business with you depending on whether you're going to follow our mission around sustainability.
If you’re trying to really, truly become sustainable, the supply chain partnership is the only way to reduce your footprint.
Q: You worked with Ray Anderson since the company went public in 1983. How would you characterize his role and the loss to the company when he died of cancer this past year?
A: If you look at the carpet industry in 1994, it was an extremely brown industry. Ray had this epiphany, and it really started with: the world was in trouble. We were going to try to build a product without waste in it. I was the CFO at the time, and I will tell you I literally thought Ray had lost it. We were 95% petroleum based; how were we going to get off it? We were basically a petroleum company.
Ray was the visionary that changed the whole industry. And he also changed a lot of other industries, because he spoke to a lot of management teams about sustainability. Losing Ray is a huge loss to the world.
Q: In 2009, Ray said Interface was about halfway to its goal of `Mission Zero,’ the idea that you'll have no negative impact on the environment by 2020. Where would you say you are now?
A: We have to have a few breakthroughs to get there. In the past seven years, the percentage of recycled and bio-based raw material use has grown from four percent to 44 percent. We can see our way to the [carpet] face being 100% recycled. We can see our way to the backing being 100% recycled. That's the product side of it. The real area that we struggle in is energy, and we need help. We've been trying to figure out how to get off the grid for a while, and it's just cost-prohibitive to do that. We need more solar energy. We need more hydro energy. We need more green energy out there. Eight of our plants currently run on some renewable energy.
Q: How much of a push toward sustainability needs to come from regulation? What’s your advice to lawmakers for encouraging a more sustainable business culture in America?
A: States are moving to keep carpet out of landfills now. California passed that, and there’s a lot of other states that are contemplating the same kind of regulation. The biggest thing I would like to see is that when the government is out purchasing things, they should give preference to recycled content, to a lower footprint, to all the things around sustainability, so it would drive companies to be able to compete for that business. I think companies can do it without regulations if you have the right incentives.
Q: A lot of sustainability is about preparing for the future. How far do you plan ahead? Do you have a five-year plan? A ten-year plan?
A: We have a two-day retreat with our board every year, where we develop a five-year plan. The economy and the opaqueness of the overall macroenvironment is pretty interesting. You try to put a five-year lens on that versus what's going to happen in Europe and what's going to happen around the world.
Q: What are your favorite big-picture indicators that tell you what's going on in the world? Is it housing starts in Hong Kong or commercial real estate prices in Dubai?
A: To us, corporate profits are a good thing to watch. Our product is a discretionary product, so when corporations feel pretty good about their prospects, they tend to invest in their offices.
With the economic downturns, a lot of people didn't get to refurbishing their facilities. Also, there is some hiring going on trying to attract some of the better students coming out of universities today. Now people are having to upgrade their spaces to actually attract talent. We're seeing that happen particularly in the United States today. Our product plays really well into that transformation.
Q: What are you reading right now?
A: The Fifth Discipline and Limits to Growth. And one of the books that I would like for people to know about is Ishmael by Daniel Quinn. It's very thought provoking, and it's a very easy read. It's an "aha" kind of book.
Q: What about it made you say “Aha"?
A: It's talking about the world from the perspective of a gorilla -- what happened to the world from his perspective, and how man pretty much destroyed the world, if it doesn't change. It's a great read.
Visit www.bloomberg.com/sustainability for the latest from Bloomberg News about energy, natural resources and global business.-0- Jun/04/2012 11:10 GMT