(FORTUNE Magazine) – Last year, on an October evening as stifling as a greenhouse, CEOs from half a dozen of the world's largest companies gathered at the U.S. Embassy in London. At the lectern before them stood a man of medium build with lean, handsome features and a Georgia drawl: Ray Anderson, the king of carpet tile.

Anderson is founder, chairman, and CEO of Interface, the $1-billion-a-year leader in this unglamorous sector of the floor-covering industry; he introduced himself that night as one of the tribe, "a captain of industry, an American hero." But Anderson quickly made it clear that mutual admiration wasn't the main agenda. In a voice fired by evangelical zeal, he described a breakthrough four years earlier when his life--both personal and professional--had utterly changed. "I had a revelation," he told his audience, "about what industry is doing to our planet. I stood convicted as a plunderer of the earth."

The CEOs shifted in their seats as Anderson explained that he now considered the technologies of the Industrial Revolution to be "voracious," a form of collective suicide. "In the future," he declared, "people like me will go to jail." Then he rolled out his central theme: "Interface of Atlanta, my company, is changing course to become sustainable--to grow without damaging the earth and manufacture without pollution, waste, or fossil fuels. If we get it right, our company and our supply chain will never have to take another drop of oil." Leveling a finger at Chris Fay, then CEO of the British unit of Royal Dutch/Shell, he added, "We want to put you out of business."

Since 1987, when Norway's then-Prime Minister Gro Harlem Brundtland advised the United Nations that economic enterprise must be "sustainable"--that it must "meet the needs of the present without compromising the ability of future generations to meet their own needs"--environmentalists and left-leaning policymakers have championed the idea. The doctrine of sustainability caught on in progressive corners of agriculture and forestry and has lately become the rage among city planners and architects. It is less popular, as you might expect, among the world's industrialists, many of whom see sustainability as a well-intentioned fantasy that is likely to have very expensive implications.

Part cheerleader, part scold, part dreamer, Ray Anderson wants to be the man to reconcile them all--left and right, ecologist and oil baron. His 1994 conversion turned him into the rarest of hybrids: a born-again green industrialist. The years he has since spent trying to reform Interface got him noticed by Bill Clinton, who in 1997 named him co-chair of the President's Council on Sustainable Development. Anderson has made the job his bully pulpit. Drawing on his Baptist roots and his engineer's head for facts, he has spread the gospel of sustainability: Unless we as a species stop bickering and do something, he says, the end--our end--is imminent.

Even two years ago, that kind of rhetoric would have been branded, particularly in business circles, as alarmist and shrill. But there has been a tectonic shift over the past year or so. As Anderson puts it, the corporate brain is waking up. He points to the treaty that emerged from the 1997 environmental summit in Kyoto, Japan, as a sign of a growing international consensus that the greenhouse effect and global warming are real and that the burning of oil and natural gas is largely responsible. In signing the treaty, 160 nations agreed that the world's industrialized countries would cut their greenhouse-gas emissions by more than 5% by 2012, compared with 1990 levels. The treaty won't bind the U.S. unless the Senate ratifies it. (Some Senators argue that the treaty lets developing countries off too easily; the Clinton Administration has decided not to submit it for ratification until that deficiency is addressed.) But the mere fact that the treaty exists signals a broad recognition of the problem.

Anderson's main job as co-chair of the President's Council on Sustainable Development has been to work with a panel of business leaders, environmentalists, and local and federal government officials to deliver policy recommendations on global warming to the White House. He has been a vocal advocate on the council for giving incentives to business for cutting emissions, while his co-chair, Jonathan Lash, in his capacity as president of the nonprofit World Resources Institute, helped to persuade General Motors, British Petroleum (now BP Amoco), and Monsanto to support action on climate change. Dozens of other companies are backing a bill before the Senate that would give "early-action credits" to businesses cutting emissions ahead of the schedule set in Kyoto. (The Pew Center on Global Climate Change, a public-policy nonprofit in Arlington, Va., counts another 20 companies pushing for some form of early-action credits.)

Meanwhile, in the wake of the hottest year on record, 1998, some of the largest multinationals have embraced sustainability on their own. Royal Dutch/Shell and BP Amoco, for example, have promised to cut greenhouse-gas emissions an ambitious 10% from 1990 levels; Royal Dutch/Shell says that it will do so by 2002, BP by 2010. GM has pledged to cut total energy use by 20% vs. 1995 levels by 2002; Toyota has rolled out a hybrid gas/electric car in Japan; German companies have begun work on hydrogen-fueled jet engines; Volvo, deutsche Bank, Electrolux, ICI, Monsanto, and Unilever have formed a consortium to assess ways that sustainability could be applied to their businesses; and DaimlerChrysler, Ford, and a small Canadian company have formed a joint venture to develop fuel-cell powered systems that could eventually replace the gasoline engine.

The Council on Sustainable Development's charter, however, is set to expire on June 30; as FORTUNE went to press, its future was uncertain. Anderson believes a private organization that includes legislators and other government types should take its place. From Anderson's standpoint, such a coalition would be only the beginning. Sustainability, as he understands it, implies nothing less than the reinvention of the modern corporation. It places the planet's ecological health on a par with the production of goods and services and the creation of wealth. That entails retooling on an unprecedented scale.

At Interface, adopting sustainability has meant reconceiving the business from the ground up, from the composition of its products to the way they are produced, distributed, and even disposed of. Anderson takes the project seriously enough to have had the following credo set in bronze in the floor at his newest U.S. factory: "If we are successful, then we will spend the rest of our days harvesting yesteryear's carpet and other petrochemically derived products, recycling them into new materials, converting sunlight into energy--with zero scrap going into the landfill and zero emissions going into the ecosystem. And we'll be doing well--very well--by doing good."

This last idea, that sustainability will ultimately pay off in dollars, is Anderson's most potent argument in his quest to convert the Royal Dutch/Shells and Dow Chemicals of the world. "Business will get on board not out of altruism but self-interest," he insists; to expect anything else--a moral mission such as his own, for instance--is naive. (For businesses that have trouble locating their self-interest, Anderson favors a tax package that would penalize polluters.) Still, Anderson expects most businesses to understand that when the environment goes down the tubes, the market itself won't be far behind. In the 21st century, he says, the spoils will go to those with the foresight to invest accordingly.

As long as companies are willing to adopt green practices, says political scientist and sustainability specialist Nazli Choucri at MIT, their rationales don't much matter. "Every company applies [sustainability] as they see fit," she says; "If you do it to save money, it still makes you green, even if inadvertently." Choucri cites three reasons companies go for sustainability, aside from real concern about dwindling natural resources: "First, to be one step ahead of the sheriff, so to speak, in terms of liability and the environmental impact of what you do. Second, you might worry about your competitors getting better PR from this. Third, you might be aware that the Administration is trying to bring sustainability into the national agenda. Think of it as a very strong social wave, much like the clean-air movement of the 1970s.... If there is a national consensus emerging, you want to be at the table shaping it, not at the receiving end."

For the first 60 years of his life, Anderson pursued the green that doesn't grow on trees. Son of a postmaster and teacher, he grew up a smart, athletic kid in West Point, Ga. He charged through Georgia Tech on a football scholarship, then upset a comfortable career with a leading carpetmaker by quitting to start Interface in 1973. The long hours helped finish his first marriage, but the company took off after Anderson discovered carpet tile. Squares of industrial carpeting that can be laid down and taken up cheaply, carpet tile lacked class in the eyes of most broadloom men--it was the flooring equivalent of the leisure suit. But Anderson pounced on the idea and scored with customers by offering tiles that were prettier (and more expensive) than the British originals. By 1993 he ruled the market, manufacturing in 29 plants around the world. He was secure in a happy second marriage and enviably rich.

Interface in those days was no environmental trailblazer. Carpeting is, in fact, toxic stuff: Pools and pools of petroleum are drained to make the nylon, which is then fastened in fiberglass and PVC, two known carcinogens. Factories flush their dye water--full of heavy metals and other toxins--into wastewater streams, and blow carbon dioxide, the most worrisome greenhouse gas, from their smokestacks. Old carpet ends up in landfills--an indestructible, potentially hazardous waste.

In 1994, public awareness caught up with Interface. Customers began asking what the company was doing for the environment; Anderson had little to say in response. "For the first 21 years of the company's existence, I never gave one thought to what we were taking from the earth or doing to it, except to be sure we were in compliance and keeping ourselves 'clean' in a regulatory sense," he says. Then an employee passed him a book, Paul Hawken's The Ecology of Commerce. Hawken had written about the extinction of species at a pace not seen since the dinosaur era, about the earth choking on its own waste, industrial gases threatening the climate, the decimation of the world's forests, and "the death of birth."

"Think of it, 'the death of birth,'" Anderson says. "That phrase was a spear in my chest." (It had been coined by Harvard biologist E.O. Wilson, whom Hawken quoted.) Reading the book in bed, Anderson cried. He read passages to his wife. She cried. "It invaded my soul," he says.

Several days later Anderson addressed a gathering of Interface managers and repented, in a mea culpa that astonished even himself. He had fouled the earth, he told them; now he was challenging himself and Interface to adopt new ways. By the end of the talk, Anderson says, everyone in the room was crying. "It was the most stunning experience," he recalls. "The feeling was, 'We've been doing it wrong all these years.' You can call it guilt."

Nowadays he travels the world, giving a similar speech to several hundred audiences a year. "Every ecosystem on earth is in decline," he typically tells them. "This is a crisis: It is a funeral march to the grave, if someone or something doesn't do something to reverse the deadly decline. Business and industry--the largest, wealthiest, most powerful, most pervasive institutions on earth, and the ones doing the most damage--must take the lead.... Once one understands this crisis, no thinking person can stand idly by and do nothing. When you get past denial, you must do whatever you can. Conscience demands it."

There is no mistaking his passion. The private Ray Anderson is almost entirely gone, associates note, replaced by the itinerant preacher. He dedicates his quest to his six grandchildren and seems haunted by "my role in the world they will inherit. I am trying as hard as I can to undo my mistakes."

That hasn't been easy. After his epiphany, Anderson's challenges multiplied. Sales at Interface slumped in the mid-1990s, hurt by Anderson's slack management and other problems. Not only did he need to revive the business, but he also felt compelled to do so in a way consistent with his new green ideals.

To set the business straight, he recruited a new president for Interface's carpet-tile division: a tough, down-to-earth carpet-industry veteran named Charles Eitel (now COO and president of Interface). Then he turned to the environmental part of the problem. He brought in advisers--not the usual McKinsey types that bosses call in at stricken companies. Instead Anderson hired green-movement figures, starting with Hawken, who besides being an author is a successful ecoentrepreneur, the founder of Erewhon Trading, a natural-foods company, and Smith & Hawken, a garden-supply outfit. Anderson also hired David Brower, the man who helped put John Muir's Sierra Club on the international map; Bill McDonough, a green-design pioneer; and Amory Lovins, a physicist and consultant on resource efficiency at the Rocky Mountain Institute.

Anderson called the consultants his dream team; it became Eitel's job to make them part of the turnaround. A boyish-looking 49-year-old, Eitel remembers feeling squeezed between two seemingly irreconcilable imperatives--make Interface money, make Interface green. His first response, he recalls, was anger: "I'm just trying to run a company, and suddenly I'm responsible for changing the world, too? Why can't the next generation do this?... Now I'm proud to do it, but then it seemed impossible."

As Eitel grappled with the business, Anderson adopted Lovins as his mentor and set about transforming himself from autocrat to father figure. Hawken, meanwhile, took charge of reeducating the employees. "When we started," Anderson recalls, "my employees said, Sustainability sounds like perpetual motion. How do you do it? How do you put back more than you take?" But before long, says Lovins, salesmen began taking Anderson's lead and styling themselves as ecocrusaders as they pitched carpet tile with renewed fervor. "This happens a lot in green companies," Lovins claims. "Freeing up the contradiction between making a living and doing it in a way that your kids can be proud of you causes an implosion of energy."

The turnaround, unorthodox though it was, worked. Interface's stock price has gone up 70%, and profits are up 81% since 1994. Annual sales have risen 77%. At the same time, Interface has become more efficient and learned to use fewer raw materials. Interface says it's 22% of the way toward sustainability; "And it's happened in just over four years," crows Anderson. The scorecard since 1994: emissions and solid wastes are down 30% and 50%, respectively, per revenue dollar. That has translated into $19 million in cumulative extra cash flow, net of $62 million of R&D and $14 million of capital spent in converting to sustainable technology. "I told you sustainability makes good business sense," Anderson says, flashing his best smile. "We've got a revolution in this company."

In its products and industrial processes, Interface's progress has come through thousands of small steps--such as eliminating a fourth of the nylon in every carpet tile. Interface is in the first stages of designing compostable or recyclable carpet; it's experimenting with hemp, sugar cane, and corn; it has added a recyclable carpet tile to its product line. A division in Maine that makes fabric for office partitions now spins the stuff from recycled soda pop bottles and is replacing dangerous chemicals in its dyes. A $1 million photovoltaic grid--one of the country's largest units used in manufacturing--powers Interface looms in California.

Despite all this, though, the company is still making carpet the old way--unsustainably. That's because nylon is not yet recyclable, Anderson is quick to explain. He tells suppliers that the first among them to produce a recyclable nylon will get all his orders. "The technology doesn't exist today. The best recycling attempts that have been made lose half the nylon. It's five to ten years away," Anderson notes. Likewise, Interface is waiting for costs to drop before fully converting to renewable energy. Power from photovoltaic cells costs three to four times more than electricity from oil. "We'll convert as we grow sales," Anderson promises. For now, Interface plants one tree in the rain forest for each 4,000-mile air trip taken by one of its 7,600-plus employees--more than 12,000 trees at last count. But these are admittedly interim measures. "We are decades from taking that last drop from the wellhead that Anderson talks about," says Jim Hartzfeld, senior vice president of Interface Research.

To some observers, sustainability still sounds like perpetual motion--some kind of alchemical sleight-of-hand. Certainly it's a stretch to imagine a day when the world will make cars, skyscrapers, computer chips, plastics, and all the rest without actually using up anything. Anderson concedes that for now, sustainability is more a guiding principle than anything else: "What we're doing is incredibly difficult. My executives may be right--it may be several generations. But I hold out this hope of living to see it."

Anderson's admirers are a mixed group. Steve Percy, who was CEO of BP Amoco's U.S. subsidiary until March, says, "Ray is very passionate about sustainability, and leaders always think long-term." Lester Brown, founder and president of Worldwatch Institute, a leading proponent of sustainable development, echoes that sentiment: "Ray's as committed to saving the environment as any environmentalist I know. He's committed to helping his colleagues in the business community understand that the environment isn't just some fringe issue--it isn't just cleaning up some stuff at the end of some pipe--but it is the foundation on which the global economy rests."

At the same time, there is no shortage of people to either side of Anderson who are skeptical. To his left are those who remain unconvinced that Anderson has resolved Lovins' "contradiction between making a living and doing it in a way that your kids can be proud of." After Anderson spoke at a recent Greenpeace business conference in Europe, Peter Knight, a respected English environmental consultant, challenged him: "Besides giving great speeches and making the company more efficient, I can't see what you are doing that's so different." "We aren't doing enough," Anderson replied. Knight certainly seemed to agree, pointing out that Anderson is still draining all that petroleum, still churning out carpet tile that will end up in the world's landfills. Such critics wonder why Anderson doesn't simply stop making money and keep making speeches. "I could go sit in a redwood," counters Anderson. "I admire the people doing that. But I want to change industry."

To Anderson's right are the folks like Jerry Taylor, a political scientist at the conservative Cato Institute in Washington, D.C., who calls sustainability a "solution in search of a problem." Taylor says the profit motive in capitalism is already leading to technological advances that are cleaning up the environment quite nicely: "We have a better environment than ever before. It's not collapsing." According to this line of reasoning, if resources were running out, commodity prices would be rising. Instead, the world has seen the opposite. Oil prices, for example, were plummeting until very recently, even as grim predictions--and evidence--of global warming multiplied.

"When oil is cheaper than water, there's no incentive not to pollute," says Matt Arnold, founder of the Management Institute for Environment and Business at Lash's World Resources Institute. "Unless you share the environmental concerns, companies may not find sustainability attractive in the short or medium term."

Indeed, finding companies that share those concerns deeply enough to act on them is the crux of Anderson's challenge. His experience at Interface will doubtless be repeated by companies around the world as they attempt a similar process of reform. Like Interface, they may well find that the first 10% or 20% reductions are relatively easy to achieve--and, as advertised, actually boost profits. But in the medium term, and very likely the long one, they will rediscover the long-standing dilemma of the environmental movement: Revolution is expensive, and not everyone will spend the money without the threat of the lash hanging over them. After all, the clean-air movement was given teeth by the Clean Air Act of 1970. It's hard to imagine the success of the former without the latter.

This seems to be what Anderson is getting at when he says that the promise of profits and good PR isn't always enough to induce business to transform itself. The market is a "dishonest broker," he maintains, because it places no value on the environment: "The last front of sustainability is the redesign of accepted notions of commerce. We need a tax shift to raise the price of oil to reflect the externalities ignored by the market, such as the cost of the cleanup after climate change, and the cost of our military presence in the Middle East. I really do believe the earth cries out for a carbon tax to make renewables more competitive." The day oil's price reflects its cost--$100 to $200 per barrel, in Anderson's view--will be the day businesses like Interface will shift to 100% sustainability and "kick ass in the marketplace."

The near-term environmental outlook isn't good, Anderson warns. The Kyoto accord does nothing about the greenhouse gases that already double-glaze the globe. "Nothing we can do will prevent the world from getting warmer and more turbulent, with coastal flooding and new diseases," he says. "Get ready to live with it. We'll be taking steps like Kyoto all through the 21st century."

Asked what he would tell business leaders who doubt that time's running out, Anderson pauses to think. It makes for an incongruous image: the carpet king in his corporate suite, conjuring a formula to save the world. Finally, as sunlight glints off a sculpture at his elbow--a tower of animals representing biodiversity--he leans forward and admonishes his hypothetical colleagues: "Only you collectively can make a big enough difference to save the species from itself. To save the species from you."

REPORTER ASSOCIATE Eileen P. Gunn