A visionary CEO says business, not government, must save the environment
In part one of this two-part interview, Ray Anderson, founder and chairman of Interface, Inc., explained how he adopted the cause of sustainability. He also showed how his billion-dollar carpet company became even more profitable by going green.
Governments don't lead, they follow. And governments move, well, ponderously at best.
Here are just a few of Interface's successes: 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%, smoke stacks by 33%, and effluent pipes by 71%.
These efforts and others landed Interface at 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.
In this second part of the interview, Anderson explains how other companies can do what Interface has done. For starters, he says, cut waste. Ask for help if you need it; Interface has a consultancy called InterfaceRAISE that can assist businesses with their sustainability initiatives. Ask your suppliers to get on board, because that will have an environmental ripple effect and prevent you from inadvertently "green washing."
Just don't depend on government to be much help. As Anderson says, "All too often, a politician will jump to get in front of a parade, but politicians never start them." And when critics say environmental policies hurt business and cost jobs, don't believe that either: Interface has proven that what is lost of either can be replaced and then some. But, says Anderson in the following discussion, the only ones equipped to fix the ill effects of industry are the ones who cause them.
And they must. As Anderson related in part one, the best way to avert climate-change disaster is to change the way we do business. Leading a company to achieve a zero environmental footprint is not only entirely possible, it's also highly profitable. And the moral and business arguments for doing so are impossible to deny.
GMJ: Early in our conversation, you said that that the industrial system was ruining the biosphere and, left unchecked, would destroy it. But you also said that the only institution that could prevent this destruction was the same one doing the damage -- the institution of business and industry.
Ray Anderson: Yes.
GMJ: Why not government?
Anderson: Governments don't lead, they follow. And governments move, well, ponderously at best. Business is doing the damage, and business can turn on a dime. Now, government has a role, and I hope the book makes that clear. So does the church, and so does education.
But business is far and away the most powerful player. And if business does not get on board, then it's basically over for homo sapiens because the industrial system as it is operating today is destroying the biosphere -- and the biosphere undergirds civilization itself.
GMJ: Do you think business can change? And will it do so in time?
Anderson: It's a matter of survival and self-preservation. But it could already be too late. It really could. If it doesn't happen quickly enough, we can reach the point of no return, and that's especially true of global warming.
We're perilously close already to the point of no return, which is when the positive feedback loops begin to kick in and the methane released from the permafrost and the bottom of the ocean increase. The polar ice caps melt and no longer reflect heat; instead, this increases heat absorption, which in turn increases melting.
As for planting trees to absorb carbon dioxide, there's no way you can make up that difference by planting more trees; there's not enough land. So you've got a lot of bad things going on -- and getting worse.
The government's regulatory regime has helped a lot, and thank goodness for it.
GMJ: Do you think that there's anything at all that government can do to help?
Anderson: Oh, yes. Government has its role. I think its greatest power is taxation. With an enlightened taxation policy, the government could change the world for the better. That step would force organizations to internalize their external costs by making them pay for their output, which is now paid for by everyone else. Then it becomes a cost of doing business. That's what cap and trade essentially does by setting a price on carbon emissions. The sooner we do that the better -- and the higher the price of carbon the better.
GMJ: Won't that hurt business and cost jobs?
Anderson: I don't think so. I think it's going to create new industries, though it's probably going to drive some old ones out or change them. Petroleum and a lot of other industries certainly need to change what they're doing, but there are whole new fortunes to be made with new technologies once the playing field is level and we're all internalizing our external costs.
Wind power will be very competitive. Coal will disappear once the table is leveled. Nuclear doesn't stand a chance once the table is level. You take away the government subsidy right now on the insurance side of the nuclear industry, and the nuclear industry cannot get funded. Level the playing field, get the prices right, internalize the externalities, and you'd have a whole new game.
But only the government can do that. With its purchasing power, the government can move markets. With its taxation policy, the government can start whole new industries and quit propping up dangerous old ones. The government is the biggest landlord in America, so it can change the whole scene on building construction. The government's regulatory regime has helped a lot, and thank goodness for it. We'd be in a hell of a shape if it weren't for regulations that have been put in place since Rachel Carson's 1962 book Silent Spring.
And the government ought to be raising the bar every day on its purchasing policy. It should be specifying climate-neutral products today because it's possible. And that would reward the early movers, and it would inspire innovation among the late movers -- or the fast followers.
GMJ: You said that reading Paul Hawken's book The Ecology of Commerce was an epiphany. How did you sell your epiphany to your board and to Wall Street?
Anderson: Well, in the early years, we focused primarily on QUEST -- the Quality Utilizing Employee Suggestions and Teamwork program that looked for and utilized in-house environmentally conscious ideas. We talked about the cost savings that we got from QUEST with our investors, at financial conferences, at analyst conferences, and with our board. Then we began to gain some traction on other areas of initiative such as renewable energy and recycling and so forth. And then we could show that our initiatives were highly profitable, and that's hard to argue with.
GMJ: Your sustainability initiatives required your suppliers to change their products and methods too. How did you get their buy-in?
Anderson: Thirteen or fourteen years ago, we said to our suppliers, "Here's where we're going. Those who come with us will get the business; those who don't, won't." And it changed our supply chain. There's a carrot and a stick here.
But we couldn't make any environmental claims as long as our suppliers didn't. That's "green washing." We really believe that green washing is the kiss of death. That transparent self-serving coat of green that a company spreads over what they're doing -- the least sophisticated customer can see through that. And once they see through it, your name is mud. So honesty, integrity, authenticity, transparency -- all of that comes wrapped up in one nice package.
GMJ: You said in the book that companies that want to follow in your footsteps ought to start by cutting back on waste. Why?
Anderson: Because it's the way you get ahead of the cost curve -- and there is so much low-hanging fruit. In the most efficient manufacturing or industrial company, you often will find allowances for off-quality, scrap, or waste. If you allow that, it will persist forever.
This Earth's not infinite in its ability to supply the stuff to feed our industrial system.
So we took the view that the only waste that's acceptable is zero. We define waste very broadly as any cost we incur that does not deliver a value to our customers -- from off-quality to a misdirected shipment -- that's waste. It's a bad debt that we don't collect. So when you define waste very broadly and go for zero, you start inventing new ways of eliminating waste. And if you think that's impossible, look around you: Nature's been doing it for three billion years.
GMJ: What's the next step?
Anderson: Then you sit down and figure out your own mountain -- the mountain you have to climb to reach sustainability. Chances are, your mountain won't be all that different from my mountain, and you will find that innovation cuts across all faces. To fundamentally change the way you do business does require innovation, new thinking, new processes, and new products, so you've got to unleash that.
But study the mountain first of all. Figure out where you are and how far you have to go. Get the metrics. The numbers will show you what you need to know about where you're doing damage, where you can save money, where you can improve, and what you ought to do. And you might as well get started early. Very quickly, our people began to see the new way of thinking and get on board. And we are still doing it ourselves, with very little outside help. We've not been long on consultants.
GMJ: Right, but you have chemists and machinists on staff. What about companies with no scientists around?
Anderson: We offer a very useful service in InterfaceRAISE [a peer advisory service that offers guidance on driving business value through sustainability] in that unlike some consultants, we've actually done this ourselves. We're bringing that learning to the table, and we can shorten the learning curve for clients who want to climb their own mountain.
But there are a lot of consultants who can help you get your head straight, help you see the world differently, and that's good. Eventually, you have to take over your sustainability initiatives yourself because the other guy's no better than you and doesn't know more than you do.
I think in a business like ours, you would have to get to a certain size and scale before you could undertake what we've undertaken. In other industries where there's a whole lot less capital investment and a whole lot less material intensity built on fossil fuels, maybe it's possible to start [a sustainability initiative] when you start the business. A lot of food companies have done very well that way.
GMJ: You've made a business case for sustainability. Do you want to make a moral case too?
Anderson: Yes. I think they're closely related, and the moral case needs to be made. Who are we to destroy this creation? Who are we to assume it's ours to do with as we please? It doesn't belong to us; we belong to it.
That's the fundamental mindset shift that has to happen. This Earth's not infinite in its ability to supply the stuff to feed our industrial system. It's not infinite in its ability to absorb our waste. It's finite. You can see it from space -- all you see is all you get. And who are we to deny future generations the right to exist? Who are we to use it all up in our generation and leave them nothing? What kind of morality is that? That's the height of selfishness, isn't it?
-- Interviewed by Jennifer Robison