For the series of interviews with leaders, our CEO, Federico Fioretto, today interviewes Giulio Bonazzi on sustainability. Cavaliere del Lavoro, Chairman and CEO of Aquafil Spa, Bonazzi is a world leader in regenerated nylon yarn with Aquafil’s ECONYL® brand.
“Where others see waste I see a gold mine”.
After joining the family business in 1987 and the first years dedicated to internationalization, Bonazzi set Aquafil on the path of embedded sustainability and circular processes. He followed in the footsteps of pioneers such as Ray Anderson, the legendary CEO of Interface, and Doug Tompkins, co-founder of The North Face and Esprit. His motto becomes “where others see waste I see a gold mine”.
Since then his company has become an exemplary leader in circular economy and corporate sustainability. Here are his thoughts, which are valuable for every entrepreneur who wants to take the path of corporate sustainability.
“Do it or die”
FF: Let’s start boldly right away: what would you say to a CEO who asks you what would be the benefit for a company to embark on the path of sustainability?
GB: There are two good reasons: first, because if you don’t, you die. It’s not a question of “when” but of “if”. The second is because that of sustainable products is a rapidly expanding market, so it’s also a way for the company to grow, but to do so in a healthy and sustainable way.
The curve in the search for more sustainable products continues to soar. Sometimes, unfortunately, the public gets a little confused, but when a company really has “something to say”, selling is no longer a problem. Sustainable products sell by themselves, while conventional products require incredible efforts. With ECONYL®, although 2020 is a very special year, we have not lost volume for the moment. In terms of sales, like our first quarter report shows, we have maintained the previous level. In the second, with the world economy practically at a standstill, we will lose something. However, it is 1/4 of the decrease for the “normal” product. Every day we receive requests from customers to talk about collaborations, marketing, the signing of new contracts; it is a truly continuous flow of requests.
Oil for free will not last
In this particular situation, in which it seems that oil is “given away for free,” someone might be tempted to insist on fossil fuels and materials. But it is an ephemeral contingency: fossil resources are destined to become increasingly scarce and expensive. And then there is the question of the environment and climate change. Even if you are not a Maldivian, whose land is likely to be submerged in a few years, there is little to say: there is absolutely no alternative to sustainability.
FF: If I remember well from our conversation in AIAS on April 28th, already since the crisis of 2008 you have experienced greater resilience than companies not committed to sustainability.
GB: Our structured commitment to sustainability began in 2007, when we launched our first products and saw how the market was receptive to them. That’s when we started to develop the technology. In 2009 we opened the capital to a private equity fund to make two investments: the technology to develop ECONYL® and the factory in China. Then in 2011, the ECONYL® wire production plant started up.
As far as the crisis is concerned, 2009 was a year of strong turnover reduction, as it will probably be in 2020, but still with good cash flows and a very interesting EBITDA. Ours is a very resilient company. We have rarely had single digit EBITDA, while our competitors normally do. So, even in our imperfection, we manage to perform better than our competitors.
Stronger business case
FF: This aspect should add to the validity of the Business Case for embedded Sustainability.
GB: Of course. Clearly we still position ECONYL® at the top end of the market at the moment. It goes without saying that they are all higher value-added products there. If you’re thinking of a Gucci garment or a Prada bag, or if you’re thinking of a luxury office project, price is not the main discriminating factor in the client’s choice.
But everyone negotiates hard: even Rolls Royce when I wanted to deal with it with ECONYL® has fought down to the last penny, but that’s normal. But it is clear that there is more room for manoeuvre in the high end. However, even with a slight difference in price, the consumer today certainly buys products that have less impact on the environment, if he can. Clearly, thinking of replacing each product with its sustainable version, one has to take into account that in the end people buy according to their disposable income and therefore there is still work to be done.
Competitiveness on all levels
FF: This will be a key issue: to be competitive at the lower end of the market.
GB: We also sell to H&M, for example, even if it’s in its Conscious Collection, thus in the top end of its portfolio; but it’s obvious that it’s not Gucci, it’s not Stella McCartney. In fact, if we look at our cost curve we are already competitive. It’s not that our thread costs more than the product made with fossil raw materials. As we increase volumes we become more and more competitive. Beyond the current moment, when oil will come back between $50 and $70 a barrel, and even today if we can pick up the right waste, we are absolutely no more expensive than the traditional product.
A “special” unit
FF: This confirms that a company which is deeply committed to sustainability and process circularity is already competitive compared to its conventional competitors. Tell me about your Energy & Recycling unit, established in 2007: I understand that it has been at the heart of sustainable innovation.
GB: Actually we did two things in 2007 – 2008, to give an internal signal of the importance of what we were doing, or rather three.
- The first was to close ourselves off for almost a week with experts to understand what our definition of sustainability was. Obviously every industry, every company has its own peculiarities. Once out of this “conclave” we began to create formalized organizational structures to make it clear that top management was serious about it.
- Then Energy & Recycling was born, a sort of operating unit that collected all the special projects. At a certain point we had to stop because everyone wanted to work there: obviously, that was the most fun part… I had to remember that there was also the rest!
The launch of The Eco Pledge
GB: Third, the launch of another internal initiative with our stakeholders called The Eco Pledge. This was to try to develop harmony with our people, our infrastructure, the companies in the surroundings.
From there, collaborations such as the one with Acquapark in Ljubljana. Another is with Dana, our neighboring company, whose offices are heated by the residual heat of our plant. Others started with many schools, for access to healthcare in China and so on.
This is Eco Pledge: helping people and preserving the environment for future generations.
Going back to E&R, yes: it has been the beating heart of innovation. The double name comes from the fact that energy efficiency is the first thing everyone sees for sustainability. Indeed it is a very partial aspect, probably the least important. In the meantime, however, it was a strong internal signal which said: the management is there, it listens to you.
If one came up with an idea, therefore, it was analyzed and if it was valid it was developed.
The result was that in the beginning it was I who pushed my people; after a while they pushed me. Initiatives to improve have continued to arrive and continue to arrive and it is a great satisfaction.
Ray Anderson’s legacy
FF: Here I feel all the influence of Ray Anderson and his Interface in your story! So from Interface I move on to your ACR i.e. your carpet recycling company in the USA. We can clearly define it as a new line of business, an entrepreneurial project born from sustainability. This again is interesting when dealing with entrepreneurs.
GB: You’ve got it perfectly. There is a need: to create circularity, not of Nylon itself but of the industry. We will win in the end not if Aquafil is circular, but if the finished product becomes circular; then the carpet, the chair, the Burberry mackintosh, the Prada bag etc. become circular. This is the final goal. We are creating circularity in the raw material, but our customers’ products still end up in landfill.
Some of them, such as Burberry mackintoshes or Prada bags, should never end up in landfills: they should continue to live on in the aftermarket, in the second-hand market, sectors that are having a stratospheric development.
Show value in recycling
But making a carpet circulate is a great challenge and very complicated. It is easier to make the shopping bag or plastic bottle circulate, because their life cycle is very short. Convincing customers, distributors and consumers that end-of-life is important and must be taken into account is complicated. Especially if they do not recognize a benefit or savings for them.
We have developed technology to recycle today’s carpets, made to go to landfill, based on a California law that has allocated resources to this, with the goal of taking 50% of carpets out of landfill.
At the same time we have formed a group, also people who participate in E&R, to work with customers and change the way we produce carpets so that they are easier to recycle in the future.
It is much cheaper to take apart a product already designed to be recycled at the end of its useful life.
The situation in the apparel industry
FF: with Interface and Tarkett you work a lot on textile flooring recycling. What is the situation in apparel and fashion: only “flag” products or real sustainability?
GB: It is variegated. I’m thinking of the case of Napapijri with the Infinity jacket, which is an extraordinary case of a product designed in a circular way. Many others are being created. Save The Duck has also done something like this; other brands are also thinking of changing the way they make products with an idea of circularity that can be given by the use of monomaterials or easily removable parts.
Sustainability is a journey
But sustainability is a journey that we ourselves are still walking. Some started earlier and travel faster; there are historic brands that have taken a different approach, like Stella McCartney to make a name, or Outerknown, Kelly Slater’s beachwear brand; others who are realizing now that they have to change.
Prada, for example, took almost three years to make the first launch of its products in ECONYL®, but not because it had a problem doing so. They realized that they couldn’t do what you said, the “mirror for the larks” (a bird hunting tool N.d.R.), because they would give an assist to those who, NGOs, environmentalists, consumers, would then use it against them. They made the right choice to stop, like others did, first of all to understand what sustainability meant to them and to create an appropriate path accordingly. Then they had to give themselves deadlines and try to meet them, or improve them if possible.
On the other hand, if anyone can give me an example of something today that is perfectly sustainable, I say “bravo”. In my opinion, it does not exist today. We are on our way.
Acceleration in Sustainability
FF: I fully agree. Having said that, do you see an acceleration in the transition towards sustainability?
GB: Yes, especially in recent years there has been a monstrous acceleration because the consumer is becoming increasingly sensitive thanks to the work done by the so-called influencers. Think about Hollywood: among all Hollywood stars there isn’t one who doesn’t have a social or environmental project, like Leonardo Di Caprio or Kevin Costner. This helps to drive consumer sentiment. And the consumer is also a voter, so even the various governments, most recently the European Union with the new Green Deal, have begun to think about some issues. Then there is Trump who – in words at least – is against it and prefers coal to renewable energy but…
A discriminating factor on the market
GB: After all, it is now becoming a discriminating factor in many markets, also as suppliers, to have products with demonstrably low environmental impact. Since our product is the most important ingredient for our customers, we must be able to produce our Nylon and especially ECONYL® with the lowest possible CO2 contribution. Today we are more than 80% lower in CO2 emissions than a Nylon made from fossil fuels. In order to improve further, we work on every detail, from energy to transport – we also try to get our employees come to work by bike, to reduce waste and scrap. Everything is calculated.
An inevitable choice for every company
This concludes the conversation with one of the entrepreneurs who is a symbol of the “green” turn in the industry, whom we would like to thank very much for his wide availability. He provided us with a perfect example of how it is possible, and beneficial, to pursue the generation of environmental and social value combined with excellent economic performance. When faced with the “do it or die” alternative, the question really arises as to whether embedded sustainability should today be considered an obvious and inevitable choice for every company in every business sector.
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