Mid-Course Correction: Lessons for a Circular Economy

On a steamy August morning in Atlanta, a 60-year old engineer and entrepreneur walked into a nondescript hotel conference room to kick off a new task force assembled to answer nagging questions about the environment from a few insistent customers. He had finally relented to multiple requests to share his environmental vision with the team, which he had only discovered a few days before.

 

No one was expecting anything special. In fact, the meeting had been bumped from the corporate offices for “more important” matters. The taskforce leader himself thought this side project would be wrapped up within 6-9 months. Everyone loved spending time with the CEO but expected him to make only a cursory and motivational appearance and get back to his real job.

 

No one knew the CEO was as inspired as the day he first saw carpet tiles 22 years before.

 

To everyone’s surprise, on Day Zero of Interface’s sustainability journey, founder and CEO Ray Anderson described the outline of a radical vision of a cyclical enterprise that would become ecologically restorative through its influence on others.

 

 

Ray was a source and a magnet for big ideas, learning and synthesizing from early visionaries like Paul Hawken, Amory Lovins, Bill McDonough, Janine Benyus, David Brower, and Walter Stahel, among others. After a several months of confusion about his seemingly outrageous ideas, the company grabbed ahold of the vision behind their leader and entered a phase of intense research, ‘box busting,’ and soul searching, and a new systems vision for the “Prototypical Company of the 21st Century” emerged. The central organizing idea was based on nature: “Waste = Food.” Nature is the original Circular Economy: any organism’s waste becomes “nutrients” for another.

 

We came to see that truly sustainable enterprise, its value chain, and economy within which it resides would have to be redesigned to emulate the cycles of nature. This required a two-step approach. First, we would need to eliminate as much waste as possible, with waste being defined as anything that the customer did not value. Secondly, it required we redesign systems so that any waste would be “food” for another process. Any material that couldn’t be consumed by another natural or technical process would have to be eliminated, full stop.

 

August 31 will be the 25th anniversary of Ray’s legendary kickoff of Interface’s sustainability-inspired transformation. Twenty years ago, he published his first book, Mid-Course Correction, followed a decade later by his memoir, Confessions of a Radical Industrialist. Mid-Course Correction Revisited was recently released by Ray’s grandson and the Executive Director of the Ray C. Anderson Foundation, John Lanier, featuring Ray’s original story and new chapters that expand on his legacy.

 

Having lived through the publication of the first edition—poring over and debating multiple drafts—I had not looked at it in many years. With the new edition, I re-read it and saw how clear, comprehensive, and prescient his vision was in 1998, only a few years into our journey. The systems diagrams for the transition to a sustainable enterprise are as accurate today as they were then.

 

It is an idea whose time has come. The nascent idea of the ‘Cyclical Enterprise,’ which informed the rest of Ray Anderson’s life, has become mainstream as the ‘Circular Economy.’ It’s the topic of major conferences, and mega-brands that are aligning their strategies with words and serious budgets to address the issue of waste which threatens to choke the planet and business at the same time.

 

This explosion of interest and commitment is good news, but good intentions are not sufficient. There’s not a lot new in the conversation today beyond Ray’s ideas from the late ‘90s. The challenges to shift from a linear to a circular economy are the same that challenged Interface decades ago. What have we learned that can help accelerate this process over the next decades?

 

 

The entire linear, Take-Make-Waste value chain is highly evolved with each player’s role finely adapted to fit and reinforce the “vitality” of the system as defined by its dominant metric, which is economic. Honed over decades, even centuries, these systems will react harshly to any ‘disruption’ with powerful antibodies—visible or not—to pull the system back into “order.”

 

Therefore, whole value chains and business models will have to be disrupted to create new, cyclical systems. As an example, at Interface, we hammered on our major nylon supplier for our carpets and polyester supplier for office furniture panels to offer recycled content yarn to no avail. Only after they had lost most of their market share to upstart, smaller fiber suppliers did they begin to take us seriously.

 

We also launched an early example of the “products as service” concept. Interface’s Evergreen Service Agreement (see HBS Case Study) was an attempt to disrupt and rebuild a whole cyclical material system for carpet, redefining the incentives at every node around the loop. We tried to enforce a new system on ourselves that would force changes in the incentives to redefine product design, manufacturing, and maintenance services.

 

 

Like most industries, the carpet industry is a lot more technical than outsiders realize. The ingredients for face fiber (what you see) and backing (what holds it together) are highly specialized and scientifically adapted for that use. In addition, processing equipment has co-evolved with “improved” ingredients over decades to become more and more efficient at using more tightly controlled and uniform ingredients from virgin sources. Like my son’s childhood phase of only wanting to eat “blue-box” Kraft macaroni and cheese, our production systems have become incredibly picky eaters with very narrow tolerances.

 

Seemingly sacrilegious to the idol of 6-sigma uniformity, Interface engineers, having spent time with biomimicry mavens Janine Benyus and Dayna Baumeister, redesigned Interface’s backing process to be more of an ‘omnivore,’ able to consume a wide variety of thermoplastics more widely accessible in recycling streams. Biomimicry also gave us the idea to create random patterning technology, which allowed subtle imperfections in color or texture to blend together, reducing waste in the factory and in installation while creating a beautiful floor.

 

 

“Pure” virgin sources of many materials will become increasingly scarce in the future; a more ‘omnivorous diet’ opens options for more sources, further driving economic efficiencies and creating a competitive advantage.

 

Just like our manufacturing and ingredient systems, people systems are highly evolved to support the Take-Make-Waste model in value chains. Mindsets, norms, and incentives can be deeply ingrained in corporate culture for buyers and sellers, recruiters and prospects, and CEOs and investors.

 

 

Paid on commission, Interface salespeople did not support early, more sustainably designed products that looked different and saved waste for the customer. They had quarterly sales quotas to meet and were reluctant to take their time to promote the new, weird-looking product that allowed the customer to buy three-to-five percent less due to clever biomimetic design. Wouldn’t that take money out of their pocket? How were they going to get paid for perpetually “Evergreen” leased carpet that the customer would never own? And how were they were supposed to become experts on energy, climate change, recycling, LEED buildings, capital vs. operating leases, and other issues which the full-value proposition was designed to cover? For the most part, they just wanted to sell carpet.

 

Engineers and technologists made their livings based on decades of specific, and narrow expertise with materials and processes that seemed doomed by Ray’s crazy ideas. Is it any wonder they objected to change?

 

Purchasing managers were (and are) accountable for purchasing quality products and services, to be delivered on time, at the best price from reliable sources. So, when the leading supplier in the industry wanted to change everything and use “waste” to make their products, it was not warmly received. Even if an organization declared their interest in buying innovative, green products, many were constrained by their own “three-bid” purchasing policies that prohibited buying anything truly new or green.

 

 

Ray’s vision was one he would not live to see. As his relevant time scale expanded from the quarterly perspective of a publicly listed CEO to a hundred generations, he knew that this was no simple ‘project’ that would ever be completed. Regardless, he put the full weight of his capital—intellectual, influential, and financial—behind it, and we have learned much from experiences of the company he led and others he inspired.

 

I am heartened by those leaders who have taken up the challenge and aspire to redesign our world fit for the next hundred generations. I highly recommend you revisit Ray’s story via the newly-released book. Ray envisioned climbing ‘Mount Sustainability.’ I look forward to learning with and from those climbing it.