Interface Makes Green Profitable

Interface Makes Green Profitable

By Sarah Fister Gale, September 21, 2011

Interface Global has proven that making environmentally-friendly products is not only possible, it’s good for the bottom line.

Over the past 17 years, while the rest of the industry was churning out fossil fuel-based nylon carpeting and toxic glues, Interface reinvented itself. The Atlanta, Georgia, company cut millions of pounds of waste from production processes and created innovative sustainable products.

As a result, Interface catapulted itself from a struggling mid-tier player to one of the world’s largest modular carpet makers, with 2010 revenues of $961 million and a current market cap of $1.23 billion.

Interface’s hard-fought transformation proves that even companies in industries known for heavy use of chemicals and fossil fuels can become environmental leaders if they take risks and invest time and effort in the transition. “If a 38-year-old petroleum-intensive business like ours can do this, any company can,” says Maria Davlante, Interface’s senior vice president and chief marketing officer.

From Gray to Green
Interface’s journey began in the early 1990s, long before companies started issuing annual sustainability reports or designing buildings based on LEED criteria. Ray Anderson, then the company’s chairman and CEO, was asked to talk about sustainability at an industry conference and had no idea what to say. His research on the subject led to an epiphany: business and the environment are inextricably linked, and industrialization was damaging the earth. But changing how he ran the business could benefit the environment and his bottom line.

“The industrial systems that were our worst culprit could become our salvation,” John Wells, president of the company’s Interface Americas division, says of Anderson’s conversion.

From that point on, Interface set aggressive sustainability goals, every one of them linked to bottom-line results.

“If a 38-year-old, petroleum-intensive business like ours can do this, any company can.”

Maria Davlante, senior vice president and chief marketing officer, Interface Global

One of those was reducing its impact on the environment to zero by 2020, but not at the expense of the business, Davlante says. “For us, they go hand in hand.”

The key was making the company’s impact on the environment a core measure of everything it did. Using what it refers to as “eco-metric indicators,” Interface set targets for new product development that focused on using less water and energy and reducing waste and carbon emissions. The company also set goals for increasing use of renewable energy and the amount of recycled and bio-based materials in its products. Each quarter, Interface’s nine manufacturing plants track and report hundreds of metrics, and company-wide results are reported annually. In 2010, for example, eight of its facilities used 100 percent renewable electricity.

$500 Million Saved
When Interface started out, total quality management (TQM) was a hot business strategy for making operations more efficient. Interface decided to use it to look for ways to be lean and green.

For its first mission, Interface sought to cut back on energy consumption in processes that didn’t directly affect customers. The product development team re-engineered the way carpet was produced to create less scrap. They launched energy-saving programs in factories, including installing skylights to take advantage of natural light and switching to more efficient heating and cooling systems.

Over the past 15 years, those programs cut Interface’s total energy use by 43 percent per unit of product, leading to dramatically lower energy bills. More efficient production processes helped the company slash the amount of waste it deposited in landfills by 76 percent, to 3.6 million pounds in 2010 from 15 million in 1996. That savings alone amounted to $500 million, Wells says. “These efforts were great for our bottom line and they had a huge environmental impact,” he says.

Interface reinvested much of those savings in research and development to produce more environmentally-friendly products. For example, R&D teams and scientists worked together on bio-mimicry projects to look at nature for ways to reduce the environmental impact of their products. Their research produced a line of modular flooring called Entropy with nature-inspired colors and designs with small tiles that can be placed randomly in any direction and still fit into the pattern. The flexible size and pattern reduces carpet waste during installation to as little as 1.5 percent, according to Davlante, since smaller square tiles can be placed into any open space. That compares with 14 percent waste for installation of more traditional carpet designs. Since its release in 2000, the Entropy line has become one of the company’s most popular flooring products, she says.

Coming up with such solutions requires that companies look beyond near-term return on investment to more strategic goals. “Focusing on long term ROI isn’t always popular,” but it’s necessary to achieve these kinds of results, Davlante says.

Interface encourages its R&D teams to take risks and to invest the time and creativity in finding these kinds of solutions, even if they don’t always pay off. “You need to create a level of comfort that allows people to take risks so they can to seek that greater reward,” she says.

Not Everything Works
Not every idea for an environmental product works, even at forward-thinking companies like Interface.

The company dropped several early product ideas because they didn’t make sense financially. Early on, Interface considered making all its products of natural materials such as wool or hemp. It was a great goal, but the cost of producing 100 percent wool carpet was astronomical, and getting hemp legalized for use in products was unrealistic, Wells says.

Instead, development teams redesigned manufacturing systems to use more recycled material and produce less waste. That led them to start a program to collect recycled carpeting to be used in new products, and a separate product line that uses adhesive tabs to hold carpet tiles in place instead of more common carpet glues, which are toxic.

Both projects took years to get going. The TacTiles line of carpet with adhesive tabs took three years to bring to market. The company started selling its ReEntry line only after oil prices rose enough that the benefit of using recycled materials offset the investment needed to collect old carpeting for reuse.

Both projects have been worth the investment. Not only did customers respond, the products have helped differentiate Interface from competitors and saved it money.” Davlante says.

Even when the payoff of an idea isn’t evident, the environmental benefits sometimes make backing it worth the risk. Interface’s management recently debated whether to install a solar array at one of its California factories. CEO Dan Hendrix crunched and recrunched the numbers, but even factoring in state subsidies the financial payoff wasn’t there, Davlante says.

Hendrix green-lighted the project anyway. A few months later, Interface won a large order from a customer who specifically wanted to do business with a California carpet maker with an environmental focus. “That business more than paid for (the solar array),” Davlante says. “Marketing solar-made carpet was indeed a success.”

Business leaders who want to follow in Interface’s footsteps need to take risks and believe that achieving environmental goals will benefit their business. When they embrace these ideals, the payoff can be substantial. Davlante says. She sums up that philosophy with a quote from Interface’s former CEO Anderson, who started the company down its green path: “This is a better way to make a bigger profit, and not at the expense of the earth.”

Making Green Supply Chains Pay

Rethinking how you make, package and distribute products and services to be friendlier to the environment can yield substantial short-term cost savings too.

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