InterfaceInc - Case Study.pdf

7/21/2019 InterfaceInc - Case Study.pdf

http://slidepdf.com/reader/full/interfaceinc-case-studypdf 1/13

1

Interface Inc.: “Doing Well by Doing Good”

This case is prepared as the basis for group discussion rather than to illustrate either effective or

ineffective handling of an administrative situation. The case is written by V D Krishnaveni, Assistant

Professor, PSG Institute of Management, Coimbatore, India, with inputs from Ajith Sankar R N, Assistant

Professor, PSG Institute of Management, Coimbatore, India. The copyright for the case exists with

the case writer. The case has been prepared based on secondary research.

This case study is released to the public domain without cost. While the case writer holds the copyright tothis case study, the reader may reproduce, distribute, publish, and transmit this case study in any formincluding photocopying, recording, or other electronic or mechanical methods PROVIDED THAT no textor figures are altered.

Two weeks before he was due to deliver the kickoff speech at a task force meeting in August1994, Mr. Ray C. Anderson (Anderson), Founder and Chairman of Interface, the global leader incarpet tile manufacturing, was sweating. The task force, comprising representatives from all of

Interface’s global divisions was meeting up for the first time to see what they were doing for thenatural environment in response to growing consumer interest in that area. Jim Hartzfield, anassociate in the research division, had convened the task force and insisted that Anderson makethe opening speech.

For the twenty-one years prior to this incident, by his own admission, Anderson had notseriously considered what Interface had taken from the Earth or how they were giving back.Being in the carpet-tile industry, Interface’s major input was petroleum. Their plants consumedhuge amounts of energy to transform raw materials such as nylon and other synthetic polymersinto modular carpets. Their processes resulted in waste that was sent to landfills1. Largetransportation systems were a part of the value chain2. Even consumers would send the old, used

and worn carpets to landfills. Despite a lot of deliberation, Anderson was not able to come upwith anything better for his speech than the fact that Interface had always complied with the law.

Interface – A Brief History

In 1969, as Director of Development, Floor Covering Division at Deering Milliken3, Andersonhad the chance to learn about what was then a brand new product – carpet tiles. Anderson fell inlove with the idea of modular carpeting and the opportunities it presented. Offices in the USwere going through a phase of change where they needed to keep upgrading their equipment tokeep up with the latest technology and this implied constant rewiring and reconfiguring of theoffice spaces, especially the floors presenting the perfect opening for carpet tiles.

1 The typical types of waste that are created during carpet production would include off quality carpet, scrap,

damaged yarn, trimmings left over after small pieces of carpet tiles have been cut out of large rolls of carpet and

so on.2 As per Michael Porter, Professor, Harvard Business School, value chain refers to all the activities that add value to

the customer and includes everything from production to after sales service.3 Deering Milliken was a company that started off as a major player in the textile industry space and later moved

into specialty chemical, floor covering and performance materials sectors. In 1976, it officially changed its name to

Milliken and Company.



2

People around Anderson were skeptical about the fact that perfectly good broadloom carpetswould be cut into 18” carpet tiles and sold at around twice the price. They did not quite see the potential that the new product offered, nevertheless Anderson helped Milliken bring it from theUK to the United States. In 1972, Anderson’s frustrations at being passed up for a higher post six

years ago and the stifling bureaucracy at Milliken made him think of starting out on his own.

Not only did Anderson have to face up to professional skeptics but even at the personal front, hedid not have the support of his wife who could not understand the driving need for Anderson towant to give up a perfectly respectable job with a good pay to become an entrepreneur.

Anderson, however did not give up on the chance to take charge of his life. He overcame legaland financial hurdles and severely strained his marriage in the process of starting a joint venturewith Carpets International (CI)4 UK in 1973 . Anderson’s investment was US $50,000, 10% ofthe US $500,000 that CI had insisted that Anderson raise on the American side. The JV wasknown as Carpets International- Georgia, Inc. (with 51% ownership belonging to CI and 49%

with Anderson and his American investors) and had a sister company, Carpets International-Georgia (Sales) Inc. (which handled sales and had 49% ownership belonging to CI and 51% withAnderson and his American investors). The American investors who backed Anderson gave himtheir voting power and because of this sweat equity and his own voting share, he became anequal partner with CI. In 1982, the two companies were merged into Interface Flooring Systems,Inc. By 1987, Anderson and his American investors were able to buy out Carpet International’sholdings completely .

The year 1996 saw Interface’s sales exceeding US $ 1 billion for the first time. By 1998,Interface had 29 manufacturing sites and customers in more than 110 countries. They were hometo brands such as InterfaceFLOR, Heuga, Bentley, Prince Street and FLOR. Around 40% of thecarpet tiles used in almost every one of the 110 countries was supplied by Interface. A series ofacquisitions saw them enter the broadloom business, textiles, chemicals and architectural products like raised access floors. By 2011, the number of employees reached 3,500. It was billed by Fortune magazine as one of the “Most Admired Companies in America”(1999) and alsocame up in the list of “100 Best Companies to Work For” (1998). In 2011, the company had anet income of around US $ 38 million on a sales exceeding US $ 1 billion (Refer Annexure I forfinancial details pertaining to the last five years).

The Epiphany

Moving back to 1994, Anderson knew that people did not want to hear that Interface had alwayscomplied with the law – everyone knew they were law abiding. He needed something more – something like an environmental vision. That’s when he happened to chance upon the book – The Ecology of Commerce, by Paul Hawken5. By the time he was halfway through the book,Anderson knew what he had to do. He realized that the traditional way industries were running

4 Carpets International, UK was the firm that had patented technology about carpet tile manufacturing in 1972.

5 Paul Hawken is one of America’s foremost authorities in the field of sustainability. He has written books and

articles on the subject and also started related businesses. He is a consultant to companies and the US

Government.



3

was ruinous to the Earth and that it was not sustainable. He has not just found the material for histask force meeting kick-off speech, he even had a new vision for his company.

At the meeting, Anderson quoted Hawken liberally. He explained how the ‘take-make-waste’ linear system6 followed by industries where they would take too many resources from the

environment in a harmful manner, create products through processes that are highly pollutingand energy-intensive and create waste that is potentially harmful to future generations is notsustainable. A model created by Anderson depicting the same is available in Annexure II. Heasked the audience to make Interface a “restorative” organization, to attain sustainability andthen to go beyond sustainability and help put back more than what they take from the Earth. Atage 60, Ray Anderson had changed from being an “ecological plunderer ”7 to a “leadingcorporate evangelist for sustainability”88.

Mount Sustainability and Mission Zero

Very broadly, Mission Zero seeks to eliminate any negative environmental impacts by Interface by the year 2020. Sustainability was intended in all dimensions – people, process, product, place

and profits. Mission Zero was based on the principles of a ‘consensus document’ drafted by Dr.Karl-Henrik Robert (Robert)9, a Swedish oncologist and ratified by ecologists, chemists, physicists and medical doctors. The principles state that human beings must not increase thecontent of substances from the Earth’s crust or man-made substances in the Earth’s biosphere asthis may affect the life supporting capacity of the Earth. For billions of years since its formation,the Earth has slowly absorbed all substances that are toxic to life into it, leaving a habitable biosphere; but we human beings are changing all that. We are systematically digging outsubstances from inside the Earth (such as fossil fuels) and polluting the planet and fast reachingthose levels beyond which they would become a hazard to all living beings. We should notreduce natural diversity and to follow these principles, we must learn to utilize resourcesefficiently.

Anderson likened achieving sustainability to climbing up a mountain – one that was higher thanMt. Everest and one that would take a lot more effort. He called it ‘Mt. Sustainability’ and hewanted Interface to reach its pinnacle and prove to other industries that they could do it andremain profitable at the same time.

Anderson and a global team identified seven fronts which had to be tackled to reach the summit.

6 A linear system refers to a system where the final output does not become an input for any other process. In a

cyclical system, the output of one process becomes the input of another. An example would be the carbon dioxide

cycle in nature where CO2 produced by living beings and other processes is utilized by trees which give out life

supporting oxygen which in turn is utilised by living beings.7 As per Anderson

8 As per an article in the New York Times dated May 22, 2007

9 Dr. Karl-Henrik Robert is a cancer scientist who did extensive research on different forms of cancer. He realized

that it was not just adults but also very young children who were increasingly being affected by the disease. On

further analysis he realized that it was the unsustainability of our processes that were to blame for the rise in

occurrences in cancer. He has co-founded The Natural Step – a non-profit organization that has helped thousands

of companies move towards sustainability since its inception in 1989.



4

1. Eliminating Waste

“… Nothing is more basic to the argument… than the proposition that disposal ofhazardous wastes is not the root problem. Rather, it is the root symptom. The critical

issue is the creation of toxic wastes…” -Paul Hawken, The Ecology of Commerce

The first thing Anderson did was to define waste. According to him, waste was anymeasurable cost that went into the product but did not add to customer value. Once wastewas defined, it was easy to identify everything that fit into that definition. So, not onlywere scrap or bad-quality carpet considered waste but even mistakes committed byemployees such as misdirected shipments constituted waste. The greenest resources wereconsidered to be the ones that were never used.

In 1998, a new addition was made to the list of wastes – fossil fuels! Interface was

determined that by 2020, it would not take a single drop of oil from the planet tomanufacture carpet tiles. For a company whose primary ingredient was petroleum, thiswas considered a huge commitment. Skepticism was high during InterfaceFLOR’s 25th anniversary celebrations when Anderson introduced suppliers and other guests to the ideaof Mission Zero 2020.

The next step was to measure waste to set up the baseline values and then come up withtargets to reduce those values. A waste control programme called QUEST (QualityUtilising Employees’ Suggestions and Teamwork) was set up. Anderson believed that the best solutions would come from people who were working on the factory floor and hewas right!

Suggestions poured in from all sites - dirty and damaged yarn could be used in carpetedges, green tax could be paid, trees could be planted, heat in a water supply systemcould be recovered by using a brass nozzle that cost less than US $ 10 (this particularinnovation saved Interface more than US $ 10,000), huge beams could be replaced bysmaller, portable creels (so that lesser thread would be wasted) and so on. Each one ofthese suggestions added to millions of dollars of savings for Interface over time and keptimproving the efficiency of the processes.

2. Rendering Emissions Benign

Once processes were made more efficient, the next step was to identify a list ofgreenhouse gases, chemical elements like dyes and softeners, trace contaminants likevolatile organic compounds and other potentially harmful emissions getting out throughsmokestacks and effluent pipes.

A Toxic Chemical Elimination Team was created to work with suppliers to eliminateharmful chemicals upstream in the value chain. The team had to come up with ways to



5

decrease use of CFCs, HFCs and SARA 31310 chemicals and to completely eliminatevolatile chlorinated chemicals. The idea was that irrespective of how lax governmentregulations in any country may be, all Interface plants worldwide, will comply with themost progressive environmental regulations.

Life Cycle Assessments

11

of different products was done to identify where the harm wasmaximum. A programme was undertaken to systematically close down smokestacks andeffluent pipes. This required redesigning some processes.

The InterfaceFLOR Division in Canada is a case in point for rendering emissions benign.It completely eliminated use of any chemical on Canada’s list of hazardous substancesand use of process water 12 by moving away from wet printing of carpet tiles and bringingdown their air emissions by 30% (against 1995 baseline values). These wereaccomplished in the context of plant production increasing by 242%. All other plants – from Maine to Europe had similar stories to tell. Three fold advantages emerged – unnecessary materials were eliminated, harmful chemicals were avoided and processes

became more efficient and cost-effective.

Another unique initiative was the voluntary buying of carbon offsets. Interface wanted itscarpets to become carbon neutral even when end users were vacuuming them andgenerating emissions. The only way this could be achieved with the current levels oftechnology was to calculate the emissions that a carpet would produce from the time ofmanufacture to when it would be recycled and to purchase carbon credits that wouldoffset the emissions. To this end, Interface has been spending about $ 2 million annuallyon carbon offsets.

3. Shifting to Renewable Energy

“… One statistic makes clear the demand placed on the earth by our economic system:

every day the worldwide economy burns an amount of energy the planet required 10,000

days to create. Or, put another way, 27 years worth of stored solar energy is burned andreleased by utilities, cars, houses, f actories, and farms every 24 hours. …”

-Paul Hawken, The Ecology of Commerce

All efforts were made to harness solar and wind energy. The Bentley Prince Street plantset the standard by connecting all of its solar generated electricity directly to its carpettufting machines and selling the carpet so produced under a new brand called Solar-Madecarpet!

10 A list of chemicals that require to be reported to the Environmental Protection Agency (EPA) is present in Section

313 of The Superfund Amendments and Reauthorization Act (SARA) of 1986.11

Life Cycle Assessment (LCA) refers to a comprehensive evaluation of the environmental impact of every stage of

a product right from extraction of raw material to disposal.12

Process water refers to any water that is used in the manufacturing/treatment process or other industrial

processes.



6

The InterfaceFLOR plants at LaGrange (the USA), West Point (the USA), Belleville (theUSA), Craigavon (Ireland) and Scherpenzel (The Netherlands) soon had 100% of theirelectricity requirements met by on-site solar photovoltaic cells, Green-e-certifiedrenewable energy credits and/or wind power. There was also a shift to newer, cleaner andmore efficient production technology. For instance, at LaGrange, methane produced in

the municipal landfills was harnessed to produce energy for its operations and helped it become climate neutral.

4. Closing the Loop

Interface realized that they needed to move away from the linear system of carpet makingto a cyclical process where old and worn carpets would become inputs for creating newcarpets. It was a challenging task. Carpets contain an upper layer of yarn which could bemade of nylon, wool, polypropylene, polyester or a mix of several materials. This upperlayer is tufted into a polyester backing layer and there are layers of latex and vinyl plastisol holding it in place. There could also be a layer of glue holding the carpet to the

floor.

Getting all these materials back from a worn carpet in a usable form seemed like aherculean task. One that Interface undertook nevertheless. Research went into thecreation and production of new kinds of backing material that used lesser material, produced lesser waste and was functionally more efficient. PVC was recycled. The triedand tested means of recovering material from worn carpets was by melting the old carpetand extruding its contents. This process required heating up to a temperature of about 400°C which in turn required a lot of energy. A new thermoplastic process called CoolBluewas developed and it did away with such heat intensive extrusions.

A new term – negawatts – was coined. It represented all those units of electricity thatnever got consumed.

5. Resource Efficient Transportation

The next target was the usage of fossil fuels in the supply chain processes. Calculationsrevealed that sending out deliveries through rail, instead of trucks, reduced 75% ofBTUs13 per ton mile. Soon deliveries were being made through rail, ship and river barges,which were more efficient modes of delivery, and trucks were used only in the last mile.

Research went into reducing the weight of the carpet without impairing functionality tomake shipping even more efficient. Interface became a partner at the US EPA’sSmartWay Transport14 program to reduce fuel use and GHG emissions. Wide-base tyreswere used (instead of multiple thin ones), aerodynamic changes were introduced intrailers, hybrid chilling systems were set up and auxiliary power units were placed intrucks. All these small changes led to big savings. Interface’s Netherlands’ operations

13 A BTU refers to the amount of energy needed to raise the temperature of 1 pound of water by 1°F.

14 The SmartWay® program, initiated in 2004 by the EPA is a public-private collaboration to reduce emissions

resulting from transportation. It incentivizes increased efficiency of the supply chain.



7

witnessed a 25% decrease in shipping costs (for products bound to Italy) after thechanges.

The company fleet was upgraded to cleaner and greener vehicles. Interface joined several programmes such as Trees for Travel15 to offset carbon16 produced through travel.

Employees were given cash rewards for shifting to less polluting vehicles.

6. Sensitizing Stakeholders

Interface’s stakeholders comprise its employees, customers, investors, suppliers and justabout anybody else with an interest in Interface. Interface wanted to set the industrystandards when it came to sustainability – and it wanted to draw all its stakeholders intoits circle of influence.

The idea was that if Interface could remain financially sound and viable while beingsustainable, it would inspire others to emulate its environmental footsteps.

7. Redesigning Commerce

…Current commercial practices are guided by the promise that we can stay the way we

are, live the way we have, think the thoughts of old, and do business unburdened by realconnections to cycles, climate, earth, or nature. Restorative economics challenges each

of these assumptions. …

-Paul Hawken, The Ecology of Commerce

Interface made a shift from selling products to selling services. It realized that what people wanted is not a carpet but an aesthetically appealing interior with less noise fromwalking, foot comfort, durability, cleanliness and flexibility. This did not require the saleof a carpet. So, Interface embarked on a bold move to change its business model – thevery core of how they were making money. Carpets were leased instead of being sold.Interface would handle carpet maintenance and take back the worn carpet after use andreplace it with something new. The Evergreen Lease was thus created.

The benefits of this new model were many. The customer got new carpet at zero capitalcost and Interface had a steady supply of old carpet to feed its recycling process. Onlythose sections of carpets that were most worn out (usually this was only 20% of the floorcovering) had to be replaced, allowing the remaining carpet to be used for longer periodsof time.

All these are just a few of the initiatives undertaken by Interface to reach the Mt. Sustainabilitysummit. Interface is extremely transparent with regards to its progress in different areas such asenergy, climate, waste, facilities, transportation, design process, manufacturing, innovations and

15 Trees For Travel is a Dutch initiative where people and companies can offset the GHG emissions of their air travel

by paying the foundation to plant and maintain forests.16

Carbon offsetting refers to credits gained for the reduction in emission of carbon dioxide or its equivalent in

greenhouse gases.



8

culture (refer Annexure III). A 2009 article published in Greenbiz gave an insight into somestatistics. GHG emissions have gone down by 71% compared to 1996 values due to actualreductions and offsets. Energy consumption per unit of production is down by 44% and 72% ofInterface’s global energy needs are met by renewable energy. Three factories run completely onrenewable energy. At least 24% of the raw material content is recycled or bio-based. By 2010,

Interface had almost achieved its goal of zero waste.

About Ray Anderson

“..Part cheerleader, part scold, part dreamer…[Anderson is] the rarest of hybrids: a born-again green industrialist..”

-Fortune Magazine

Anderson was born on 28 July, 1934 as the third son of William Henry Anderson and RuthMcGinty Anderson. His mother had been a teacher and was instrumental in making Ray love books. Ray’s other passion was football.

A football scholarship saw Ray in Georgia Tech where, after a brief stint in aeronauticalengineering and textile engineering, he finally chose industrial engineering and graduated withhonours in 1956. For the next 17 years he worked in different capacities at Milliken andCallaway before starting Interface .

He has received several awards and accolades for his work on sustainability. In 1996, he won theInaugural Millenium Award from Global Green and was named Entrepreneur of the Year byErnst and Young. He was one of Time’s Heroes of the Environment in 2007. In 2010, he won theLifetime Achievement Award from GreenLaw, the Inaugural Global Sustainability Prize fromthe Univeristy of Kentucky and the Sustainability Award from the Women’s Network for aSustainable Future among many others. He was awarded 12 honorary doctorates.

He died in 2011 after a prolonged battle with cancer.

The Way Forward

There are many challenges facing Interface. Not only do employees have to ensure sustainable practices in their factories but also make sure that suppliers follow sustainable practices.Interface is still relying on complex and costly inventions and innovations that are yet tomaterialize to move beyond the low hanging fruit in sustainability. Behavioural changes amongemployees and motivational levels have to be sustained, if Interface is to move to the next level.

According to Lindsay James, Director, Strategic Sustainability, InterfaceFLOR, Chicago andMikhail Davis, Manager, Strategic Sustainability, InterfaceFLOR, San Francisco , the biggestchallenge, however will be to keep the efforts on track after Anderson’s death. They say, “Visionand inspiration don’t appear on the balance sheet, but their absence will show up there sooner

or later if we fail to pay attention…”



9

Annexure I

Source: Interface Inc. 2011 Annual Report



10

Annexure II

Typical Company of the 20th CenturyAdapted from “Typical Company of the 20th Century”, Pg. 109, Mid-Course Correction

The input for most industries comes primarily from the lithosphere and to a small extent throughnatural materials in the biosphere. The industrial processes however, end up releasing effluents

and emissions only into the biosphere. In some cases it is released into the air, in some, intowater and in most cases into landfills where some materials can last for centuries without breaking down.

Employees, investors and customers come from community and industries are connected to theGovernment as they are bound by its policies and legislations.

The most glaringly obvious omission in this model of the 21st century company is that there is nosustainability link anywhere.



11

Annexure III

Source:www.interfaceglobal.com/Sustainability/Our-Progress/Energy.aspx

Source: www.interfaceglobal.com/Sustainability/Our-Progress/Waste.aspx

0 0 1.5

3.34.3

6.2 5.5 5.9

11

15.217

26.628.3

29.8 30 31.2

0

5

10

15

20

25

30

35

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Renewable Energy Use (% of Total Energy Use)

% of Total Energy Used Moving Average Trendline

15

12.9

10.6

7.78.7

6

4.44.9 4.9

5.4 5.3 5.1 4.9

3.4 3.62.6

0

2

4

6

8

10

12

14

16

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Waste to Landfill from Carpet Factories

Pounds in Millions Moving Average Trendline



12

Source: www.interfaceglobal.com/Sustainability/Our-Progress/Manufacturing.aspx

1 2 25

3 4 4 4

8

1619

25 24

36

40

44

0

5

10

15

20

25

30

35

40

45

50

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Recycled and Biobased Material Use At Interface

% of Total Raw Material Used Moving Average Trendline



13

References

1.

Anderson, R. C. (1998). Mid-Course Correction : Toward A Sustainable Enterprise. White River

Junction: Chelsea Green Publishing.

2.

Anderson, R. C., & White, R. (2009). Confessions of a Radical Industrialist . London: Random

House.

3.

Hawken, P. (1993). The Ecology of Commerce. New York: HarperCollins.

4.

Interface. Retrieved February 07, 2013, from http://www.interfaceglobal.com

5.

Levering, R. et al (1998) The 100 Best Companies to Work For in America . Retrieved February 16,

2013, from http://money.cnn.com/magazines/fortune/fortune_archive/1998/01/12/236444/

6.

Executive on a Mission: Saving the Planet. (2007, May 22). The New York Times

7.

Kaye, L. (2012) Ray Anderson, One Year Later: A Supplier’s Perspective . Retrieved January 13,

2013, from http://triplepundit.com/2012/08/ray-anderson-interface-aquafil/

8.

Aston, A. (2012) Dan Hendrix: The Future of Interface is Bright and Greener than Ever . Retrieved

March 02, 2013, from http://www.greenbiz.com/blog/2012/01/25/dan-hendrix-future-

interface-bright-greener-ever?page=full

9.

James, L. & Davis M. (2012) Mind the Void: Interface After Ray . Retrieved March 04, 2013, from

http://www.greenbiz.com/blog/2012/01/23/mind-void-interface-after-ray?page=full10.

Greenbiz Staff. (2009) Interface Releases Environmental Stats From 2008; Continues Positive

Trends. Retrieved April 02, 2013, from http://www.greenbiz.com/news/2009/04/21/interface-

releases-environmental-stats-2008-continues-positive-trends

11.

Greenbiz Staff. (2010) Interface 1 Percent Shy of Zero Waste Operations . Retrieved March 21,

2013, from http://www.greenbiz.com/news/2010/03/23/interface-1-percent-shy-zero-waste-

operations?page=full

12.

Kinkead G & Gunn E. P. (1999, May 24). In the Future, People Like Me Will Go to Jail: Ray

Anderson is on a mission to clean up American businesses-starting with his own. Can a Georgia

carpet mogul save the planet? . Fortune Magazine

13.

Goldstein, A. (2013) Interface’s plan to vacuum carbon out of carpet manufacturing. Retreived

December 31, 2013, from http://www.greenbiz.com/blog/2013/12/26/interface-plan-carbon-offsets-carpet-manufacturing?page=full

http://www.interfaceglobal.com/

http://money.cnn.com/magazines/fortune/fortune_archive/1998/01/12/236444/

http://triplepundit.com/2012/08/ray-anderson-interface-aquafil/

http://www.greenbiz.com/blog/2012/01/25/dan-hendrix-future-interface-bright-greener-ever?page=full


http://www.greenbiz.com/blog/2012/01/23/mind-void-interface-after-ray?page=full

http://www.greenbiz.com/blog/2012/01/23/mind-void-interface-after-ray?page=full



http://triplepundit.com/2012/08/ray-anderson-interface-aquafil/

http://money.cnn.com/magazines/fortune/fortune_archive/1998/01/12/236444/

http://www.interfaceglobal.com/

Documents

InterfaceInc - Case Study.pdf