Desso The Great Indoors - Special focus on China

The Floor is Yours

Desso The Great Indoors New thinking for a new world Special focus on China.

To thrive in the 21st century new business models are needed. Winning companies will be able to meet growing consumer demand in the rising economies within the resource limits of the planet.

For half a decade, Desso has been reinventing its business model to meet these challenges, driven by its innovation strategy composed of Creativity, Functionality and Cradle to CradleŽ thinking. It is about being agile, fast and utterly customer-focused to deliver exceptional products in an ever shifting global market. And it is about doing all this in a way that is positive for the environment and people’s health and wellbeing.

The Desso Rethinking Business Series is designed to stimulate the debate about new business models, share information about Desso’s own journey and encourage and inform all progressive corporate leaders who want to unlock powerful new business strategies for the new century.

Message from the CEO of DESSO We spend 90% of our time indoors, so it is crucial that the indoor atmosphere is healthy. Air quality is one of the major health concerns raised by the World Health Organisation. 2013 has also been designated as the Year of Air by the EU’s Environment Commission.

While there is still work to be done in driving down external air pollution caused by transport and industry, there remains also a challenge to maintain clean air indoors. Volatile Organic Compounds from paints, plastics and other materials used inside can pollute the atmosphere unknowingly. Further, there is the problem of fine dust with tiny particulates that can cause serious harm to human health. As discussed in this report, indoor air pollution is being linked with an alarming rise in incidences of asthma in China.

Business is in a strong position to tackle such problems while making functional and elegant products that meet customer needs. This is a win-win situation: businesses developing competitive products that go beyond customer expectations, inspired by the desire to improve people’s health and wellbeing.

At Desso, our vision is to make the floor work for our health and wellbeing, designing and producing compellingly designed carpets that also function to reduce health risks caused, for example, by fine dust and noise. With this in mind, we recently launched our Great Indoors campaign to raise awareness of the need to focus on the issue of the indoor built environment and show businesses that there is a great opportunity to develop innovative products inspired by the goal of improving the indoor space for people’s living and working lives – what we refer to as health and wellbeing innovation.

This report – focused on the issue of indoor air quality – is the first in our series of thought leadership articles dealing with the challenge of creating the Great Indoors.

Alexander Collot d’Escury CEO, Desso

Carpet innovation offers one route to solving China’s asthma crisis

What do you do if your children are suffering from a serious asthma condition in China, one of the world’s greatest pollution hotspots? One young mother eventually moved her son to London to control his asthma1).

Of course, such an option is not open to most families in China. Recent fatality figures caused at least in part by air pollution are staggering. According to The Atlantic Magazine, air pollution in China contributed to over 1.2 million deaths in in 20102).

“There has been a dramatic increase in the incidence of asthma in China over the last 20 years, and estimates that the rates are up by as much as 40 percent over the last five years. Shockingly, prevalence in some cities is 11 percent – and rising.”

For families in China this can be a major concern. Not only is ashtma a potentially fatal disease but also a leading cause of hospitalization among children. Perhaps, counterintuitively most of the pollution occurs indoors where, as we know, we all spend most of our time.

The Atlantic Magazine stated: “Most exposure to air pollution occurs indoors, and complete avoidance is challenging if not impossible.”

The country’s rapid industrialisation in recent decades has lifted millions

out of poverty and propelled the economy into the world’s super league. But, as the Government in Beijing realises, the health impacts need to be considered and dealt with quickly.

However, a major problem such as extreme air pollution cannot be dealt with quickly. In the meantime, the

Government and all those involved in creating the built environment need to look at other faster solutions to the problem of indoor air pollution.

The Atlantic magazine cited one expert, Dr Charles Weschler, Adjunct Professor at the Environmental and Occupational Health Sciences Institute at Rutgers University and

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Visiting Professor at Tsinghua University in Beijing who claimed that the link between motor vehicle emissions and asthma was fairly strong and that it took place indoors mostly.

consumers living in cities across the world. According to a report, from the McKinsey Global Institute (Urban World, 2012)4) just 440 of these cities will ‘generate close to half of global GDP between 2010 and 2025’.

Dr. Weschler said: “Most of the exposure to motor vehicle emissions actually occurs indoors, since this is where Chinese urban residents spend most of their time (and outdoor-to-indoor transport of motor vehicle emissions is significant). Other indoor pollutants, of both outdoor and indoor origin, are anticipated to contribute to asthma attacks.”

While this brings new opportunities, Potočnik said, it also brings with it environmental and sustainability challenges that need to be addressed. One of these relates to air quality. This is clearly one of the big issues in China.

In China, thousands of cities will be built in the years to come. Globally, cities will define our future, Janez Potočnik, European Commissioner for Environment said recently at a conference3) on sustainable cities.

Cities are ‘the engines of economic growth, job creation and innovation’.

By 2030, he added, there will be three billion new middle class

While most of the global debate centres on external air pollution, there is less said about the problem of particulate air pollution indoors which in the case of China is possibly the major contributor to asthma.

The problem of fine dust particles in the air can pose serious risks to people’s health and productivity. In fact, the World Health Organisation has estimated that more than two million people die every year from

breathing in tiny particles present in indoor and outdoor air pollution5).

This is even more worrisome from the perspective of indoor air quality when you consider that we spend 90% of our time indoors. Not only is better indoor air quality an imperative from a health point of view but it also boosts worker productivity with a positive impact on people’s wellbeing and economic growth.

A Californian study by William Fisk from Lawrence Berkeley National Laboratory6) demonstrated that the economic impact of increased productivity from improved IAQ, can improve office worker productivity by 0.5 to 5 percent, with estimated savings of $20 to $200 billion.

The presence and size of particulate matter (PM) or fine dust is a determining factor in air quality and is directly linked to potential health problems.

Once inhaled, these particles can contribute to the spread of microbial contaminants, such as mould, pollen and allergens. In addition, they can affect the heart and lungs and cause serious physiological problems.

Particles with an aerodynamic diameter of 10 μm or smaller (PM10) can enter the lungs and particles smaller than 2.5 μm (PM2.5) can even enter the cardiovascular system, resulting in serious health effects7).

The key for businesses like ours is to recognise that we are doing more than supplying a material or interior fitting that goes into a new, retrofitted or existing building or structure, as important as that might be. We have an opportunity to combine that with a new added value component that contributes in some way to better health and wellbeing – that helps to create the ‘Great Indoors’ as we have termed it.

The insight that we spend 90% of our time indoors has informed our corporate vision to strive to be the world leader in making

environmentally responsible flooring products that deliver outstanding value in design and functionality and thus contribute to people’s health and wellbeing.

We put one question at the forefront of our minds: How can we make the floor work for our health and wellbeing? This means thinking very differently. To give this true substance, we need to be able to deliver and this is where our innovation pillars of Creativity, Functionality and Cradle to Cradle® come in to the equation.

Clothes can make the person; enhancing the way they feel about themselves and how well they perform. Similarly carpets can have a major impact on the way in which people behave and act inside buildings. Great designs can provide inspiring or peaceful environments; they can encourage greater interaction and collaboration or they can provide quiet, breakout areas.

Therefore, creativity, supported by feedback on our latest designs from architects and designers in our regular Circles of Architects® is

a vital element of our ongoing ability to innovate and offer competitive products.

Functionality ensures we add even more value driven by the desire to boost health and wellbeing. This might relate to improving the indoor air quality or improving the quality of acoustics or helping users to be more energy efficient in relation to their lighting. ‘Our people in R&D and elsewhere have an additional layer of thinking. They are not just considering inert products that are installed; they are dreaming up new products with special functions built in based on the need to make people’s lives better, to improve people’s wellbeing and to boost productivity.’

Finally, but definitely not least, we have been learning how to move towards the less wasteful circular economy via our Cradle to Cradle® commitment since 2008. This embraces a whole new way of looking at doing business in which goods are made out of the healthiest materials so they can be recycled in a healthy way at the end of the product’s

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life. In emulating nature’s cycle, you are trying to design products that can be disassembled later on and the materials are not wasted but are instead used as positive nutrients through the manufacturing or biological cycle to make new products.

It encourages a new discipline of choosing healthier chemical ingredients for the materials you use, increasing the amount of renewable energy you consume and strengthening existing corporate responsibility commitments such as good water stewardship and a commitment to excellent labour practices and the support of human rights through the supply chain.

With 90% of our carpet tile products Cradle to Cradle® certified we are someway down the road on reaching these goals. However, the journey is on-going and we will continue to work at developing and designing products that have a positive impact in this way on health and wellbeing and the environment.

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Cradle to Cradle®, therefore, is a unique and vital additional pillar to our innovation strategy; fused with Creativity and Functionality it helps us create products that contribute positively to human health and wellbeing and the environment.

Together this innovation machine coupled with our vision to make the floor work for our health and wellbeing also enables us to deliver commercially successful products that stand out in the marketplace.

And a perfect example of this is our Desso AirMaster® carpet tile, developed and designed to clear the air.

At Desso, we started investigating much more deeply how to solve the problem of bad indoor air quality and whether we could use the carpet product to do something about it; this led us to designing a new carpet that would deliver all the vital elements of design and quality but would also help to improve the indoor environment from a health and wellbeing point of view.

What could be more important than making the indoors healthier whether you are talking about people in offices, schools, hospitals, care homes and so on? When everyone spends 90% of their time inside somewhere, they need to feel their health is being protected. This issue becomes even more significant when you consider the rapid rate of urbanisation across the world. With so many people living in cities, the issue of sustainable and green cities becomes ever more relevant and the issue of the ‘Great Indoors’ will be a critical factor in that debate.

We knew from a study8) by the German Allergy and Asthma Association (DAAB) that carpets are better at retaining fine dust particles than hard floors. But we set about making a carpet that would be much better than regular carpets at holding in the particles, ready to be vacuumed away.

This result was the creation of the DESSO AirMaster® carpet which has patented9) technology specially

ultra-fine yarn filaments (DESSO AirFiltersTM) that capture and retain the smallest particulate matter (< 10 μm).

The coarser dust is captured in the thicker yarns of the lower pile (DESSO DustCollectorsTM). The open product structure ensures that dust is easily released during cleaning.

developed to capture and retain hazardous particulate matter.

In fact, it is eight times more effective at capturing and retaining fine dust than hard flooring and four times more effective than standard carpet solutions9). This makes it the most effective flooring solution to capture fine dust from the air.

It meets our broader sustainable goals to use healthy materials as the DESSO AirMaster® carpet captures fine dust without the use of chemical additives. The high pile consists of

Air quality problems are not just an issue for China. A recent study published in the March 2013 issue of Environmental Health Perspectives found a correlation between higher levels of particulate air pollution and higher numbers of babies delivered at low birth weights in 14 cities across nine countries including the US, South Korea, Brazil, Spain and Italy10).

This was a grim reminder that all countries need to look into this issue.

The story behind the DESSO AirMaster® shows that business innovation can help in this area while boosting economic growth at the same time. It helps us achieve our corporate vision of designing and creating compelling new products like

this that add value for our customers and transform the indoors into the ‘Great Indoors’.

Desso’s commitment to making the transition to the circular economy and designing positive values into products and buildings from the starts is key route to solving problems such as the rise of asthma cases in China. Whether that be in schools, offices or hospitals it’s critical that we all look at how we can start out by designing something better from the outset, what the founders of Cradle to Cradle® (a basis for the circular economy) refer to as being ecoeffective.

To further this debate, Desso’s CEO Alexander Collot d’Escury will be at the World Economic Forum’s ‘Summer Davos’11) in Dalian, China this September where leading Chinese and international business and political leaders will come together to discuss the hot topics of the day. The path of health and wellbeing through eco-effective design and the circular economy will be at the top of Desso’s list.

About Desso’s Great Indoors Campaign: Desso’s corporate vision is to ‘make the Floor work for our Health and Wellbeing’ based on the customer insight that people spend 90% of their time indoors. It is given substance by a four pillar strategy: innovation (Creativity, Functionality and Cradle to Cradle®), operational excellence, market expansion (customer segments such as education as well as new regions such as Latin America) and strong communications.

The strategy is based on understanding customer needs and going beyond by developing innovative products that contribute to people’s health and wellbeing. This is reinforced by Desso’s development of healthier Cradle to Cradle® materials. As part of its portfolio of ‘health and wellbeing’ products, the DESSO AirMaster® carpet that reduces the amount of fine dust in the air indoors is a trailblazing product, helping to open up new markets for Desso and change people’s perceptions about the way in which materials in the built environment can improve people’s lives.

Desso will be encouraging the sharing of information and best practice among key individuals in business and research involved in the fight to improve indoor air quality.

The latest events, reports and interviews will be posted on www.desso.com.

REFERENCES 1)

Lua Wilkinson, China’s Asthma Problem is Bad – and Growing Worse, The Atlantic, 2013. Available

online at: www.theatlantic.com 2)

Lua Wilkinson, China’s Asthma Problem is Bad – and Growing Worse, The Atlantic, 2013. Available

online at: www.theatlantic.com Cities will define our future, 17 April, 2013. Online at: http://europa.eu/rapid/press-release_

3)

SPEECH-13-326_en.htm 4)

Online at: http://www.mckinsey.com/insights/urbanization/urban_world

5)

WHO, Tackling the global clean air challenge, 26 September 2011, News Release.

6)

William J. Fisk and Arthur H. Rosenfeld of the Lawrence Berkeley National Laboratory in Berkeley in

California, US 7)

United States Environmental Protection Agency (US EPA).

8)

Study performed by Deutscher Allergie- und Asthmabund e.V. in 2005.

9)

Based on tests performed by GUI, with DESSO AirMaster® versus standard PVC hardfloor and versus

standard structured loop pile carpet.

10)

Larson, Christina, Air pollution, birth defects and the risk in China (and beyond), Bloomberg

BusinessWeek, March 28, 2013. Online at: http://www.businessweek.com/articles/2013-03-28/airpollution-birth-defects-and-the-risk-in-china-and-beyond 11)

http://www.weforum.org/events/annual-meeting-new-champions-2013

Communicating our Vision Communicating Desso’s health and wellbeing vision is one of its strategic goals. In the past few years, senior executives from Desso have spoken at key events on such topics as the circular economy and designing Cradle to Cradle® products. These include the World Economic Forum’s annual summit in Davos, the Accenture/Guardian Sustainability 24 global event, the Ellen MacArthur Foundation, Chatham House, London Business School, IMD Lausanne and the Ethical Corporation & Business in the Community Summits in the UK. There has been extensive press coverage on Desso’s sustainability progress including the Harvard Business Review Online, the Financial Times, The Guardian, The Sunday Times, BusinessGreen.com, Business Strategy Review(London Business School), Ethical Corporation Magazine, Edie.net, Sustainable Business Magazine and Modus Magazine (RICS).

In addition, international business schools have developed in-depth case studies on Desso’s innovation and sustainability strategy with a focus on its Cradle to Cradle® strategy. These include London Business School, the University of Exeter Business School and IMD Lausanne.

For more details, see the following pages.

THOUGHT LEADERSHIP LONDON BUSINESS SCHOOL

In 2013, London Business School (4th in the world in the FT’s Global MBA 2012 Ratings) continues to teach the Desso Case

study (Desso – Taking the Sustainability Challenge)16) to MBAs and executives. In 2011, Desso presented at London Business School’s Special Executive Programme (60 executives) and was invited to talk at the annual Global Leadership Summit at LBS in

May 2012. The LBS Journal, Business Strategy Review published an article on Desso and filmed an interview17) with the then CEO of Desso, Stef Kranendijk’.

IMD, SWITZERLAND

Stef Kranendijk, former CEO & Chairman of Desso invited to speak to global executives on Desso’s Cradle to Cradle® innovation strategy at two events at leading Swiss business school, IMD during October to November 2012. The conferences were organised

by Professor Michael Yaziji, who has shaped the partnership between the World Wildlife Fund (WWF) and IMD to create the school’s One Planet Leaders Programme. IMD, based in Lausanne, Switzerland has been ranked number one outside the US for executive education and its MBA programme by the Financial Times and the Economist respectively. IMD Case Study on Desso in progress.

THE UNIVERSITY OF EXETER BUSINESS SCHOOL

In November 2012 the University of Exeter Business School published a new Case Study on how Desso has been rethinking its

supply chain to drive its Cradle to Cradle® innovation platform. Led by Professor Michael Howard, the study is titled: Desso and

the Cradle to Cradle® Challenge: Rethinking Carpet as a Closed-loop Supply System.18) Ranked 2nd for business studies by the Sunday Times, the University of Exeter Business School also launched the innovative One Planet MBA programme with the WWF. CRANFIELD MANAGEMENT SCHOOL

Cranfield Management School, one of the top five research-intensive universities in the UK, alongside Oxford, Cambridge and London’s Imperial College, started researching for a Case Study on Desso’s Cradle to Cradle® strategy in 2012 with completion planned in 2013. One of the first ever of the School’s cross-functional Cases, it is investigating Desso’s transformation through various functions and areas including HR, innovation and production. Led by Professor David Grayson CBE, director of the School’s Doughty Centre for Corporate Responsibility, it has already involved a guest lecture by Kranendijk in May 2012 to students and faculty. A film of Kranendijk being interviewed by Professor Grayson is available on YouTube.19) DAVOS 2013: DESSO HELPS START DISCUSSION ON CIRCULAR ECONOMY

Desso part of discussions at the Davos annual summit to develop a coalition of leaders on the circular economy. Discussion to be continued at the ‘Summer Davos’ in China in September 2013.

DAVOS 2012: DESSO PART OF LAUNCH NEW REPORT ON CIRCULAR ECONOMY20)

Desso cited as an example of a pioneering company in a new study, Towards the Circular Economy: Economic and business rationale for an accelerated transition21) launched in January 2012 by the Ellen MacArthur Foundation and the management consultancy, McKinsey & Co., at Davos.

THOUGHT LEADERSHIP (continued) DESSO-RSA Debate – Reinventing Business: The Transition

to the Circular Economy

In October 2011, Desso partnered with the RSA in the UK to hold a debate, chaired by RSA’s CEO Matthew Taylor:”Reimagining business – the transition to the circular economy”. 200 guests and over 6,000 viewings on YouTube. http://www.youtube.com/ watch?v=wGpxNqCVbJQ.

16)

Ioannis, I., & Ody-Brasier, A., Desso – Taking the Sustainability Challenge, London Business School, November 2011. Available online at: http://www.ecch.com/

educators/ 17)

The video of the interview is available online at: http://bsr.london.edu/lbs-article/650/index.html

18)

Howard, M., Jeanrenaud, S., & Correia, F.,Desso and the Cradle to Cradle ® Challenge: Rethinking Carpet as a Closed-loop Supply System, The University of Exeter

Business School, September 2012. Available online at: http://www.ecch.com/educators/ 19)

http://www.youtube.com/watch?v=oT5D7yF-Ft4&playnext=1&list=PL5BF7CCCD373BD9F2&feature=results_main

20)

Towards the Circular Economy: Economic and business rationale for an accelerated transition. Available online at:

http://www.ellenmacarthurfoundation.org/circular-economy/circular-economy/towards-the-circular-economy 21)

The report is available online at: http://www.ellenmacarthurfoundation.org/

RECOGNITION In 2012, Desso continued to win recognition for its innovation strategy of Creativity, Functionality and Cradle to Cradle® thinking.

•

2013 winner of a Big Tick Award for Sustainability from Business in the Community (BITC)

•

Desso won the Guardian Sustainable Business Award for Waste and Recycling for its implementation of Cradle to Cradle® design in its business strategy. It was up against two other shortlisted companies, BAM Nuttall and Coca-Cola Enterprises.

•

Desso picked up for the second year running a high commendation for the UK-based Green Business Awards (Waste and resources category, supported by WRAP) introduced by ENDS (Environmental Data Services), a specialist information service for environment professionals.

•

Desso has received a ‘red dot product design’ award for its ‘Visions of’ carpet line. The ‘red dot’ is a quality seal for aesthetic forms and lasting trends, handed out each year during one of the most renowned design contests in the world.

IN PRINT HARVARD BUSINESS REVIEW ONLINE

I Got My Strategy from Greenpeace, 21 March 2012 FINANCIAL TIMES

Innovation: Fostering creativity in staff, 29 May 2012 Case Study: Desso, Financial Times, 10 November 2010 THE TIMES

On course to save the world, 21 February 2012 (Times MBA report) GUARDIAN SUSTAINABLE BUSINESS

Celebrating and recognising best practice, 30 May 2012 Desso: Recycling to infinity and beyond, 2012 How Desso aims to spread the Cradle to Cradle® philosophy worldwide, 16 May 2012 Cradle to Cradle®: how Desso has adapted to birth of new movement, 1 September 2011 Full circle: products that are made with recycling in mind, 22 September 2011 SUNDAY TIMES

Green pioneers: Eco-warrior takes to the floor, Sunday Times, 17 July 2012 BUSINESSGREEN.COM

Desso Chief: European Circular Economy could balance out US shale advantage, 12 March 2013 Is your business enlightened? 17 June 2011 Is the path to sustainability paved with carpet tiles?, 16 June 2011 LONDON BUSINESS SCHOOL JOURNAL, BUSINESS STRATEGY REVIEW A Good Yarn, Spring 2012

MODUS MAGAZINE (RICS)

On Leadership in Sustainability, September 2012 ETHICAL CORPORATION MAGAZINE

Sustainability commercialised - The bottom line of Cradle-to-Cradle, 6 February 2013 Rather than romanticise nature, Learn from it, October 2011 EDIE.Net

Desso Cradles a New Way of Thinking, 2 January 2013 SUSTAINABILITY BUSINESS MAGAZINE

Desso’s Cradle to Cradle® strategy pays off, 19 July 2011 HUMAN RESOURCES MAGAZINE

From the C-Suite: Stef Kranendijk, October 2011 DESSO THOUGHT LEADERSHIP ESSAY

Re-imagining business: The transition to the circular economy, October 2011

SPEAKING ENGAGEMENTS World Economic Forum, Davos Summit KPMG Summit, New York World Business Council for Sustainable Development, Council Meeting, Berlin Cradle to Cradle速 Product Innovation Institute Meeting, New York Accenture/Guardian Newspaper Sustainability 24 Summit The 4th Annual Global CSR Summit & Awards 2012, Philippines BNP Parisbas Fortis Summit, Brussels Ellen MacArthur Foundation Circular Economy Conference, Bradford Chatham House (Royal Institute of International Affairs) Department of Energy & Climate Change (DECC), London Blue Monday CEOs Meeting on Sustainability, London London Business School, MBA Classes London Business School Special Executive Programme London Business School Global Leadership Summit Birmingham Business School (Video interview available)22) Ethical Corporation Responsible Business Summit BITC Responsible Business Convention EcoBuild Cranfield Management School Lecture CASS Business School Sustainability Lecture Names Not Numbers Conference

22)

http://www.birmingham.ac.uk/schools/business/departments/economics/news/2012/november/stef-kranendijk.aspx

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About Desso® Desso is a global carpets, carpet tiles and sport pitches company, active in more than 100 countries. Desso products are supplied to corporate offices, education, healthcare, government, homes and also hotels, cruise liners and airlines.

It also produces world leading sports surfaces such as the DESSO GrassMaster®, which has been installed at the home grounds of premier football sides and at the football ‘temple’ Wembley.

Today, most people spend on average 90% of their time indoors which has led to the company’s vision: ‘How to make the floor work for our health and wellbeing’.

Our mission is to ensure that we develop unique products that deliver a much improved indoor environment that maximises people’s health and wellbeing and ultimately their performance. This is driven by our innovation programme based on the three pillars of Creativity, Functionality and Cradle to Cradle® design.

For more information please visit: www.desso.com

Published by: Desso B.V. Corporate Communications PO Box 169 5140 AD Waalwijk The Netherlands corporatecommunications@desso.com www.desso.com © July 2013, DESSO®

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