The Sustainable Industrialist: Ray Anderson of Interface
If you believe Ray Anderson, we are at the dawn of the New Industrial Revolution.
Anderson, 72 years old, a man with a soft Georgia accent and a kind, rather rumpled face, makes an unlikely-looking radical. But he may well be the most visionary figure in American business today. As chairman of the textile manufacturer Interface (NASDAQ:IFSIA), he has transformed the company he founded 33 years ago into the world's first industrial firm devoted to sustainability. By this Anderson doesn't mean conservation or being more careful about pollution. He means sustainability in the strictest sense: "taking nothing from the earth that is not rapidly and naturally renewable, and doing no harm to the biosphere." This would be a tough mission if you grow lettuce commercially. If you make carpeting, which for decades has been utterly dependent on petrochemicals, it is seemingly impossible. But it is happening. From a standing start in 1994, Interface is on track to be sustainable by 2020.
As Anderson tells his story, it involved something little short of a conversion experience--and yet it began as a response to the market. Interface makes carpet tiles, the 19.7-inch-square pieces of floor covering that you see everywhere, in airport lounges and office buildings and increasingly in private homes. Interface's clients are for the most part architects and interior designers, a group ahead of the curve in environmental awareness. In the early '90s Anderson was confronted with customers who wondered what the company was doing for the environment. They could not have anticipated the response they got.
Anderson confesses now that he had not really thought about the environment as a concern. The company, it was true, had taken steps to reduce interior air contamination; otherwise its only "policy" was to comply with the law. But when he began to ask questions about Interface's overall impact he became alarmed. Coincidentally, a book published that same year, 1994, came to his attention: The Ecology of Commerce by Paul Hawken. Hawken, founder of the garden supply company Smith and Hawken, among other ventures, is a passionate environmentalist, and his book decries the industrial devastation laying waste to the world's resources.
Anderson asked his engineers to determine what had been extracted from the earth to produce the company's income. That year Interface was enjoying some $800 million in revenue, and the engineers concluded that to get there they had used 1.2 billion pounds of raw materials, most of it oil and natural gas, and much of that incinerated. "I was staggered," Anderson later said. "I wanted to throw up. My company's technologies and those of every other company I know of anywhere, in their present forms, are plundering the earth. This cannot go on and on and on."
He announced to his customers that he was setting out in quest of sustainability, and within the year he had set the company on that seemingly quixotic course. Anderson is reticent about the way he persuaded his colleagues, but it must have taken some art and all of his newfound passion. "What are we going to do, use hemp and wool?" someone asked. "Who's going to raise our sheep?" But Anderson, who had recently stepped down as CEO but retained the chairman's role, had a lot of clout. Though publicly traded, Interface remained very much his company. Once it had been a handful of guys who had bought a small factory and were waiting for the first order to come in; it was now approaching a billion dollars in annual sales.
The company's first move was to concentrate on waste reduction, everything from carpet scraps to industrial effluent, which immediately led to savings--more than $60 million in the first three years. To date, cost reductions for waste have amounted to more than $300 million, enough to finance Interface's research into the heart of its sustainability problem, how to use recycled textiles for its products. Currently such material is used for most of the company's carpet backings, and Anderson is confident that Interface will soon know how to use it for everything, to achieve a "closed loop" system. In the meantime, Interface looks everywhere for reductions in energy use and raw materials, which has led to a frenzy of innovation, mundane and exotic: from redesigned pipelines (wider openings, smaller pumps) to a study of the gecko to figure out how to get carpet to stick to floors without glue.
Interface also expects ultimately to effect a change in consciousness in customers. The company has already established a program under which customers lease carpet tile installations. The company keeps them clean and replaces individual tiles as needed, and at the end of the life cycle reclaims and recycles everything. It is a vision shared by a number of environmentalists: companies take lifetime responsibility for what they produce.
It has not all been smooth sailing for Interface since the transition to sustainability, but Anderson blames only the business cycle. The recession of 2001 hit the company and the entire industry hard, when new office space construction declined by more than a third. Interface's stock fell from about $20 to as low as $2.66; it has recovered significantly since then and was trading early this fall at about $13 a share. "We never thought for a minute about abandoning sustainability," Anderson says.
These days Anderson spends much of his time on the road--151 speeches last year--spreading the gospel of sustainability. Typically, he will acknowledge whatever laudatory introduction he's been given and say, "I prefer to describe myself in simpler terms. I'm a husband, a father, and an industrialist. Some people call me a 'radical' industrialist, but I want to assure you that I am as competitive and profit-minded as anyone in this room." He goes on to offer the story of his conversion, an evocation of environmental crisis, and the description of a credo for industry. His inventory of the destruction of nature builds with a quiet force, but in truth, the environment has more thunderous Jeremiahs, more lyrical poets than Anderson. His message carries the peculiar gravity of someone whose life and company have been changed by his convictions. "I am a recovering plunderer," he says, "and an organization of more than 5,000 people, daily, is instrumental in that recovery."
According to his mentor Paul Hawken, it is Anderson's practicality that is his most impressive aspect. "Ray approaches things like an applications engineer. He didn't just look around, he said, 'Okay, what can we do?' and he took it step by step. Interface is in the details, at least a thousand small substantive initiatives that accumulate into a system."
What began as a response to customer inquiries has developed into a philosophy of business and indeed of economics, a philosophy that puts Anderson at odds with a lot of mainstream thought. In the Church of Capitalism, Ray Anderson manages to be both a faithful parishioner and a heretic.
If there is a single key economic concept in Anderson's thinking it is contained in the term "externalities"--all those costs of doing business that inure to society but never get charged to anyone's bottom line. If you figure in the externalities, he says, "the true cost of a barrel of oil is about $200."
In the book he published in 1999, Mid-Course Correction, Anderson takes a personal, even an impassioned view of the deceit built into the market economy: "…[T]he market, in its pricing of exchange value without regard to cost or use value, is, at the very least, opportunistic and permissive, if not dishonest. It will allow the externalization of any cost that an unwary, uncaring, or gullible public will permit to be externalized--caveat emptor in a perverse kind of way. My God! Am I a thief, too?"
"I am a recovering plunderer," Anderson says, "and an organization of more than 5,000 people, daily, is instrumental in that recovery."
There is a certain mystery about Ray Anderson's life story. When he had his environmental awakening he was already 60 years old. Lots of successful people have seen the error of their ways at that time of life, and have slipped away quietly to do good. Why did he put himself through all of this? Maybe you have to be an entrepreneur, a founder, to understand it. "Interface is my life," he remarked when asked recently about his decision. "And I think the greatest contribution I can make is to continue to lead this process that puts us at the top of the mountain. I'm always talking about climbing the mountain. Someone asked me the other day what I want to see when I get to the top. I said, I want to see hordes and hordes of people following us. This whole effort is about raising awareness."
The pure of heart tend to inspire low suspicions in the rest of us. But anyone looking for the hypocrisy of Ray Anderson has a hard time of it. He lives in a 2,400-square-foot condominium in Atlanta. "We do have a weekend house in the mountains: It's off the grid, entirely solar powered." After a lifetime of Buicks and Jaguars, he now drives a Prius. What about all the jetting around to tell people not to burn fossil fuels? Interface tries to offset the environmental cost of air travel with a program of tree-planting: some 62,000 of them so far. (The rough calculus: a tree for every 2,000 passenger air miles.)
Anderson acknowledges that he passed through a moment of doubt soon after he launched Interface in a new direction. Was he an alarmist? Do we have centuries left to behave this way? What reconfirmed his sense that he was on the right course was the concept of geological time. In his book, he cites David Brower's well-known analogy: If we compare the history of the planet to a week, then the whole of human existence is represented by six seconds, the Industrial Revolution by about a 40th of a second. Suppose the optimists are right and there are really not 50 years of oil left but 650? We still have only "a blink of God's eyes" in which to change direction.
Now Anderson has a new sense of urgency. "We don't have to think in geological time anymore. Global warming is happening so fast that it is taking scientists and everyone else by surprise. It hardly matters when the oil runs out. The oil era will end long before the end of oil. Climate change will end it." As he surveys the industrial landscape, he sees increasing signs of a revolutionary change toward sustainability. "Jeff Immelt has doubled GE's commitment to clean technologies--he's not doing it out of altruism alone. He's hearing his marketplace, just as we heard ours 12 years ago." Anderson believes even more emphatically what he wrote, with an element of hope, in his book: "There are new fortunes to be made in the next Industrial Revolution."