Carpet Industry Reality

1
Carpet Industry Reality

• 4.5 Billion pounds of carpet are sent to
  landfills annually Thats 2 of annual US
  landfill volume.
• 20 years ago there were 18,000 public landfills
  that would accept carpet today there are
  approximately 1,800
• State landfill bans, advanced disposal fees, and
  likely RCRA 6002 CPG designation by
  Federal EPA in 2006.

2
Annual US Landfill Volume (Actual and Projected)
sq yds
Solid waste is the single largest environmental
impact made by the carpet industry. Transitional
strategies like monofills and WTE will precede
C2C.
pounds
X 1000 billions
3
Carpet Industry Environmental Footprint
4
Paradigms of the Past

• Cradle-to-grave production has been the carpet
  norm since introduction of tufting in the
  1950s.
• Shaw grew to industry dominance in 1980s through
  efficiency and scale. We began reducing waste
  and recycling 60 different waste streams before
  it was considered environmentally correct.
• The industry was challenged in 1994 to move
  toward sustainability, but it has largely
  remained a marketing issue. Sustainable
  technologies are more talk than action.

5
Establishing Cradle-to-Cradle Innovation at Shaw

• Industry must see the business case for
  sustainability. Doing things right is not
  enough.
• The commercial carpet industry was an early
  adopter of sustainability as a competitive
  issue.
• Most carpet industry efforts were initially
  aimed at raw material and resource use
  reductions. Reducing waste had a positive
  financial effect. Shaw had already been doing
  these things since the mid-1980s.

• Carpet tile backing presented an opportunity for
  sustainable innovation due to PVC toxicity
  concerns and high backing weights of emulsion
  coating.
• Metallecene polyolefin offered a pathway to a
  flexible backing that could be extruded at low
  weight without the use of plasticizers (1997
  Scientific American article).

6
Champions Are Key To Success

• A partnership between Middle Management and
  Senior Management is critical to setting
  realistic goals and development budgets. Early
  successes are essential.
• Senior Management funded EcoWorx backing
  development in two stages based on material
  formulations run on outside equipment that
  demonstrated the path forward at the same or
  lower price than PVC.

• Design parameters were lower weight, equal cost
  and performance, sustainable recycling, and
  competitive advantage protected by IP.
• By June 1999 we had perfected the EcoWorx
  formulation and developed marketing materials for
  its introduction at Neocon in Chicago.
• EcoWorx won Most Innovative Product at Neocon,
  manufacturing management saw that the market
• perceived value.

7
A Five Million Dollar Investment

• The biggest hurdle for the project was the 1996
  construction of a 1 million sq. ft. carpet tile
  facility with state-of-the-art PVC backing
  capabilities. Shaw had the most stable PVC
  backing in the industry.
• Shaw spent 1 Million in the pilot phase on a
  single station extrusion line that produced first
  quality tile. Production of significant amounts
  of material for test installations was critical
  to further funding.
• Senior Management decided to fund an EcoWorx
  extrusion line with a capital cost of 5 Million
  based on early tile success and the promise of a
  single technology platform for tile and
  broadloom.
• Beyond the pressure on PVC, the magnitude of PC
  carpet and regulatory threat of landfill bans
  encouraged further development. We expected an
  exit from PVC in 6 to 8 years (and did it in 4
  yrs).

8
McDonough and Braungart
Cradle to Cradle

• In 2000 we approached Bill and Michael to learn
  more about their work to apply it to our own with
  more rigor.
• EcoWorx offered a truly recyclable material, but
  it took optimization under the MBDC Toxicity
  Protocol to achieve a true technical nutrient.
• At this time Evergreen depolymerization was
  running and Shaw was taking over 50 of the
  output. EcoSolution Q nylon 6 was recoverable as
  a technical nutrient. All dyes, pigments, and
  auxiliaries were tested and optimized under MBDC.
• Our work with Bill and Michael has provided
  clarity in our pursuit of sustainable solutions
  since that time.

9
Reaching Out To A Cradle-to-Cradle Audience
The William McDonough Design Portfolio reflects
the sophisticated design interpretation of Bills
photographs from China. Its a statement that
environmental excellence does not have to
sacrifice cutting-edge design and color.
Specifiers and owners have made the portfolio one
of the fastest growing carpet tile offerings in
the industry.
10
Growth of EcoWorx Sales
EcoWorx of Shaw of Industry
1999 42,000 sy .5 .1
2000 723,000 sy 8.8 2
2001 2,516,000 sy 30.5 6
2002 3,159,000 sy 39.6 7.7
2003 4,584,000 sy 53.8 10.7
2004 7,890,000 sy 77.5 19
2005 (est.) 11,040,000 sy 91 23
Shaw exited PVC carpet tile production at the end
of 2004, 4 years after introduction. EcoWorx was
responsible for annual double-digit tile growth
since 2001. About 9 of 2005 tile sales will be
produced with the EcoLogix PET cushion tile
backing.
11
EcoWorx Environmental Guarantee
Every square yard of EcoWorx carpet tile is sold
with an environmental guarantee. A toll-free
number is imprinted on the back of every tile.
Shaw will transport and recycle its EcoWorx
carpet tiles at the end of the useful life of the
installation, at Shaw expense, back into more
EcoWorx tile of the same quality. No EcoWorx
backing need ever go to a landfill if the
occupier will call this number at the time of
uplift, regardless of who originally purchased
the tile and regardless of what product may be
replacing the tile.
12
Elutriation of Eco/Eco

• Grinding and air classification of backing and
  fiber streams
• Current capacity of 3.75 million sy annually.
  Current return rate of 50,000 sy annually.
• 2005 production est. of 11 million sy. Current
  elutriation capacity should suffice through
  2010.
• EcoWorx stream is immediately returned EcoWorx
  production.
• Nylon 6 materials pooling agreement with BASF
  Arnprior not yet utilized.

13
Additional Waste Streams

• Recent addition of post-industrial filler from
  EVA automotive sound insulation. Replaces 5 to
  20 of polymer weight without loss of performance
  or recyclability.
• Polyethylene stretch film can also be pelletized
  and used to reduce virgin polymer weight.
  Fillers necessary in order to maintain sufficient
  mass and backstitch coverage.
• Current EVA latex precoat is now being converted
  to an EVA hotmelt formulation that will boost
  thermoplastic content and give higher wet/dry
  strength.
• EcoWorx was designed to be a robust low-melt
  polymer platform. This lowers cost and increases
  recycled content sources. Focus is on noncarpet
  sources, but much more needs to be done to
  identify and evaluate opportunities.

14
The Philosophy Behind Shaws Vision of A
Cradle-to-Cradle Future
15
Cradle-to-Grave Production
16
Cradle-to-Grave Production
It would require four more planets the size of
earth for every person in the world to reach
present US levels of consumption.
Resource consumption in China, India, and other
rapidly industrializing nations in the global
economy is already affecting capacities and
pricing.
17
Thermoplastics vs. Thermosets
Thermoplastic polymer chemistry allows products
to be sustainably recycled.
Thermosets are difficult to separate into their
original components.
EcoWorx embodies intelligent design for
disassembly. Sustainable carpets must evolve
beyond the use of inexpensive thermosets like SBR
latex.
18
Sustainability Must Be A Standard Business
Practice
The traditional environmentalist response is an
unacceptable solution to industry goals of growth
and profitability. Cradle-to-Cradle Design
offers the only demonstrated path to a
sustainable future.
19
Environmental Influences
Shaw had a desire to go beyond simple recycling
and the goal of zero waste with sustainable
technologies that could become strategic to
operational excellence and profit improvement.
We chose to treat sustainability as an extension
of quality and drive it with a management system
approach.
20
Cradle To Cradle Metabolisms
Biological Metabolism
Technical Metabolism
EcoWorx and EcoSolution Q conform to the concept
of technical metabolism as described by McDonough
and Braungart. Both metabolisms are valid
pathways to a C2C future.
21
Shaw Adapts Cradle-to-CradlePrinciples
22
Cradleto Cradle
Shaw has adapted Cradle-to-Cradle concepts to
describe a future where our carpets are made of
technical nutrients that are safe for humans and
the environment, make intelligent use of
nonrenewable energy, and are returned to
sustainable manufacturing through recycling
infrastructure.
23
Safe and Healthy Materials

• By what toxicity measure? MBDC Chemical
  Protocol testing of EcoWorx, Eco Solution Q,
  and all additives and colorants, tested to 100
  ppm level in supply chain.
• Consensus standards CRI seeking Unified Carpet
  Standard as a voluntary, consensus, LCA-based
  approach. Open to 3rd party and
  self-certification.
• Thermoplastics vs. thermosets Recycling of
  thermoplastics must be weighed against the low
  cost and high performance of traditional
  thermosets. Infrastructure of collection must
  channel thermosets into non-carpet recycled
  uses. (NyBoard, LA Fibers, Remlon automotive
  nylon).

24
Safety is boring.
Until the 30-foot waves start to hit.
EcoWorx and EcoSolution Q were assessed and
optimized under the MBDC Toxicity Protocol. Shaw
will continue to utilize the protocol for product
development.
25
Coal Fly Ash Toxicity Profile
Source Georgia Power Plant Robins Macon, GA
26
Energy Reduction

• By what energy measure? No adequate embodied
  energy protocol as yet as an analog to MBDC
  Toxicity. LCA calculation methods used to
  validate move from PVC. Matching supply chain
  speciation down to 100 ppm may be difficult in
  practice.
• Role of Life Cycle Analysis Sustainable
  attributes must be optimized through good
  science. Shaw EcoWorx vs. Shaw PVC study 2005.
• Linking Mass and Energy We have no additional
  future mass income. Material is the focus
  today. The sun may provide ample future energy
  income.

27
The Promise of Solar Energy

• True C2C anticipates a solar future that relies
  on the current solar income of the earth.
• Adapted C2C recognizes the need to continuously
  reduce the fossil reliance of todays economy and
  make intelligent decisions about its use.
• As part of Berkshire Hathaway, Shaws vertical
  integration plan does not include energy
  demonstration technologies at present.
  Berkshires MidAmerican Energy is planning the
  largest wind farm project in the US a 310
  megawatt project that will power the equivalent
  of 330,000 homes each year.

28
Transitional Strategies
Shaw Waste to Steam Facility
90 of all landfilled carpet is a cleaner fuel
source than coal
Carpet Derived Fuel
29
Shaw Gasifier
30
Shaw Gasifier Facts

• Transitional strategy to divert carpet from
  landfill.
• Replaces old boilers that burned coal and 6 fuel
  oil.
• 16,000 tons/yr of carpet derived fuel and 6000
  tons/yr of wood flour from laminate operations
  will be converted to synthetic gas.
• Steam production only. No power generation.
• Reduced emissions for Plant 81. Carpet contains
  no heavy metals like mercury.

31
Value Recovery

• By what measures? Can we recover carpets for
  recycling in ways that are economicly,
  ecologically and socially sustaining? Includes
  use of LCA and Environmental Management and Cost
  Systems.
• Economies of Scale Drivers of collection
  infrastructure must be diverse and adaptive. WTE
  is a transitional technology that diverts mass
  from landfills. Higher value use of waste is the
  objective. C2C recycling may not yield the
  lowest LCA impact, but technology can change
  that.
• Competition or Cooperation? Alone, together,
  or with CARE? Eco/Eco products promise EOL
  recovery. Elutriation is in place, but volume
  low until 2007-2009. Restart or further
  development of nylon recycling is critical to
  success. Material pooling will be difficult until
  thermoplastics become more widespread in carpet.

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Cradle to Cradle is a beautiful thing
even to a bean counter
33
EcoWorx Backing Development
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• Alternative to PVC
• Cradle to cradle recycling
• 30 lighter weight than PVC
• 40 recycled content
• Environmental guarantee (e.g.)

37
Chemical Input Composition of EcoWorx and
Permabac Process
38
List of additives in Permabac Carpet Tile
39
List of additives of EcoWorx Carpet Tile
40
Comparison of Permabac PVC and EcoWorx
41
CRADLE-TO-GATE ENERGY COMPARISON for EcoWorx and
Permabac Tile
42
ECOWORX and PERMABAC Process Energy Comparison
  In conclusion, at the carpet manufacturing
plant (gtg level) the two carpet systems differ
by a small amount in energy consumption. The
higher energy use for EcoWorx has been directly
related to the physical/chemical properties of
the principal ingredients. However, this
comparison has only a slight dependency on carpet
weight.
43
Benefits of Sustainable Redesign
Permabac PVC
EcoWorx polyolefin

• Chlorinated PVC concerns
• Phthalate plasticizer concerns
• Heavy PVC coating for stability
• Limestone filler
• Antimony trioxide flame retardant (patent
  restriction)
• Nylon contamination
• Extrusion corrosion concerns
• Smoke density lt450
• 4000 sy per trailer load
• 18 x 18 standard
• High radiant heat processing
• EOL material value uncertain
• Too heavy for broadloom use
• Higher incidence of installer injury

• Food-grade polyolefin
• Flexibilized by polyethylene
• 30 - 40 lighter weight
• Safe coal fly ash filler
• Aluminum trihydrate flame retardant
• Nylon recovery not affected
• Lower capital cost
• Smoke density lt200
• 7000 sy per trailer load, lower cost
• 24 x 24 standard
• 30 less process energy
• Positive EOL value
• High potential for broadloom use
• Better ergonomics, fewer accidents

44
EcoSolution Q and Fiber Production at Shaw
45

• Eco Solution Q premium branded commercial
  nylon
• 25 post-industrial recycled content in every
  pound
• Full warranty program
• Dedicated toll-free customer service line

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Comparison Of Nylon 6 Nylon 6,6 (Ctg)
Cradle-to-Gate supply chain energy from published
studies
LCI energy data from nylon 6 depolymerization is
unavailable, but it is unlikely that the process
energy of depolymerization would exceed the
virgin supply chain energy. There is no
demonstrated commercialized process for recovery
of white nylon 6,6. LCI estimates that make a
claim of nylon service life of 30 years ignore
the fact that the average commercial replacement
cycle of 7 years has not changed significantly in
the last 20 years.
48
Shaw Fibers

• Among the largest carpet fiber producers in the
  world
• Over 600 million lbs. of carpet fiber per year
  produced
• 8 manufacturing plant locations in the Southeast
• Nylon 6, Polypropylene, Polyester, and PTT
• The most fully integrated carpet fiber producer
• From Cyclohexane base raw material to finished
  nylon 6 carpet fiber
• Produce custom colorants for solution dye fiber
  in one of the largest color resin plants in North
  America

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• 1994 Began redesign of carpet tile
• 1997 EcoSolution Q Introduction
• 1999 EcoWorx Introduction
• 1999 Best of NeoCon
• 1999 Governors Pollution Prevention
• 2002 EcoWorx exceeds PVC production
• 2003 Third Party Certification - MBDC
• 2003 EPA Presidential Green Chemistry
• 2004 Shaw exits PVC

50
2004 Impact Reductions

• 20 million lbs of post-industrial nylon 6
  recycled.
• 29 million lbs of post-industrial waste recycled
  into carpet yarn of all types.
• 16 million lbs of postindustrial coal fly ash
  recycled.
• 15 million lbs of post-industrial waste recycled
  into fiber pad.
• Post-consumer PET green drink bottles recycled
  into Ecologic cushion.
• Shaw exited PVC in favor of EcoWorx polyolefin
  thermoplastic extruded backing.

51
Recycling of Eco/Eco Products
52
Recycle Content Projection
Recycle Process Efficiency
EcoWorx Backing
50
30
Recovered Tiles
End-of- Life Tile
50
Discarded Tiles
Next Generation EcoWorx Backing
Projected 25 of new backing will be manufactured
using old tile based of 50 recovery rate and
current 30 process efficiency.
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Recycling Flow Diagram
Depolymerization to Caprolactam Polmerization
Spinning
End-of-Life Ecoworx Tile
Transportation
4 MJ/sq yd
75 Purity
2.47 kg/sq yd
Nylon
Nylon Face Fiber
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Waste
Size Reduction Separation
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1.14 MJ/sq yd
Next Generation of Ecoworx Tile
2.686 kg/sq yd
30
Ecoworx Backing
Backing Material
25
75
Virgin Backing Material
Energy assigned to nylon and backing material
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Elutriation Energy Calculations
2.25 MJ/sq yd ? Backing
4.0 MJ/sq yd
1.75 MJ/sq yd ? Nylon Fraction
2.89 MJ/ sq yd Backing
0.64 MJ/sq yd ? Backing
1.14 MJ/ sq yd
0.5 MJ/sq yd ? Nylon Fraction
2.89 MJ/ sq yd vs. 6.6 MJ/ sq yd for Virgin
EcoWorx material
56 Energy saving for recycled backing material
55
Effect of Tile Recovery
2.89 MJ/ sq yd ? Recycle Backing
6.6 MJ/ sq yd ? Virgin Backing
25
75
5.67 MJ/sq yd Next Generation Backing
14 Energy Saving

• Raising the Recycle Content of the backing is
  ONLY possible if collection and elutriation is
  more efficient.
• At 100 tile recovery the recycle content is at
  a maximum of 50 on a sustainable basis for 30
  Overall Energy Saving.

56
Eco/Eco Recycling Energy Efficiency
57
Accumulated Energy Usage in Eco/Eco
58
Corporate Environmental Efforts at Shaw
59
Corporate Environmental

• Created in September 2004 in recognition of the
  strategic importance of environmental issues.
• Paired with Corporate Quality (ISO9001/SQS) due
  to the need for an environmental management
  system (ISO14001/SES).
• Environment is the new Quality. Another way
  to operational excellence and profit improvement.

60
Environmental Management System

• Shaw Environmental System (SES) ISO 14001 based
• Takes advantage of the ISO 9000 based Shaw
  Quality System (SQS) driven by Six Sigma.
• Continuing development of Environmental Cost
  System to define the environmental and social
  aspects of business.
• Internally focused to drive innovation by making
  environmental improvement a standard Shaw
  business practice.

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Integrating Our Quality and Environmental Systems
SQS (ISO 9001) Unique
SES (ISO 14001) Unique
Shared
Customer Focus Product Realization Design and
Development Production and Service Customer
Satisfaction Control of NCP
Aspects and Impacts Emergency Response Interested
Parties Regulatory Compliance
Policy Manual and Statement Document
Control Objectives and Targets Training Internal
Auditing Measuring and Monitoring Calibration CA/P
A Systems Management Review
62
SES UpdateShaw Environmental System

• SES is data-driven through a formal management
  system structure, but it is also a price of
  admission for credibility in sustainability
  claims.
• All seven pilot facilities on-schedule for July
  2005 certification.
• All remaining plants prioritized and scheduled
  for certification by end 2006.
• SES will include an environmental measurement
  system appropriate to each facility, but common
  corporate measurements will be summarized.

63
Key Corporate AspectsWhat to measure?

• Solid Waste, Energy, and Water
• Basic goals Identification, benchmarking, and
  reduction of impacts.
• Selection criteria Highly significant, highly
  achievable, and highly aggressive.
• Tracking the scope and pace of technology
  development is also critical.

64
Environmental ResearchInterviews and Survey

• A Shaw internal awareness and attitudes survey
  will establish a baseline for annual
  measurement.
• Pride Day completion of 48 F2F interviews to help
  in designing an effective annual survey.
• Survey will go to 3000 Shaw respondents, hourly
  and salaried, in an on-line survey in May.
  
  
  
  
  
  
  
  
  
  
  
  
• Objective is to help define Shaws environmental
  identity and create messaging for internal and
  external audiences.

65
Environmental ResearchEmployee F2F Interview
Findings

• Environmental Awareness
• Low level of knowledge and awareness
• 27 could not name any impacts from Shaw
  processes
• 37 believe we have effective ways to measure
  impacts now
• 21 believe carpet is toxic
• 58 believe carpet is sustainable now
• Environmental Attitudes
• 87 believe stewardship is important at work and
  home
• 50 are pessimistic about the future of the
  environment
• 73 are enthusiastic about Shaw initiatives and
  want to be involved
• 15 feel sustainability is a waste of time
• Opinions About Shaw
• Overwhelmingly positive (80)
• Only 68 view Shaw as an environmental leader
• Only 75 said Shaw products are totally safe and
  healthy
• Only 70 feel Shaw is adequately involved in
  their community

Question everything. Make honest assessments.
Change.
66
 Shaw Industries recognizes that merely
preserving and conserving the natural bounty of
the earth will not make us a sustainable
corporation. A truly sustainable carpet industry
must mimic nature's organic cycle of life, death,
and rebirth. The answer does not lie in limiting
growth, but in encouraging the kind of growth
that is cradle-to-cradle, returning carpet to
carpet endlessly. Toward that end, Shaw has
adopted these productive policies and practices.
R.E. Shaw CEO
67
Shaw Environmental Vision

• Environmental sustainability is our destination
  and cradle-to-cradle is our path. Our entire
  corporation and all stakeholders will value and
  share this vision.
• Through eco-effective technology we will
  continuously redesign our products, our
  processes, and our corporation.
• We will take responsibility for all that we do
  and strive to return our products to technical
  nutrient cycles that virtually eliminate the
  concept of waste.
• We will plan for generations, while accepting the
  urgency of the present. We are committed to the
  communities where we live and work. Our
  resources, health, and diversity will not be
  compromised.
• We look forward to a solar-powered future
  utilizing the current solar income of the earth,
  anticipating declining solar costs and rising
  fossil fuel costs as technology and resource
  depletion accelerate.
• We will lead our industry in developing and
  delivering profitable cradle-to-cradle solutions
  to our free-market economy. Economy, equity, and
  ecology will be continually optimized.

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Any jackass can kick down a barn, but it takes a
good carpenter to build one . - Sam Rayburn