By Matthew Spieler
HARTFORD, CONN.—With a full house on hand as part of the Connecticut Floor Covering Association’s (CFCA) The Green Impact and State of the Industry Dinner, Randy Merritt, president of Shaw Industries, gave members hope from his keynote address that they can get through this tough economic climate by incorporating sustainable business practices.

He pointed out that “green is a tough subject,” and used his time to discuss the notion of sustainability in a broader sense. He said besides the environment, sustainability stands for business and community— and all three need to be worked on in conjunction with one another to truly be sustainable.

Sustainability, Merritt, said, is more than just the environment. The dictionary defines sustainable as “a practice that [maintains] a given condition, as economic growth or a human population without destroying or depleting natural resources…”

Therefore, he noted, “The first thing we should sustain is our business and move it forward. The second thing is community. You need it to be healthy to sustain your business. And third, is the environment. What are you doing in yourbusiness; what kind of strategy do you have?”

Old news

Starting with sustaining business, Merritt discussed the tough economy and brightened the spirits of the audience by noting, while many in attendance have never been through a slowdown like the current one, they shouldn’t worry. “In my 32 years in floor covering… this is now my fifth economic downturn.” Until today, the one in the late ’70s, early ’80s “was the worst.”

Back then he said mortgage rates were 17%, unemployment was over 10%, inflation was over 11% and oil was $39.50 a barrel—which equates to $100 in today’s dollars.

His point? “We’ve been through this before, and things will get better. The question is, when? And, unfortunately, no one knows that answer—not even Warren Buffett (chairman of Berkshire Hathaway, owner of Shaw).

”The biggest “culprit” for the current slowdown, Merritt said, and what makes it different from previous ones is the credit issue. “Though 2005 houses kept going up and we never thought prices would go down. Now, consumers have mortgages that are more than their house is actually worth.”

When it comes to the housing market situation, he added, “the numbers we’re seeing are nightmarish.”

Now throw in the fact that the high costs of gas and energy are taking dollars from consumers, and that food costs have also spiked—compared to last year at this time corn is four times more and wheat is three times more expensive—and you get an economic situation like the one we are currently mired in.

Within flooring, Merritt said up through 2005, the industry had grown over the past 35 years. But 2007 was down about 12% off the peak and 2008 will be down even more, probably around 20% by the end of the year.

“I’m not trying to be depressing or pessimistic,” Merritt pointed out. “These are simply the facts of life, and what you do with them will determine your overall success.”

To help break out of the doldrums and “to compensate for how the wind is blowing” you need to “adjust your sales”— that is one of the areas the whole green movement is about—he told the audience.

“Don’t worry about what you can’t control,” Merritt explained. “Do the things that are necessary to sustain your business, your associates, the communities you live in and the environment. My challenge to you is to focus on the things you can do today to make a difference, not something 10 years from now. Set goals on things you can measure.”

Two sides

In looking at the green movement, he said there are really two sides to it— commercial and residential— and while they are running the same race, they are at different phases of their existence.

Merritt likened the commercial sector as entering its high school years while the residential side is in kindergarten. “I’m not trying to disparage residential—that’s the side I’ve spent my career in. It’s just that the commercial folks have been involved in this for a number of years and most are able to speak the language. Whereas on the residential side, we just got into this a couple of years ago so there is a greater learning curve.”

He added this is true for the residential consumer who only knows about throwing a plastic bottle or newspaper into a special container. When it comes to flooring, “style, design, color, your reputation and price are all more important to her than offering a recycled product. She won’t pay one penny more because a product is recycled or recyclable. But, if the price is equal as well as all the other factors—style, design and performance— then she’ll take the environmentally friendly option just about 100% of the time. Who wouldn’t?”

When it comes to being environmentally friendly, Merritt told CFCA, “As a member of the flooring industry, you can be proud. The industry has made great environmental strides, especially when compared to other industries.

“But how can you build your own approach?” he added. “Manufacturers across the industry have reduced their energy usage, water consumption and amount of waste generated, among other things. We all started doing these things before green was in. At the time, we did this stuff to reduce cost. But it just so happened these initiatives are good for the environment. So now we document them so we can report on them.”

Using the notion of being able to measure the effects, he pointed out how employee accidents at Shaw are down 45% since 2004. We also reduced the amount of energy it takes to make a pound of carpet by 68 BTU—which saves us $2 million. And, at all our factories, we will put essentially nothing in landfills.”

The last part is especially important, Merritt noted, because of the fact landfills in the U.S. are rapidly closing with no new ones to replace them. “There were 8,000 just a decade ago; today there less than 1,800.”

Because of this last figure, he called the company’s Evergreen Recycling Center “the crown jewel” of the Honeywell purchase. “It’s met every projection since we restarted it last February.”

While Evergreen only takes back and recycles carpets made with nylon 6, Merritt noted in this new age of being green it requires innovations and working on new things. “That’s why Shaw is looking at ways to utilize all fiber types, not just nylon 6. The challenge for all of us is to figure out how to use post consumer carpet because we will not have a choice soon.”

But in order to keep Evergreen running as well as the other carpet recycling initiatives that are taking place, “we need to keep them fed. And that is where the collectors around the country come into play.”

No road maps

When it comes to this part of the industry, Merritt said those that are involved are “true pioneers. It’s not like [these people] bought into a successful franchise— there are no road maps to follow.”

The same can be said for the whole notion of sustainability. While there are no guidelines for building a successful sustainable strategy, he did lay out a few tips to have a better shot at it:

• How do you recycle? “I’m talking about the simple things,” Merritt explained, “such as paper, cups, plastic bottles, etc. Let your customers know you do these things. Have your recycle pails visible.”

• Do you work with an environmental company or organization? Besides helping a good cause, “you get a great deal of positive PR out of it.”

• How do you conserve in your business? Do you use alternative lighting, programmable thermostats, insulated windows, etc.? Do an energy assessment to help your company not only be more efficient, thus saving money, but more environmentally friendly at the same time. And by incorporating the recommendations, “make sure to tell your customers about the initiatives and programs you put in place.”

• What kind of vehicles does your company own? “Do any run on alternative fuels or a hybrid? Again, make sure your customers are aware of this.”

• What is your perception in the community? “Are you looked at as a socially responsible company, a family oriented business? Show and tell how much you care and that you’ve got it going on when it comes to family, the community and the environment.”

• Do you have an employee wellness program? “The costs of healthcare keep going up for everyone. So at Shaw, we do things to promote healthy living. This serves two purposes: If your employees are not gettingsick as much, healthcare costs will go down. And it makes it easier to recruit and retain people.”

Merritt noted whether or not you incorporate any of the advice, “you all have a unique opportunity to build a strategy to help make a difference in your community. There are no wrong answers. But, if you don’t do anything, consumers will figure it out.” He concluded by telling the audience, that even if you don’t sell a single item more after doing this you will still “end up with a better company that people enjoy working for—and that in itself goes a long way.”

Audience reaction

Members said they walked away from Merritt’s speech with a sense of hope and encouragement about their business and the industry.

Leslie Boyko of Custom Floors and past CFCA president, pointed out, “It was nice to hear him mention that this is his fifth recession and it too shall pass. It was his words of encouragement that I think people needed to hear. He touched on every subject we had asked him to.”

Brian Booth of Booth Flooring and CFCA’s vice president, added, “I liked the fact that he presented a holistic picture of our industry as opposed to just the ‘Shaw’ story. The most important thing I took away from this evening was a sense of hope. It’s easy to get discouraged in a difficult economy. He pointed out this was the fifth economic downturn he had experienced in his career. It was a nice reminder that we have all been through this before, and we will see good economic times again. We just need to use this time to get ready for it.”