Gunther Pauli Cleans Up

He built the world's first biodegradable factory. Now, armed with laptops and attitude, Gunter Pauli and his green team plan to outmaneuver Procter Gamble and the detergent giants.

Ecover is a small company with a big idea: to reinvent the cleaning business around the world. Gunter Pauli is a young CEO with a new model of enterprise: the company as open economic system and closed ecological system.

From its headquarters in Malle, Belgium, a village outside Antwerp, Ecover is challenging Procter & Gamble, Lever Brothers, and the other global packaged-goods giants. At one level, it sounds profoundly mundane: Doing the laundry. Washing the dishes. Cleaning the windows. At another level, it is mundanely profound: a $20 billion industry in North America alone, 7 billion pounds of laundry detergent last year, and one of the world's most overlooked sources of environmental destruction. Cleaning, it turns out, can be a dirty business.

Enter Ecover. The company sells everything from laundry powder and dishwashing liquid to shampoos and car wax. Its products use only natural soaps and renewable raw materials: vegetable extracts, sugar derivatives, natural oils. To make them, Pauli has built the world's most ecological factory.

The place is a green marvel. A huge grass roof keeps the factory cool in summer and warm in winter. The water-treatment system runs on wind and solar energy. The bricks in the walls are made of recycled clay from coal mines.

Ecover's relentless pursuit of green manufacturing has created a sensation in Europe. When the factory opened in October 1992, big-name politicians, environmentalists, newspaper reporters, and TV cameras all showed up. Since then it has become sort of a biodegradable tourist attraction, drawing activists from Greenpeace and Friends of the Earth as well as engineers from Dow Chemical and Chrysler.

Ecover generates annual sales of $30 million. But its public impact far exceeds its size, and its size is increasing at geometric rates. Ecover is in a position to shape the debate around the future of one of the world's most ubiquitous industries - and shaping the debate is Ecover's lever for growth.

This is serious business. And no one is more serious than CEO Gunter Pauli. At 37, Pauli is a role model for the energetic global manager. He speaks six languages. He travels constantly. He is never without a cellular phone. He swears by his fax-modem. "No one at Ecover gets a company car," says Pauli. "Everyone gets a PowerBook."

Fast Company met up with Pauli in New York City as he was ending a swing through North America. He had spent nearly a week in the Pacific Northwest looking for a site to build Ecover's second ecological factory. He had spent a day in Toronto talking business and politics with executives from one of the country's largest banks. He was about to leave for meetings at the White House and the EPA. It was, in other words, a typical week in his battle to clean up the cleaning establishment.

FAST COMPANY: I look at the world you compete in, and I don't see much room to maneuver. A handful of global companies, each with billions of dollars of sales, are spending hundreds of millions of dollars on advertising and promotion to dominate the supermarket. What do you see?

GUNTER PAULI: I see huge opportunities. The giant companies are on the wrong side of history. Their products use hundreds of highly toxic chemicals. They know it, they are not happy about it, and they are struggling to change it. Their manufacturing systems consume vast amounts of energy. They know it, they want to do something about it, but there sit the factories. They are under constant scrutiny from the environmentalists and constant pressure from the financial markets.

Think about the logic of this industry: what's in the products, how they're made, how they're sold, what happens after they get used. Then ask yourself what any rational society would expect from products that perform the simple act of cleaning clothes or dishes or floors. The gap is enormous. That's our opportunity. A box of Tide is six thousand times more toxic than a box of Ecover. Six thousand times!

So you win by becoming the "green" alternative to the corporate establishment?

I don't like the term "green." If you say green product to most people - even to deep ecologists, the true believers - they assume you mean lousy performance at a high price. That's not Ecover. We develop high-technology products based on our mastery of soft chemistry - the chemistry of renewable resources. Our R&D people know more than anyone about how to apply the power of nature to the task of cleaning. We have biologists, biochemists, toxicologists. We can make 700 different varieties of soap. We understand the cleaning properties of a vast range of renewable materials: sugar, vinegar, starch from potatoes and corn, pine oil, coconut oil, pits from citrus fruits.

Sure we talk a lot about the environment. But Ecover is not in the green business. We are in the business of pioneering sustainable economic and social development.

What does that mean?

We are not just selling products or building a company. We are creating a system. We want to create a totally open economic system and a totally closed environmental system. That system involves everything we do. The products. The ecological factory where we build the products. How we communicate our message to customers. How we work with each other. Why we spend so much time on fair-trade initiatives in Colombia.

Let's start with the products. Consumers are more environmentally aware than ever. But I don't detect a mass revolt against detergents. How do you move people away from the familiar brands?

We show them that cleaning is dirty. What do you do when you clean? You take dirt, you add more dirt in the form of chemical agents, and then you put all that dirt somewhere else - usually into the water supply. Once people appreciate that they make other things dirty when they make their clothes clean, they think differently about what they're doing. They care about their impact on the world. They don't just want to wash white; they want to wash right.

Now it sounds like you do build your message around an environmental appeal.

This industry is a huge source of environmental damage. One-third of all pollution from households comes from cleaning products. People in the US and Canada bought 7 billion pounds of laundry detergent last year. But I don't think the environment per se is our leverage point into the mass market. The leverage point is personal health, in particular, the health of children.

We want consumers to evaluate cleaning products through the eyes of their children. I'm a parent. I know how upset parents get when their kids get a rash. Allergies among children have risen by a factor of five over the past 20 years. Thirty percent of US families report problems with skin allergies. We think detergents are a big factor.

Everyone has heard of the marketing concept of "whiter than white" - the idea that a white shirt or towel isn't really clean unless it is bursting with whiteness, even if it's old and the fabric has grayed naturally. People have been trained to demand this performance from detergents. What people don't understand is the toxic chemistry behind the "whiter than white" look. We help them understand. And they start thinking differently.

You ask people to wear drab-looking shirts?

No, we teach them about optical brighteners. We don't ask people, "Do you want whiter than white?" Of course they will say yes. We ask a different question: "Do you want to take a chemical derived from benzene, put it on your white clothes, let it absorb ultraviolet rays, get energized, and then emit ultraviolet rays with a bluish hue - all to trick your brain into thinking a graying shirt is white? Is there a value to that, especially when it may create health risks? Is it worth the hazards to your kids?"

A little story. You go on a skiing vacation in the Rocky Mountains. You don't want to get burned, so you put sunscreen on your face. You come in from skiing at the end of the day and you have a terrible burn. You wake up the next morning and you have a rash on your face.

You get angry: "This sunscreen is terrible!'" Not so. The sunscreen was fine. Here's what happened. You stayed in a hotel. You shaved before you went out, and dried your face with a beautiful white towel. What you didn't realize is that, by using the towel, you were also putting on a nice layer of optical brighteners. Then you put on the sunscreen. You go out in the sunlight and all those optical brighteners energize. But they are trapped under the sunscreen. You think you are burned. You're not. It's a chemical reaction. It's the optical brighteners.

Now go ask that same person: Do you really need an optical illusion, a chemical trick to make you think a towel, which is perfectly clean, is also bursting with whiteness? Once we persuade people to ask the right questions, and then offer an alternative, they move our way.

It sounds like a big part of your game plan is to turn the big companies into Public Enemy Number One.

Absolutely not. We don't lead boycotts. We don't run Greenpeace campaigns. We are not in business to attack Procter & Gamble. We are not in the world to punch Lever in the nose. We want to be positive. We offer solutions.

The challenge, of course, is turning your solutions into a business. How does your message break through the marketing clutter in an industry this vast?

With products for the home, we started by preaching to the converted. We targeted environmentally aware and health-conscious consumers. We are very strong in health-food stores in the Netherlands. We are very strong in pharmacies in Switzerland. This strategy built critical mass. We have revenues of $30 million. We sell products in 34 countries. We have 15,000 retail outlets.

Now, as we move into the mass market, it also means we have an identity, a track record. Credibility. We don't need to bribe our way onto supermarket shelves with slotting allowances. We don't need to bribe customers with endless promotions. We stand for something.

We have a different strategy for the industrial market. We are economic thinkers. We want to make the maximum contribution with the minimum investment. We go where pollution is most highly concentrated.

Where is that? Oil refineries and coal mines?

No, office buildings and hotels. They are industrial society's great silent polluters.

Think about the numbers. Four million people work in office buildings in Manhattan. That's 8 million toilet flushes a day, 3 gallons of water per flush - 24 million gallons of water being pumped through office buildings just for flushing toilets. Now think about the toxic products used to clean those toilets, and the concentration levels they're used at because of health regulations. The impact is just unbelievable.

How different are the two markets?

The mind-set challenge is the same: How do we persuade the people responsible for purchasing to persuade their boss to consider "green" products, which they assume are overpriced and underperforming?

The answer is different. We use eco-audits. We take samples of all the cleaning products at a hotel. We verify the volumes, we look at the type of water they get discharged into, we look at the concentration levels. Then we make a report to purchasing and the top executives. They are horrified. We are doing that to the water? This is happening in our hotel? What can we do?

SAS Hotels are a good example. These are five-star hotels, great management, Scandinavian, very environmentally oriented. We just did an audit for them. We discovered that their shampoos include a chemical ingredient called alcohol etoxilates. It's incredibly toxic. In the course of a year, at their 33 hotels, they will use 3.5 tons of this toxin. Each hotel will drain 25,000 gallons into the water system.

We make shampoo from sugar derivatives. Our product is a thousand times less toxic than what SAS has been using. No added cost, no loss of performance, vast reductions in environmental damage. And that's just shampoo. This is going to be a big business for us all around the world.

Don't you risk turning people off? Life is complicated enough. Now you want us to worry about poisoning children when we wash their socks or killing fish when we shower at a hotel?

There is a high "information content" to our business. We have to appeal to people's brains. We have to persuade them to ask questions they've never asked.

But we never get solemn or preachy. We're serious people. But we also want to be fun, youthful, energetic - different. We want to be as pioneering in our marketing communications as we are in the R&D lab.

We know we have to advertise to build brand awareness. We also know people believe in recycling. So why not recycled advertising? Last spring, we organized a contest for young artists in Antwerp. We bought a whole bunch of billboards that carried ads from our competitors. Then we asked the artists to tear them apart, reassemble them however they liked, and create billboards for us. They created some remarkable billboards - colorful, cheerful, provocative, real pieces of art.

We put them up all around Antwerp. We held a press conference, introduced the artists, and got great coverage. Then we organized walking tours. People would go out, 10 or 20 at a time, and look at the billboards as if they were an art exhibit. Can you imagine, billboard tours! We got so much attention that an art collector offered to buy all the billboards from us. We said no. Instead, we auctioned them off and divided the proceeds among the artists and environmental groups.

At some point, if only to achieve scale, don't you have to play the ad game just like the big boys? Can you use guerrilla marketing and still create a global presence?

Globalization is not about standardization - selling the same bottle of Coca-Cola in the same way all over the world. It is about flexibility. That applies to everything - from the product to the packaging to our marketing message. We are not a niche marketer. We are a niches marketer. We have to take all the issues surrounding our products - performance, price, the message - and translate them into the worries and dreams of real people in real markets.

That's what we're doing in Amsterdam. The water in the City of Amsterdam is unusually stable. That should be an important piece of information for this industry. You can customize detergents based on water properties. Softer water needs fewer ingredients than harder water.

The big companies won't do that. Their factories are organized around economies of scale. They produce huge batches of standardized products. Which means, for cities like Amsterdam, that they engage in chemical overkill.

To us, Amsterdam represents an opportunity. We've created a special detergent, just for the city, that eliminates 12% of the ingredients in our standard formula. We think it is going to capture 10% of the market. The packaging is beautiful; it includes the Amsterdam coat of arms.

Go ask Lever Brothers if it would assign an R&D team for three months to create a specialized detergent for 500,000 families. Go ask P&G if it would make special production runs for one city.

Can you build a company with this sort of customization?

It's a piece of our strategy. We live and work in a global economy. But people still want to consume based on their needs. People in Amsterdam will go to the store, look at Ecover, see the coat of arms, and say, "This product was made for me. It is meant for my water." That's a real marketing advantage. We are about to do it again. The Pacific Northwest, from British Columbia to northern California, has some of the softest water in the world. We may eliminate 30% of the ingredients in our standard formula.

I want the big companies to explain to the people of Oregon, Washington, northern California, and British Columbia why their detergent should include 30% more petrochemical ingredients than they need. Are 15 million people peanuts? Are 5 million families, doing several loads of wash every week, not a market worth serving with products tailored to their needs?

It sounds like you want to replay in the detergent industry what's already happened in cars and computers: the death of mass production.

It's not just mass production. Flexibility also applies to marketing. Ecover's principle of Not Tested on Animals is very important to people in the UK. It is much less important in the United States. So we push the message very hard in the UK and not so much in the States. Germans are very concerned about the environment. But they are also very concerned about the international drug problem. So when we talk about Ecover in Germany, we highlight our fair-trade initiative in Colombia, where we create incentives for farmers to stop growing coca and start growing cash crops we can use in our products.

Isn't it hard for a small company like Ecover to manage so much complexity on a global scale?

Absolutely. That's why, as we grow, we have to maintain an open economic system. We are a company of young people. The average age is 28. We are committed to the environment and social justice. We move fast. There are no layers, no hierarchies, no secrets. When we have a problem, we face it honestly and solve it immediately. There's no bureaucracy.

Where does the United States figure in? Don't you have to take the battle to the world's biggest detergent market?

We are going to build a factory in North America next year, and we are going to build it in the Pacific Northwest. I just spent a week in Vancouver, Portland, Seattle, and Sacramento meeting with the political leaders, describing our marketing plans, explaining what we need. Our break-even point on a factory is $10 million in sales. We were at $2 million in the US last year, but we are on an incredible growth trajectory as we move into the supermarkets. We will cross $10 million by the end of 1994. The factory must be up and running by then.

Let's move from the Pacific Northwest to South America. Why have you been spending so much time developing a supplier base in Colombia?

It comes back to sustainable development. Fair trade between the rich countries and the poor countries will be a huge issue for the rest of this decade. Capitalism has won everywhere in the world. But the game is rigged. Fifty developing countries depend on three or fewer commodities for 70% of their exports. The terms of trade for these commodities have deteriorated by 25% over the last 10 years. In places like Colombia, people are working harder and harder for a smaller share of the rewards. We want to make a contribution to changing that dynamic.

Can Ecover possibly influence what happens in Colombia?

We are one of Europe's largest consumers of essential oils - natural perfumes. People just don't feel their clothes or dishes or toilets are clean unless they "smell" clean. But we won't use synthetic perfumes. So we buy essential oils from a processor here. Some of the fragrances we use cost more than $2,000 a quart, and we buy 3,000 quarts a year. To deliver a lemon scent - everyone wants their dishes to smell like lemon - we use essential oils from lemon grass. Today, our European processor buys its lemon grass from France, Greece, and Morocco.

Colombia, because of its rich biodiversity, is home to more than a thousand essential oils. In fact, right through the 1940s, until they were wiped out by synthetics, essential oils were one of Colombia's biggest exports. Lemon grass grows like a weed in Colombia. Coffee growers actually ring their fields with it to prevent soil erosion.

We think we can turn a throw-away product into a cash crop. Today a farmer in Colombia gets $12 an acre for growing beans for coffee and $300 for growing coca for cocaine. We will pay $600 an acre for lemon grass. Plus we will buy directly from cooperative growers and a local processor, a company called La Selva, rather than through intermediaries.

How does the CEO of a small company, sitting in Belgium, figure out how to do deals with cooperatives in Colombia?

I don't figure it out in Belgium. I figure it out in Colombia. I put on my jeans, lace up my boots, hop in a Jeep, ride on a horse, and get out to the countryside. I have been going to Colombia for 15 years. I have been to Colombia three times in the past 18 months. I speak perfect Spanish. I know the problems of the drug trade. I know the problems of the guerrillas. I can go out and negotiate, motivate, and mobilize.

You've just spent 10 days in North America. How do you compare the environmental movement here with what's happening in Europe?

The movement in North America is much more professional and coordinated. Partly it's the nature of the two regions. America is one country with 250 million people who speak the same language. Groups in Europe often have no clue what's happening 200 miles away. One is canvassing villages in English, the other is holding rallies in Danish. It's harder. On the other hand, European environmentalists have been much more effective in shaping national policy and passing legislation than the Americans. Nothing gets through Congress.

So US environmentalists are more organized than Europeans, but less effective. How do you explain that?

It's a question of focus. Americans love direct action. Practical, down-to-earth initiatives. "Let's distribute efficient light bulbs in our town." "Let's promote recycling in Seattle." Europeans are fascinated with this part of the American environmental movement. We can't believe the amount of paper recycling in some of your cities. It outpaces even what the Germans are doing. But when it comes to something as simple as energy taxes, well, you saw how hard it was for President Clinton. There's just not the policy clout. Compare that with Europe. Three years ago, the Dutch government resigned after a dispute over environmental policy. It was the first time that environmental issues ever brought down a prime minister. When's the last time the head of the EPA resigned over a policy difference with the president?

What's the biggest lie environmentalists tell about the business world?

That businesspeople are not genuinely interested in the environment. Business is interested. In fact, business is scared about the environment. That's good. The more scared business gets, the faster it will move.

Right now, the best-financed environmental research institute in Germany is the Wuppertal Institute. A group of companies created it to examine one issue: What if the worries about global warming are correct? What does massive climate change mean for business?

Their research is shaking up lots of companies. The insurance industry is already beginning to rewrite policies based on changes in weather patterns. That's just one small example. Business takes the environment very seriously.

What's the biggest lie people in business tell about environmentalists?

That environmentalists don't have their facts right. Every time a dispute flares up, business says, "It's not scientifically proven" or, "You're taking all this out of context." Environmentalists have their facts damn right. These days, they tend to have more technical expertise than the companies they're fighting.

Every so often, by the way, an executive admits the reality. More than once - in private - businesspeople have told me, "We would love to hire some of those toxicology experts from Greenpeace. They've been studying this stuff a lot longer than we have. They know what they're talking about."

How does Ecover manage to be a force on both sides of the debate without alienating everyone?

It comes back to open systems. We are a transparent organization. We have nothing to hide. We work with lots of big companies. They visit our factory and meet with our researchers. We speak their language, we understand their problems. At the same time, we don't disguise our commitment to the environment and social justice. We work with Greenpeace. Our detergent boxes invite customers to join Friends of the Earth.

But there's a more important point. These two camps just aren't as separate as they used to be. General Motors and Procter & Gamble are facing huge changes in their world. So are Greenpeace and Friends of the Earth. The era of the Left Greens is over. The era of the Right Capitalists is over. The two sides are converging. We accelerate the convergence.

Inside the Biodegradable Factory

"Our zero-emissions philosophy sounds radical today. In 20 years it will be standard operating procedure. Businesspeople will look back on this century and be horrified by the damage inflicted by manufacturing. Zero-emissions is inevitable. Which doesn't mean it's easy.

"Our big challenge now is water treatment. We need water to make our soaps. Of course, after we make the soaps, the water that's left is full of pollutants - vegetable pollutants in our case, but even vegetables are toxic in high concentrations. We generate about 1,500 gallons of wastewater every day.

"We said two things about water when we drew up the plans for the factory. We don't want to pump any waste into the surrounding water supply - none. And we don't want to use any electricity from the public grid to eliminate the waste - none. The system is not fully operational yet, but we are close. It will be running by the middle of next year.

"Here's how it works. First, wastewater goes into a big machine called a biorotor. It's sort of like a cement mixer. It sits outside the plant. It spins around and around and exposes the water to oxygen. The bacteria in oxygen love to eat vegetable waste. This process - exposing water to oxygen - eliminates 80% of the waste.

"Of course, we have to eliminate the remaining 20%. We pump the water through a series of four lagoons, each of which contains specially chosen plants. Micro-organisms in the plants eat away at the waste. The water then flows into a reed meadow for final purification.

"It's been tough. Our water contains 180 different kinds of vegetable waste. It took us four months just to identify their concentration levels. We leased the biorotor to make sure it would work. For the first six weeks there were no results. And then, for about two weeks, we hit a streak of hot weather. And it was like - boom! The reaction started, the bacteria came alive. Eventually we reached 80% purification. We knew the process worked.

"Then we tackled the issue of electricity. First we bought solar panels to power the biorotor. We also figured we could use wind power to pump water from the biorotor into the lagoons. We put up one windmill, studied it, and calculated how many more we would need.

"We've since moved on to the lagoons. Here too we will go slowly. Our four lagoons will have 30 different types of plants. We need to pick just the right kind - plants that ththrive on e `nutrients' in our waste. And we have to pump the water into the lagoons very slowly, over a period of months, to let the plants adapt themselves to the waste. When we've got that right we will use another windmill to pump the water from our reed meadow, the final processing stage, back onto the grass roof for irrigation and cooling.

"The system is radical. But we have been very cautious in the execution."

This Shampoo Is for the Birds!

"Here's a case study of how fast this organization can react. It was the day after that huge oil spill off the Shetland Islands last January. An Ecover customer, no one we knew, called our headquarters and asked to speak with someone - anyone. He was leaving for the Shetlands to help save the wildlife. But he understood, as few people do, what a disaster it is to clean oil-soaked birds with conventional detergents. Basically, you use petroleum-based cleaners to dissolve petroleum. It makes no sense.

"In fact, the cleaners are so harsh they destroy the birds' natural layer of protective wax and oil. They die anyway. These rescue trips are still worth the effort; there's something valuable about the human contact with nature. But they aren't very effective. If the oil doesn't kill the birds, the cleaners will.

"This person was desperate. Our receptionist didn't know what to do. So she switched the call to marketing. The person in marketing knew that one of our R&D people is an ornithologist, so she kicked it to R&D. Then and there we decided to take on the project. Two days later, with people from research and manufacturing working around the clock, we had developed a natural shampoo and conditioner based on pine oil. The shampoo liquefies the petroleum on the birds without completely destroying their natural coatings. The conditioner helps restore the coatings.

"Of course, we still had to get it to the Shetlands. DHL, the air freight company, is headquartered in Brussels, not far from our offices. The CEO is a friend of mine. He agreed to make the shipments. Three days after that first call to our office, we landed bird shampoo on the Shetland Islands. It was great."

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