When it comes to the environment, this visionary chief executive's business is doing very well by doing good. Here's how.
During World War II, the Coast Guard imported 29 reindeer to St. Matthew Island in the Bering Sea to feed the men it had stationed there. Over the next 13 years, the original herd expanded to 1,350. By 1963, 6,000 reindeer covered the island.
Three years later, a U.S. Fish and Wildlife biologist found only 42 reindeer alive. The explosive growth of the herd had decimated the island's vegetation, leaving the reindeer vulnerable to starvation; by the 1980s, no reindeer were left alive on the island. St. Matthew was left a barren, windswept rock, blanketed in bones.
Zero footprint seemed to be absolutely the right thing to do, and it quickly became smart business, too.
That story was a revelation to Ray Anderson, founder and chairman of Interface, Inc. Anderson started the commercial carpet tile company from scratch in 1973, and by 1994 Interface was a billion-dollar organization and the world leader in its industry. Then in 1994, Anderson read about the reindeer on St. Matthew Island in Paul Hawken's book The Ecology of Commerce. To his surprise, the story left Anderson with a sense of horror, foreboding -- and familiarity. Traditional carpet manufacturing is a high-input, heavy polluting industry, and Anderson began to believe that industry was doing to the planet what the reindeer had done to St. Matthew Island.
So, at the age of 60, Anderson decided to pivot his company away from environmental malefaction and toward sustainability -- all "while doing well -- very well -- by doing good." As he writes in his book, Confessions of a Radical Industrialist: Profits, People, Purpose -- Doing Business by Respecting the Earth (out last month from St. Martin's Press), "I wanted Interface, a company so oil-intensive you could think of it as an extension of the petrochemical industry, to be the first enterprise in history to become truly sustainable -- to shut down its smokestacks, close off its effluent pipes, to do no harm to the environment, and to take nothing from the earth not easily renewed by the earth."
He didn't waste any time. Between 1996 and 2008, Interface cut its net greenhouse gas emissions by 71% in absolute tons (the Kyoto Protocol, in contrast, called for 7% reductions by 2012, which many said was impossible). Yet over the same time frame, Interface increased sales by 66% and doubled its earnings, expanding its profit margins and propelling innovation. Interface also reduced greenhouse gas intensity (relative to sales) by 82%, wastewater stream by 72%, landfill-bound scrap waste by 78%, total energy usage by 44%, smokestacks by 33%, and effluent pipes by 71%. Interface also reached the top of GlobeScan's Survey of Sustainability Experts -- all while saving the company $405 million. And, since 2003, Interface has sold 83 million square yards of carpet with zero net global warming effect.
As he relates in this two-part interview with the Gallup Management Journal, Anderson believes that any company can do what Interface has done -- and that they must do it. For one thing, it's profitable -- as he writes, "Not only have these measures paid for themselves, they helped us ride out the deepest, longest marketplace decline . . . in our industry's history."
But that's not Anderson's fundamental rationale for changing the effect his business has on the environment and, he hopes, society. It's because he believes that unless we get industry right with the environment, the story of those reindeer on St. Matthew Island won't be a warning to humanity. It will be our fate.
GMJ: You risked Interface -- which took a half a lifetime's work to build and cost you your life's savings and your first marriage -- on the belief that you had to make the company environmentally sustainable. That takes guts. What made you take such a risk?
Ray Anderson: Well, the opportunity came in the summer of my sixtieth year on this earth. At that point I had five grandchildren and two daughters -- and a third child by the name of Interface. And at age sixty, I was subconsciously, perhaps even consciously, thinking about what this third child of mine would grow up to be. Interface had been a child prodigy, but what sort of a virtuoso would it become?
Zero footprint seemed to me to be absolutely the right thing to do, and it quickly became smart business, too. Of course, I wondered if I had put this third child of mine on some quixotic tangent. But it did not take a long time for the business sense of it to become clear.
GMJ: How did your tangent begin?
Anderson: Reading Paul Hawken's book The Ecology of Commerce was an epiphany. And for a year after that, I read everything I could get my hands on, on both sides of the issue. I became more and more convinced that Hawken had been absolutely right: that the industrial system was destroying the biosphere, and left unchecked, would destroy it. [Yet] the only institution on earth that could really make a difference was the same one doing the damage -- the institution of business and industry. So it was a conversion experience, it was an epiphanic experience. It was a road to Damascus experience.
We're saving more than we're spending. It's a whole lot like quality. As we used to say, quality doesn't cost, it pays.
But as we began to implement Mission Zero, it quickly became clear that this was going to be a good business move. With the waste elimination effort, our costs began to go down; our customers began to embrace what we were doing; our people, one by one, got turned on to what we were doing and the higher purpose in it. As time went on, we found an incredible fountainhead of inspiration. So it was clear that the business case was powerful.
GMJ: Now before we go into that, can you clear up an issue? Interface is not pushing for environmental consciousness, it's moving toward sustainability. Can you clarify the difference?
Anderson: Actually, we're not sustainable. There is no such thing yet as a sustainable business. We're a little more sustainable day by day, but we aren't there yet, and nobody else is, either. I doubt you could find half a dozen sustainable products in the whole wide world because we're still making things with fossil fuel energy and we're still using stuff from the earth to make them.
"Sustainable" is an absolute term in my mind. Sustainable is a term like "round." You're either round or you're not. You're either sustainable or you're not, just like you're either pregnant or you're not. And by the way, the word "sustainability" is terribly misused. People are claiming this is sustainable, or that's sustainable, here's a sustainable product. Time out: There's nothing yet that you could call truly sustainable.
What we have defined for our company is zero footprint. Sustainability is the top of the mountain. And until we get there, we are still unsustainable, but less so every day. We are, however, very environmentally conscious, which is what keeps us moving towards the top of the mountain.
GMJ: Do you think it's possible to be perfectly sustainable? To be perfectly round?
GMJ: You do?
Anderson: We're going to show the world how by the year 2020, that's Interface's Mission Zero. Eleven years from now, we intend to be at the top of the mountain. The calculation is a bit tricky because it's comparing apples to oranges and peaches and tomatoes, but we're more than halfway to the top of Mount Sustainability. Maybe even sixty percent. So we're basically on schedule in this twenty-six-year-long journey.
GMJ: That's a long process.
Anderson: Yeah, it's not the program of the week, or the month, or the year. It's the program of a lifetime. It's a commitment of a lifetime.
GMJ: You've said sustainability doesn't cost, it pays. What do you mean by that?
Anderson: Well, the business case for sustainability is there. Costs are down, so it's saving money. Products are better, which means the top line is better. People are motivated and galvanized, which means employee morale and engagement is up. And the goodwill of the marketplace is astonishing. I don't know what else provides this kind of a business case: Costs are down, products are better, people are motivated, and customers are receptive -- and we're winning market share.
GMJ: But how are you paying for all this?
Anderson: We pay for every bit of it -- and more -- with our waste-elimination effort, which was one of the first results of our QUEST program: Quality Utilizing Employee Suggestions and Teamwork. We are some $405 million ahead of the game on waste elimination, which is far more than we've invested on all the other faces of the mountain. And we're ahead of the cost curve. We're saving more than we're spending. It's a whole lot like quality: We used to say quality doesn't cost, it pays. We proved that to be true. It turns out to have been true all along; we just didn't know it until the Japanese showed us.
GMJ: Right. But your labor and input costs must be substantial. And don't recycled materials cost more?
Anderson: Actually, our labor cost is a small part of our total cost. The biggest part of our cost is in raw materials. Manufacturing carpet is a very raw material-intensive business. It's a capital-intensive business, too. And recycled materials do cost more in the beginning, as do the investments that you make because you're in pursuit of the recycled content. But with the price of oil climbing over the long term, there almost certainly comes a break-even point somewhere around $75 or $100 a barrel. After that, the recycled materials cost less than the virgin materials. And as the volume of recycled materials and the efficiency of obtaining them increase, those costs will come down and reduce that break-even point.
Today, we're winning market share in the depths of this recession because of the commitment we've made.
GMJ: What effects have your sustainability initiatives had on your competition?
Anderson: I had this team of advisors that included Paul Hawken, Amory Lovins, David Brower, Janine Benyus, and Bill Browning, just a really powerful group of people. And they convinced me that what we were doing was so unique, not just in our industry, but in all of industry. We were [pioneers], and it was important that we succeeded in every way, including financially, because of the influence that it could have on other industries and on other companies much larger than ours. We realized we had to succeed, even at the expense of our competitors. Well, probably at the expense of our competitors. So we had to succeed demonstrating a better business model, and you can only do that financially at the expense of your competitors.
We took the view that environmental consciousness was a competitive advantage, and we were going to push it for all it was worth. That would, of course, spur our competitors to do their own thing in their own way, but we weren't going to help them. So we stole a march on the industry -- we were ten, twelve years into this before our competitors began to wake up and realize that we were costing them business. In fact, twelve years ago, one of my biggest competitors looked me in the eye and said, "Ray, you're a dreamer." Well, today he's scrambling to catch up.
GMJ: That said, do you think this is the right time for your book? The recession's made a lot of business leaders pull back from their environmental commitments to save money.
Anderson: I don't buy that. This is not about spending money. This is about competing on cost, product, people, marketplace, and goodwill in the worst of times as well as the best of times. Today, we're winning market share in the depths of this recession because of the commitment we've made.
I was with some people in the airline industry just two hours ago, and they were talking about their own green initiatives. We asked what event that triggered this kind of new thinking, and they said it was the recession. They knew they had to do something different, and as they looked around the world, they realized that sustainability was a new way of thinking about how to do business -- because it's a way of saving money and winning customers. It's also a way to motivate their own people and, in their case, produce an even better product.
GMJ: You've written that your successes depended on your employees' willingness to take risks.
Anderson: You have to let go of the past to embrace the future. So we're going to play to win, not play to not lose. There's a real difference there. And when you come to a fork in the road, like Yogi Berra supposedly said, you take it. If you make a mistake, quickly learn from that and back up and take the other fork -- but let's move ahead instead of hanging on to the status quo.
That message sank in, and it empowered our people to dare to risk, to work in teams, and to challenge everything that we were doing. In other words, to challenge the status quo. In your own workplace, right where you're working, whether it's on the factory floor or in a cubicle, challenge the way you're doing things and find that better way.
In part two of this interview, Ray Anderson will explain how other companies can do what Interface has done.
-- Interviewed by Jennifer Robison