Confessions of a Radical Industrialist

Profits, People, Purpose--Doing Business by Respecting the Earth

Ray C. Anderson with Robin White

St. Martin's Press

Prologue

This is a book about the future of business and industry, a future driven by a new and powerful idea: sustainability. Specifically, it deals with what it takes to run a profitable, modern business with the environment in mind, doing no harm to the earth and taking from the earth nothing that cannot be renewed naturally and rapidly by the earth. It is about a new business model that can generate not just bigger profits, but better, more legitimate ones, too.

But as I sit here today, October 10, 2008, writing while I vacation in the ancient town of Brugge, Belgium, a global financial meltdown seems to be under way; putting into question whether the economic system can survive.

Here’s a snapshot at this moment in time. While it’s 7:05 p.m. in Belgium, it is 1:05 p.m. in Atlanta, where I live. The Dow Jones Industrial Average is down 345 points, following seven consecutive days of decline. It appears to be moving toward 8,000, or lower. The Federal Trade Commission has just approved Wells Fargo’s acquisition of Wachovia for $11.7 billion.

Venerable Merrill Lynch is in the process of disappearing into Bank of America, a route Countrywide Financial has already taken. Lehman Brothers, a longtime pillar of stability in the investment banking world, has failed; with only its brokerage and mutual fund businesses surviving under the banners of Barclays of the United Kingdom and Neuberger Investment Management, respectively. Fannie Mae and Freddie Mac have gone into federal government “conservatorship.” Washington Mutual, the largest savings bank in the United States, is being gobbled up by JPMorgan Chase, out of the receivership of the Federal Deposit Insurance Corporation (FDIC).

Bear Stearns, the first really big shoe to fall, is already being absorbed by JPMorgan Chase in a deal brokered by the U.S. Treasury Department over a weekend. Goldman Sachs and Morgan Stanley, for so long dominant forces in the investment banking world, have opted to change their very nature and become regulated commercial banks. They were the last of the mega–investment banks once Bear Stearns, Merrill Lynch, and Lehman Brothers were gone. Mitsubishi UFJ, a Japanese bank, is taking a $9 billion equity position in Morgan Stanley to shore up MS’s capital structure and prepare it for the role of acquirer in the turmoil ahead, portending more consolidation to come. American International Group (AIG), said to be too big to be allowed to fail, is being propped up by the Federal Reserve to the tune of more than $100 billion.

And the U.S. Treasury Department is trying to determine just how to “invest” $700 billion of taxpayers’ money to jump- start the “clogged up” (Secretary of the Treasury Henry Paulson’s term) American credit markets.

Clogged up means banks have stopped making loans, even among themselves, and credit is drying up, even for borrowers with impeccable credit standing. Meanwhile, Europe an central banks are undertaking their own forms of rescue with capital infusions of more than a trillion dollars.

A year ago the Dow Jones Industrial Average was above 14,000. The Dow is an important number on Wall Street. It is an important number on Main Street, too. Wealth worth trillions of dollars has evaporated, taking with it the savings of millions of people. While the much- touted benefits of a “trickle down” economy have always been hard to document, the trickledown hurt of a freeze in capital, in short- term lending and in mortgages and auto loans is now painfully apparent to just about everyone. I look into my laptop’s screen and see a financial industry in turmoil. It seems as if the financial world we have known for three quarters of a century is changing before my eyes. The underlying culprit is said to be the bursting of the sub prime home loan bubble in the United States, which precipitated a whole new set of consequences: many trillions of dollars lost in arcane derivatives that few people even understand.

Watching this unfold from afar is truly surreal. Personal, too, as I watch my own investment portfolio shrink. I think that all my holdings are in sound companies, but who really knows? Even those who have the responsibility of running those banks don’t seem to know what to do or where to turn. One wonders who or what is “running” whom.

However, another kind of sustainability is on my mind. My company, Interface, has become nearly synonymous with corporate environmental sustainability. But can we sustain sustainability, or will the economic storm sweeping over the world force us to put our efforts on the back burner?

I answer myself: No way! We will continue. You see, while environmental and financial sustainability have often (and mistakenly) been seen as opposite goals, they are, in truth, one and the very same. We have seen that for ourselves. We know it to be absolutely true.

Oil’s price is down today to less than $80 a barrel, the lowest in a year. Not long ago oil was $147 a barrel and reaching for more. Down $67 a barrel!

Is that good? Or bad?

The book that follows this introduction was largely written while the Dow was falling from around 13,000 to around 10,000, oil’s price was rising, and gasoline was topping $4 a gallon in the United States. But concern for the future of the American banking system, and the unprecedented entry of government institutions into the world of private finance— to rescue it, no less— never once entered my mind, though smart people I know and talk with regularly have been saying financial upheaval was coming. Yet, quite intentionally, I was writing about the future, the future of the real economy— the place where real stuff gets made and sold, and real services are rendered. It is quite distinct from the financial economy, with its stock market and its various indexes, altogether a sort of imperfect analogue of the real economy.

The point of my story is deceptively simple. Business and industry— not just American business and industry, but global business and industry— must change their ways to survive. Some people have been saying this for a long time. Many more are saying it today.

I make no claim to prescience, only to conviction. And by survive, I do not mean maintain identity and integrity within the context of a financial system in meltdown, either. By survive, I mean business must be steered through a transition from an old and dangerously dysfunctional model to a far better one that will operate in balance and harmony with nature— thrive in a carbon- constrained world, and put down the threats of global climate disruption, species extinction, resource depletion, and environmental degradation.

In a word, develop a business model that is sustainable. Even as I write this introduction I have not yet settled on a title for the book. But I think it should somehow mention “hubris.” (It probably won’t because it’s not catchy enough.) For there’s nothing quite like staring apocalypse in the eye to humble oneself or a society. To know that nobody has control over events puts the limitation of power into a new perspective.

Puffed- up hubris is run out of town on a rail by something just as useless: unthinking fear.

What we need instead of hubris or fear, and what this book offers, is a new and better way forward. And yes, hope, a hope learned from my own, personal experiences running a company that is reaching for sustainability. There is a chance that on the other side of this financial meltdown a new sanity will overtake the world of business, industry, and finance, and its analogue, the stock market. Then this book can assume relevance for newly opened minds and become a map for change.

Therefore, I am altering as few of the words already written as possible, though it is tempting to rewrite some passages that are predicated on high prices for oil. But I take the view that the upheavals in finance will be followed by slowing business and declining demand, therefore falling oil prices— for a while. Then this too will pass away, but the fundamentals of supply and demand will still be there. So I let stand unchanged those passages, in the conviction that their relevance will become clear on the next leg up of the real economy.

The story you will read has grown out of real- life experiences— mine and those of the people of my company, Interface, Inc. We’re not some small, boutique manufacturer of green widgets. We make and sell carpet tiles— more than a billion dollars’ worth in the most recent year. We also make broadloom carpets— about a hundred million dollars’ worth in a year.

Our sales force covers the world, selling our products in 110 or more countries in any given year.

Almost all our products are made for commercial and institutional interiors. A relatively small but growing portion is made for home use. Interior designers and architects are extremely important to us. It is their choices of our products for their projects that keep the wheels turning in our factories in six countries on four continents— with more to be built in time, always close to their markets, not for cheap labor, but for sensitivity to customer needs and to shorten transportation pipelines.

We are a company that is highly dependent for our raw materials on petrochemical products produced by big chemical companies. We use a lot of energy, too. All of it used to come from burning fossil fuels. Not so anymore.

But I get ahead of myself.

In 1998, I published Mid- Course Correction, an autobiographical account of my formative years and some forty- two years (at that point) in the business world. The last twenty- five of those years had been invested in the founding of my company, its growth and development and its survival. But the last four of those twenty- five years were the primary focus of Mid- Course Correction.

Those were the four years that followed my 1994 epiphanal reading of Paul Hawken’s The Ecology of Commerce (HarperCollins, 1993), four years that had seen the literal “mid- course correction” of Interface away from the extractive, abusive path of business as usual and toward a renewable, cyclical, and benign business model— a model of sustainability. The plan for executing our course correction— a wide- ranging and astonishingly successful program we now call Mission Zero— was the heart of Mid- Course Correction.

Ten years have passed since Mid- Course Correction’s publication. A lot has happened at Interface during those ten years, but Mission Zero is still the plan. Given the progress we have made in executing it, I thought it was not only time for an update but for a how- to manual to more clearly show others the way.

For the reader who has not read Mid- Course Correction, I have rewritten its essential story, so you need not feel something important is missing from this account. For the reader who has read Mid- Course Correction, you may read some passages that seem familiar, but they are expressed more expansively here. I hope not to bore anyone with repetition. As with Mid- Course Correction, I make no effort to prove anything. This is not an academic book. It is a real life story of real people doing real, if extraordinary, things.

Today, as many CEOs are wondering how they will weather the financial storm, the step- by- step plan that we crafted at Interface assumes greater importance than I imagined when I set out to formulate it. As you read this book, you will see that the choices— the trade- offs—we are told we must make between financial success and environmental success, between doing well and doing good, are just plain false.

I began by saying that this is a book about the future of business and industry; I should say the necessary future of business and industry, if we are to choose the survival option and lead humankind away from the environmental abyss toward which we are rushing headlong. Conversely, if the institutions of business and industry fail in their own mid- course correction toward ecological survival, the financial meltdown I am observing from Brugge will seem like a tea party by comparison.

That is a very large burden for the institutions of business and industry to bear. This book is about lightening that burden. It offers a template for a better, more benign business model. It also makes the business case for sustainability in pure business terms.

If you have better ideas, I hope you will share them with me; for as long as I live, I will be looking for a better way. That’s what sent me and my company on a quest to achieve the very sustainability that some really knowledgeable people said was just plain impossible.

Of course, many of those same people were the ones who brought us Sub prime mortgages, overleveraged hedge funds, and credit default swaps, and a traditional framework of financial “values” that appears to be collapsing before our eyes.

Meanwhile, the value of nature’s ser vices to all of humanity— clean air, fresh water, arable land, pollination, seed dispersal, and climate regulation, just to name a few— has not lost a cent. They are, they will be, and always were the real gold standard. Investing to conserve and protect them has been a winner for us. As you read this book, I think you will see that investing in the earth’s future— the earth that all business, all life, utterly depends upon— can be a winner for you, too.