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Reinventing Business: Desso's Shift to the Circular EconomyStef Kranendijk, CEO, Desso"We need to reconsider our model of growth," the European Commissioner for the Environment Janez Potocnik said at a recent meeting held at the Dutch Parliament in The Hague.1 "What we need today, is a growth model that looks ahead - one that offers predictability, stability and that is, most of all, sustainable."As business and political leaders gather for the Rio + 20 summit this message is, I believe, fundamental to our future.In 2007, when I became a co-owner and the CEO of Desso, one of Europe's leading manufacturers of carpets and sports surfaces, I built our vision on a circular growth model in which goods are designed to be recycled. Two reports underline the reasons why we need to make this shift. 'Resource Revolution' produced by McKinsey in 2011 stresses the resource constraints and environmental pressures that will ensue as commerce attempts to satisfy the needs of the growing billions of middle classes in the rising economies.In our own market, "China could every year add floor space totalling 2.5 times the entire residential and commercial square footage of the city of Chicago. India could add floor space equal to another Chicago annually."2The economic opportunity in being able to meet this rising demand is huge. However, we cannot do so if the earth's resources are exhausted, leading to price hikes, or if the environment is severely damaged. But if businesses learn to use their resources more effectively, the economic opportunity is enormous. The McKinsey report estimates that global business could make resource productivity savings of between US$2.9 trillion and US$3.7 trillion per year by 2030.3There will be further advantages to businesses that develop these capabilities. "Companies that succeed in improving their resource productivity are likely to develop a structural cost advantage; improve their ability to capture new growth opportunities, especially in resource-scarce, rapidly growing developing markets; and reduce their exposure both to resource - and environment-related interruptions to their business and to resource price risk."4Another report: 'Towards the Circular Economy', produced by the Ellen MacArthur Foundation and launched at the World Economic Forum in Davos, with the analytics crunched by McKinsey & Co, claimed that businesses could save as much as US$630 billion in the EU per year through developing cyclical production models. The report cited Desso as one of the pioneer companies leading the way. "A major spur to innovation and an inspiration for both customers and employees, Desso's broad adoption of the circular economy principles had been driving top-line growth."5Since 2007, when we started on this journey, we have increased our earnings through the worst years of the recession by modelling our business on the circular concept known as Cradle to Cradle®. This means making sure we use materials in more and more of our products that have been assessed against a number of specific human health and environmental criteria. It is a grinding process to assess and reconfigure the ingredients in our Above: Desso AirMaster®, the carpet that clears the air The Floor is Yours?126 gren supply chain

Right: Tiles with DESSO EcoBase® backing" The McKinsey report estimates that global business could make resource productivity savings of between US$2.9 trillion and US$3.7 trillion per year by 2030 "materials in this way; and it is something that we have to develop with our suppliers. But it means we can start to build closed loop systems along all our supply chains. We have met our Cradle to Cradle® targets every year so far, making most of the initial changes in our carpet tiles division - the largest part of our business. By 2010, we had achieved a Cradle to Cradle® Silver Certification for 90 per cent of our polyamide carpet tile range, with our polyolefin based backing known as EcoBaseT. Due to its innovative composition, the polyolefin based layer of the EcoBaseT backing can be fully recycled within our production process. Getting this certificate meant that the ingredients had been assessed and up to 97 per cent are positively defined.6 We also created a new business to take back old carpets from our customers and competitors (excluding those containing PVC). Much of the yarn is separated and sent back to a supplier to be remade into new yarn and the bitumen backing (most common at the moment) is reused in the road and roofing industry. In the future, we will get our EcoBaseT carpet tiles back and here the polyolefin based layer is fully recyclable.In this new model we have begun to think differently, which has led to innovations based on the desire to improve human health, wellness and well-being. One example is the development of the Desso AirMaster® carpet tile which is specially designed to capture large amounts of fine dust that would otherwise become airborne again inside buildings. This product has proved enormously popular with offices, schools, care centres and so on. They all deal with the problem of fine dust causing or aggravating conditions such as asthma, and the feedback is that our carpets help to combat this problem.In the immediate term, we in Europe face continued economic challenges. However, we agree with Potocnik when he says that Europe can become more competitive but "only if it becomes greener."7 nREFERENCES1 Potocnik, J, Building on the pillars of life, development and poverty eradication, meeting of the infrastructure and environment committee of the Dutch Parliament, The Hague, 13 April, 2012.2 Dobbs, R, Oppenheim, J, Thompson, F, Brinkman, M, & Zornes, M., Resource Revolution: Meeting the world's energy, materials, food, and water needs, McKinsey Global Institute, November 2011. 3 Dobbs, R, Oppenheim, J, Thompson, F, Brinkman, M, & Zornes, M., Resource Revolution: Meeting the world's energy, materials, food, and water needs, McKinsey Global Institute, November 2011.4 Dobbs, R, Oppenheim, J, Thompson, F, Brinkman, M, & Zornes, M., Resource Revolution: Meeting the world's energy, materials, food, and water needs, McKinsey Global Institute, November 2011.5 Ellen MacArthur Foundation, Towards the Circular Economy - Economic and business rationale for an accelerated transition, 2012. Available at: www.ellenmacarthurfoundation.org/about/circular-economy.6 Positively defined = all ingredients have been assessed as either Green (optimal) or Yellow (tolerable) according to the Cradle to Cradle® assessment criteria.7 Potocnik, J, Building on the pillars of life, development and poverty eradication, meeting of the infrastructure and environment committee of the Dutch Parliament, The Hague, 13 April, 2012.ABOUT THE AUTHORStef Kranendijk became a co-owner and CEO of Desso in 2007 after it had been bought out from the Armstrong Group. He has also been President (EMEA) of Stanley Works, Vice President of P&G for Central & Eastern Europe, Vice President & General Manager of P&G Germany and General Manager of P&G Netherlands. Contact Details:Morice MendozaMENDOZAMEDIAmobile: +44 (0) 7944 128298e-mail : morice@mendozamedia.co.ukFor more information, please visit: www.desso.com or www.twitter.com/dessogroup???green supply chain 1 27