We recently attended the Carpet & Rug Institute’s (CRI) 2017 annual meeting of in Dalton, Ga., where we had the opportunity to talk with Joe Yarbrough, the trade group’s president.
During our conversation, Yarbrough discussed a variety of topics reviewing some of the accomplishments the trade association had achieved over the past year, including the dissemination of information on carpet and rugs to the industry and consumers on its website. He talked about the group’s environmentally oriented Green Label Plus program and recognition of it by the EPA and approval by ANSI. He also talked about the promotion efforts of the group advancing the benefits of commercial and residential soft flooring reaching some projected 25 to 28 million.
The prime focus of the conversation, however, was upon carpet recycling and events in California involving the Carpet America Recovery Effort (CARE), the stewardship organization of the industry. The following are excerpts of that conversation which can be viewed at floortrendsmag.com/videos.
TF: The situation with the CARE organization and its relationship with CalRecycle appears to have become very complicated in recent years and quite costly for the carpet industry. Can you review the situation for us?
Yarbrough: Within our Extended Producer Responsibility efforts and the CARE panel, a great deal of CRI resources have been consumed, particularly within the state of California. In my presentation, I talked about activities in some other states, but the activity and stress on the industry and the stress on CRI’s resources have really been focused on activity within California. There are three prime things we have dealt with there.
First, CARE, the stewardship organization for our industry, has had to submit a stewardship plan addressing how that plan would be operated and managed. During 2011, the first five-year plan was developed. It expired in December of 2016. Two plans have since been offered to CalRecycle and have been rejected, one in December of last year and one in February of the current year. We have, as a result, been operating as an industry that is selling carpet into the state of California as if the existing plan were still in effect. And those who manufacture and sell carpet in the state are operating under the governance of the previously approved plan as if it were still in effect.
The second issue is that CARE was found by CalRecycle to be noncompliant with the statute for the years 2013, 2014 and 2015, and the fines that were levied against CARE aggregated to about $3.3 million. As a result, we are going through an administrative law process whereby CARE is denying those accusations because we think we are being unfairly fined for noncompliance when we think we have done everything possible to conform to the expectations of AB2398.
The third factor is that the state legislature in California determined that since the original statute was initiated in 2010, now six or seven years later, it needed to be amended. There were actually two members of CRI that supported that amendment. Unfortunately, that amendment was passed. I say unfortunately because CRI membership, responsible for 90% of the volume of the industry, did not support the amendment of AB2398.
Why did we believe that AB2398 did not need to be amended in order to achieve the carpet recycling objectives in California? The language as written is very contradictory, and there are elements in it that are unclear. CalRecycle could not define the language of the original statute calling for “continuous meaningful improvement” and therefore they have the authority to set the rates and the dates by which those rates have to be achieved.
Because of the rates and the levels that have been codified in this new amendment, they have basically set our plan up to fail. We are all going to abide by the law. Our CRI members and everyone that is involved with the CRI and its efforts as well as with CARE are law-abiding citizens and businesses, so we are going to do everything we can do to comply with the law. But the law itself is going to make it very difficult to succeed. So, we have our work cut out for us.
A new plan is presently being developed. It will be submitted first to the new advisory committee authorized under the statute, which will make recommendations, and the CARE organization will have to both accept those recommendations and incorporate them into the new plan that will be submitted. For those recommendations that CARE does not feel it can adhere to, a reason will have to be given as to why they are not acceptable or adoptable.
TF: The rate and level at which carpet can reasonably be recycled within the state of California appears to be the main bone of contention. Is that the prime issue?
Yarbrough: It is probably the most significant issue. The problem we have is that there are headwinds with the recycling of any product, whether it’s carpet, tires, or just about any product. The main issue that carpet has is that there are numerous alternatives that are economically available and readily available as competitors to carpet. Most of the other products that are being regulated and recycled, such as tires, for example, have no substitutes. With mattresses, I suspect one could sleep on the floor, but most people want a mattress. When people paint their houses, there may be other ways to accomplish that, but they are not very good alternatives. Carpet remains one of the very few products—if not the only product—being regulated that has alternatives. So, our industry is being damaged in perhaps an unusual way compared to other attempts.
Our industry has invested many tens, perhaps hundreds of millions of dollars developing recycled technology, developing ways to reengineer the product to make it more readily recyclable. Carpet is a pretty tough environment to be on the floor and to be abused the way it is and, therefore, it is designed and engineered to be long lasting. These are attributes consumers expects and as a result they don’t stain, they don’t wear out. So, deconstructing carpet is pretty difficult.
Also, the reality is that carpet recycling is not the only element of having a sustainably focused industry. There are many additional elements. Our industry has reduced water consumption required to make a square yard of carpet as much as 50% every six or seven years. We have reduced the energy intensity required to produce our products by as much a 15% over that past five or six years. Carpet products are designed to be durable, but they are also designed to be a safe and healthy product. The industry is doing a number of things to design products for recyclability. There are a number of things taking place that don’t just limit the fact that every square yard might have to be taken to be recycled. There are a number of other great things that our industry is doing to invest in the sustainability of products across the spectrum.
TF: How does one develop a percentage or a quantity of carpet within the state of California that should be recycled?
Yarbrough: California has statutes that set goals for the recycling of everything in the state. The state has set a goal saying that 75% of everything must be recycled by a certain year. I can’t recall the precise point in time that this should be accomplished. The reality is that even the state agencies responsible for executing these recycling programs are seeing some of the same headwinds that we are for carpet. For example, the percentage of polyester bottles being recycled has shrunk dramatically as have the number of tires.
The headwinds that exist in today’s climate — which for the most part is a good climate with lower energy costs, lower petroleum and petroleum derivative costs — when it comes to recycling, the competition for the cost of recycling a product to the cost of a virgin material has flip-flopped, so there are not markets readily available to accept it. So, what has been happening is that pundits and many folks in California that have objectives that call for the recycling of everything have goals, which are easy to establish but are not necessarily based on reality, practically and pragmatically and are arbitrary in many respects.
TF: Is there an arbitrary nature with many of the goals set with the statutes in California, including those with carpet?
Yarbrough: To that point, as we are developing our plan, we have had negotiations with CalRecycle trying to cooperate and develop a plan that would meet their expectations. We have not been compliant for three years and have subsequently been found noncompliant for 2016, however, it is our plan to work with them in a cooperative way that will help us understand what they are seeking that we can do as an industry to comply with their expectations. The reality is that those dialogues have had peaks and valleys of cooperative exchange. The reality is that we have told CalRecycle that we felt we can reach a level of 24%, but it would have to be at the end of 2020.
Two things: first, we didn’t expect that our plan approval would be delayed by what now may be as much as a year and half. We didn’t expect that some of the things that prohibit us from expanding would be delayed by the fact that the plan was not approved. So, by having the statutory requirement, moving this 24% rate up one full year to the first of January 2020 is really setting the plan up for failure. We are going to do everything we can do to make it succeed, but it’s going to be extremely difficult.
TF: How have these events affected CRI members and carpet sales in California?
Yarbrough: When we compared the sales of carpet in California with the amount of sales of carpet in the other 49 states, the analysis showed carpet was losing market share in California at a different rate than the rest of the nation. It appears that for every $0.05 per square yard, the assessment fee has increased. It started at $0.05 as of January of this year and is now $0.25 per square yard, and we have had incremental increases over the five years of the program. What we have seen is that for every $0.05 the assessment fee has been increased, we have roughly seen a 2% decrease in market share in California.
TF: Can we say that if not for the increase in the price of petroleum and petroleum derivatives, we would not be having this conversation?
Yarbrough: It’s likely we would not be. I submit that had petroleum stayed in the $150 a barrel range, we would be having a different conversation about other issues. The good news is that we have become more energy independent as a nation. That has affected these petrochemicals that are derived from petroleum as well as energy costs. I think that has improved the basic economy, has improved the amount of material that consumers are buying, including carpet and flooring, and that is all positive. But the reality is that those that are promoting and pressing for carpet recycling, the headwinds that these factors have created in some cases are insurmountable. But at the end of the day, our industry is robust, it’s a healthy industry and our members are confident that they are doing good things with their going to market strategies. I also submit that the fact that carpet recycling is not the only element of being a good steward of the environment, and having a good sustainable strategy that the other things the industry is doing in addition to carpet recycling bodes well for the position as an industry relative to this question in a broader sense.