Green Machine

Gunter Pauli's radical eco-factories completely eliminate pollution. They also rewrite the rules for growth, productivity, and profit.

Gunter Pauli fires up his PowerBook and proudly displays an elaborate computer model of the world's most unconventional brewery. The plant is under construction in southern Africa — Namibia to be exact. Water flows from the brewery into ponds designed for fish farming. Mushrooms grow on piles of spent grain from the fermentation process. Chickens feed on earthworms set loose in the grain. It seems part science experiment, part environmental theme park. Pauli says it's serious business.

"It's a small plant, but it will generate more sales than a traditional brewery of the same size," he declares. "And it will create more jobs. That's what 21st-century entrepreneurship is about. Companies have to be financially sustainable. They also have to be socially sustainable."

Gunter Pauli, 40, is a new breed of innovator: the social entrepreneur. There's no denying his corporate credentials and globetrotting workstyle. A graduate of INSEAD, the prestigious European business school, he spent several years criss-crossing Europe as a lecturer and consultant for IBM. He's written eight management books, is fluent in six languages, and maintains a travel schedule that would exhaust the most ardent road warrior.

But Pauli is as much social crusader as business leader. For the last five years, he's championed an ambitious program to challenge the logic of how conventional companies work. Pauli wants to create manufacturing facilities, like his new brewery, that function as closed-loop systems — factories that completely eliminate waste by reusing or recycling all the raw materials they take in. He calls it zero-emissions manufacturing.

"This is part of the drive for higher productivity," Pauli argues. "We're always pushing to do more with labor and capital. It's time to focus on the productivity of raw materials. Zero emissions sounds radical today. In 20 years it will be standard operating procedure."

Standard or not, it's already operating in a few places. Pauli is the former CEO of Ecover, a small Belgian company that makes cleaning products (laundry powder, dishwashing liquid, car wax) from natural soaps and renewable raw materials. In October 1992, Ecover opened a near-zero-emissions factory in Pauli's native Belgium. A grass roof keeps the plant cool in summer and warm in winter. The water-treatment system runs on wind and solar energy.

Ecover's "green factory" triggered a media sensation in Europe. But Pauli left the company after a bitter struggle with its lead investor. The young CEO saw a chance to create a global brand by opening more factories around the world. His partner preferred a cautious approach: move the green factory into the black, then grow.

So Pauli moved to Tokyo, and the United Nations University, where he launched the Zero Emissions Research Initiative (ZERI) in April 1994. Today he sits at the center of a global network of scientists, corporate executives, and political leaders that is piecing together zero-emissions technology and documenting its performance benefits. ZERI's budget for 1995 was $2 million. Its budget for 1996 is $10 million. And Pauli is putting the finishing touches on a prospectus for a $50 million investment fund (to be financed by governments) to underwrite zero-emissions factories in industries from beer brewing to sugar processing. The goal is to have three plants up and running by March 1997.

Fast Company visited Pauli at his United Nations University office in Tokyo. We challenged him to discuss his agenda in terms even the most cynical venture capitalist could understand.

"I don't claim zero emissions is cheaper," he says. "I do claim it can make more money."

Here's the business plan.

What's the core idea?

Zero emissions is the next breakthrough in business productivity. Total quality management meant zero defects. Just-in-time manufacturing meant zero inventories. We're striving for zero emissions — 100% throughout. You use everything. You completely eliminate waste.

Take beer. The brewing process wastes massive amounts of water. In Japan, it takes ten liters of water to brew one liter of beer. Japan isn't exactly overflowing with pure water. Brewing also requires huge supplies of grain. China imports more than 16 million tons of grain each year just to make beer and alcohol — more than it imports for people. But the fermentation process extracts only 8% of the nutrients in the grain. Of the nutrients left behind, 26% is pure protein. Does it make sense — morally, environmentally, economically — just to waste those resources? Is there no food shortage in the world?

What's the business case?

One word: growth. Today productivity means cutting costs and downsizing workers. No wonder business is on the defensive! Who supports higher productivity if it means losing jobs? Our model says you increase productivity by growing faster. Find ways to generate more revenue — and jobs — from the same raw materials.

Think about sugar. You can't harvest sugar cane year-round, so lots of expensive equipment sits idle for months. In Okinawa, for example, the sugar industry is the second-leading source of employment. But the mills operate only two months of the year. What if you could use the waste from sugar mills to make other products — generating new revenue and new jobs in the process?

We're designing a zero-emissions system to do that. The chief byproduct of sugar processing is waste material called bagasse. Most mills just burn it as fuel. But it contains fibers that can be used as substitutes for cellulose — for example, in paper pulp. Brazil, Colombia, and Indonesia produce lots of sugar and incinerate the waste. Then they destroy their rain forests because they need cellulose for paper. It's a huge missed business opportunity.

Can you execute?

We are executing. Namibia Brewers Ltd. is the first company to commit to building a commercial plant based on zero-emissions principles. Its flagship beer is Windhoek Lager. It's a premium, high-quality beer, a good seller in Botswana and South Africa.

On June 1 we'll start brewing a new beer, using sorghum, in Tsumeb, in Namibia's northern desert area. Meanwhile, we're building the zero-emissions system around the brewery. The creativity of our researchers is incredible. We've got 40 different biochemical processes to reuse everything: heat, water, solid waste, carbon dioxide. These processes will create 12 different products in addition to the beer.

The first thing we do is treat spent grain as a resource rather than as waste. We've figured out a way to grow mushrooms on it. So in addition to selling beer, this operation will sell mushrooms — and Namibia has imported all its mushrooms until now. But growing mushrooms is just a start. We've also devised a way to extract protein from the grain. What's the secret? Earthworms. We introduce earthworms into the grain. They eat it, converting vegetable protein into animal protein. Then we use the worms as chicken feed. They make high-quality feed — the chickens love it — and you can produce lots of it.

Now we've got mushrooms, chicken feed, and chickens — which, of course, create their own waste. We collect that waste and put it in a machine we call a digester, which generates methane gas that produces steam for the fermentation process. We use the waste from the digester as feed for fish farming. A brewery pumps out lots of water. That water will flow into ponds, and the ponds will support eight different types of fish that we can sell.

This isn't just a brewery. It's a fully integrated biosystem. We estimate this complex will produce seven times more food, fuel, and fertilizer than a conventional operation, and create four times as many jobs. We need time to generate conclusive results. But I'm convinced our numbers will blow people's minds.

Is there a market?

We live in an age of oversupply. Customers have more choices than ever. If you tell people, "We offer high quality, low prices, good features," what you're really saying is, "We're the same as everyone else." You need something bold, new, different. Then you need a simple, clear-cut message that targets what people care about and is easy for them to verify.

Zero emissions is such a message: "We don't pollute. We offer healthier products. We create jobs." I've seen the power of that message. It's what we did when I was CEO at Ecover. We didn't sell, we educated. We didn't compete on price, we competed on emotion. We took products that were utterly devoid of excitement — who cares about laundry detergent? — and made them something special.

The heart of our message was our factory. Thousands of people visited us in Belgium. It became a media attraction, a place for political leaders and corporate executives to visit. People walked on the roof, touched the grass, planted flowers. We captured 6% of the Belgian detergent market in 18 months, and we barely spent a dime on advertising.

Our factory didn't just supply cleaning products; it supplied education and entertainment — edutainment. That's what people are looking for today. They want products that reflect their values, and they want a good story. That's how you create a bond with customers.

How big can you get?

Our growth model is industrial franchising. It's a new approach to intellectual property for the 21st century. First we patented products. Then we patented processes. Now it's time to "patent" organizations. You find something that works, you capture it, and roll it out.

I want to go to investors and say, "Where are the growth markets for beer? They're not in Europe or Japan. They're not in the United States, unless you're talking about microbreweries. The growth is in Africa, Asia, and Latin America. But these are areas with serious water shortages, which means you can't build large breweries. We've created a model that supports 40 or 50 small-scale breweries throughout Africa. If you want to be there, this is the way to do it."

What's your technology advantage?

Our core technology isn't biology, chemistry, or engineering. It's the Internet. The zero-emissions movement faces big technical challenges. So we use the Net to support a global team of experts who swap ideas, brainstorm about problems, conduct experiments. It totally changes the technology paradigm. It's like creating the Stanford Research Institute without putting anyone on the payroll.

Today we have 4,600 scientists participating in 60 different electronic discussion groups. The lists are very targeted. On the brewery project, we have a group strictly for mushroom experts. There's another one to talk about earthworms, one for methane gas. There's so much energy on these lists, so many problems getting solved — and we don't even know each other! I have a staff of four people in Tokyo. They ask questions, launch online conferences, keep the conversations going. Talk about productivity! We have a team of nearly 5,000 researchers, but only four people on the payroll.

We also use the Net to interact with our public constituencies. Last year in Tokyo, we held the First World Congress on Zero Emissions. We broadcast live over the Multicast Backbone, the Internet's video channel. Swedish Prime Minister Ingvar Carlsson addressed us from Stockholm, and became the first head of state to speak over the M-Bone. Just this May, we convened the Second World Congress in Tennessee. President Suharto from Indonesia addressed us over the M-Bone.

The reach and speed of the Net is so critical. We're organizing a worldwide, decentralized movement around zero emissions. We need to move fast, generate breakthroughs, and spread the word. The Internet is the infrastructure that keeps the momentum growing.

Steven Butler (0005770171@mcimail.com) is Tokyo bureau chief for "U.S.News & World Report." Contact Gunter Pauli by e-mail (pauli@hq.unu.edu) or visit Zeri on the web, http://www.zeri.org.

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