Interface

Perspectives on Decision Making March 30, 2006 Wendy Porter, Director Environmental Management

Interface Inc. World leader in carpet tile manufacturing Eighteen manufacturing facilities on four continents; sales in over 100 countries Markets include commercial interiors, automotive, healthcare, hospitality, and residential

Interface, Inc. - Then Founded in 1975 by Ray Anderson Traditional Southern Businessman Manufacturer of Textiles Carpet Tile – World Leader Fabrics Broadloom Carpet Modeled the “First Industrial Revolution” Take – Make – Waste Commitment to Compliance – others make the value judgments for what is acceptable

Interface Inc. - Now World Leader In Modular Carpet Tile Manufacturing $850 Million in Sales 18 manufacturing facilities in seven countries Broadloom Carpet and Fabrics

Interface Inc. - Now Recognized leader in Sustainable Manufacturing We are on a journey – we have not yet arrived Sustainability is a dynamic process which enables ALL people to realize their potential and to improve their quality of life in ways that simultaneously protect and enhance the Earth’s support systems.

Ray Anderson Founded the company by borrowing $50,000 from family and friends Traditional Southern Businessman of his time Profit driven Volume driven Commitment to Compliance Asked to provide the company’s environmental vision to compliance staff Did not know what to say other than – comply with existing laws and regulations – bothered him Significant change of course for Interface. Company that was largely profit focused, needed to change its business model to become “sustainability” focused – with financial sustainability just one of the prongs. To be successful, Ray knew that he would need to change all elements of the company’s business. How did Interface embark on this change, what has been our lessons learned, and how does that relate to EPA?

Ray Anderson Received Paul Hawken’s book – “The Ecology of Commerce” – read the book during a family vacation Epiphany – “Spear in the Chest” Chartered the course to become the first sustainable enterprise by the year 2020 Openly and publicly committed to the journey Affects all aspects of how we do business and at all levels in the organization Integrated into all positions and responsibilities, not a task group. Significant change of course for Interface. Company that was largely profit focused, needed to change its business model to become “sustainability” focused – with financial sustainability just one of the prongs. To be successful, Ray knew that he would need to change all elements of the company’s business. How did Interface embark on this change, what has been our lessons learned, and how does that relate to you?

Our Compass Eliminate waste Benign emissions Renewable energy Closing the loop Resource efficient transportation Sensitivity hook-up Redesigning commerce

Guiding Coalition- Eco Dream Team Paul Hawkins Amory Lovins Hunter Lovins Janine Benyus Bill Browning Robert Fox John Picard Jonathon Porritt Daniel Quinn Dr. Karl Henrik Robert Walter Stahel Fox is architect. Browning is building engineer and architect – environmental design. John Picard is one of the preeminent Energy, Technology, Telecommunications and Real Estate infrastructure advisors in North America and Asia and the founder of e2. Jonathon Porritt is a regular columnist for BBC Wildlife Magazine, NFU Countryside Magazine and the Gloucestershire Echo. Mr. Porritt's numerous appearances on television and radio, countless public lectures and many hard-hitting articles in newspapers and magazines have made him probably the best known "green" in Britain today. Daniel Quinn is best known as the author of Ishmael, the novel that in 1991 won the Turner Tomorrow Fellowship, established to encourage authors to seek "creative and positive solutions to global problems." Professor Karl-Henrik Robèrt, M.D., Ph.D., is one of Sweden's foremost cancer scientists who, in 1989, initiated an environmental movement called "The Natural Step." Stahel regularly lectures at universities and conferences in Europe, Japan and the USA on subjects ranging from tools such as eco-design, risk management and loss prevention. His research focuses on strategies and policies for a more sustainable development, and the insurability of risks as the 'natural' borderline between State and the market economy.

Interface’s Guiding Coalition Internal Global Sustainability Council Reviews definition, metrics, progress Wrestles with complex and evolving issues Ensures consistency across the organization Advises Senior Management Comprised of regulatory, scientists, manufacturing, sales, marketing, legal, manufacturing, purchasing, human resources, financial people from all across the company

Making the Case for Change Made the business case for sustainable manufacturing Introduced the concept of “Natural Capital” Identified the cost of “waste” to the business and the environment Utilized compelling global measures of environmental degradation dating to the start of the industrial revolution

Making the Case for Change Tied the measures to Interface’s environmental footprint Identified the opportunity to “Do Well by Doing Good” Capitalized on the ability to differentiate the product in the market place Engaged each employee on a personal, emotional level

Global Achievements Waste avoidance of an aggregate of $299 Million since 1995 Renewable energy (thermal and electrical) climbed to 13% 3 photovoltaic sites 6 facilities with certified green electricity Introduction of first carpet tile made from 100% post consumer carpet tiles

Global Metric Achievements 52% reduction in green house gas emissions Water use reductions of 81% in modular carpet, 41% in broadloom carpet Terratex Brand development – fastest growing fabric brand in commercial interiors Introduction of Cool Carpet™-climate neutral carpeting

Global Metric Achievements Bio-based fiber development and market introduction Re-entry program for recovered and recycled carpet tiles ReSKU program development for recovered and reused fabric Non-directional carpet tile Guaranteed carpet tile match so you can replace just the tiles worn or damaged

Guilford Solid Waste Reduction

Understanding and adopting sustainable business practices requires a new awareness of the world; the whole world, its natural systems and all of its species. It requires a deeper understanding of how the Earth works, and how man's processes affect nature's delicate balance.

Culture Change at Interface The changes that have occurred at Interface are monumental – they challenged the very nature of who we are, what we do, how we do it, and how it is valued in our marketplace Our changes are not done – if we are to reach our vision

Culture Change at Interface Understanding and adopting sustainable business practices requires a new awareness of the world; the whole world, its natural systems and all of its species. It requires a deeper understanding of how the Earth works, and how man's processes affect nature's delicate balance.

Culture Change at Interface Each choice we make has a "cost." True cost is a combination of the economic, social and environmental costs set against the offsetting benefits associated with each choice that we make.

Historical Decision Making Must Do’s, Required, Legal Obligations Profitability ROA, ROI, Free Cash Flow, etc Strategic Investment/Expansion Market potential

Current Decision Making Sustainability – three legged stool Financial Environmental Social Without all three legs, the stool falls Foundation in the “Natural Step”: Nature is not subjected to increasing concentration of substances extracted from the earth’s crust Nature is not subjected to increasing concentration of substances created by society Nature is not subjected to degradation by physical means Basic human needs are met worldwide

Sustainable Decision Making Definition for Financial has been expanded to include: Cost of “waste” (labor, rework, off quality, materialization, scrap, inspection, packaging, transportation, etc) Cost of non-renewable energy Cost of non-renewable and/or recyclable materials Added component associated with Risk Environmental risk Social risk

Sustainable Decision Making Found the nexus where environmental and financial sustainability intersect Created value in the marketplace for environmental and social sustainability Wall street Customers Consumers Public Communities

Examples Cool Carpet (Climate Neutral) Green-e Certified Fabric 100% Recycled Polyester Fabric Compostable biobased Fabrics Landfill Gas Entropy Carpet Weave II HVAC Dye and Chemical Protocol

What Does This Mean to You? You need to decide How has your role been influenced by the first industrial revolution? How could that role be changed in a sustainability focused world? How can you better support a sustainability focused world? Change is significant Our managers, accountants, maintenance personnel, janitorial, etc will all tell you how significant a change it is…….. How can you take the information you have and find the nexus with societal practices and values? How can you help make the case for change?

You’re all right, the world is wrong? Right? Why Change? You’re all right, the world is wrong? Right?

Management Challenges in the Next Decade We are not moving fast enough to ward off the consequences of our continued assault on nature– we need to make more progress faster if we are to reverse the trends What is keeping you from acting faster? How can you support the actions of others?

Management Challenges in the Next Decade Goods-to-Market time is shortening – can the existing regulatory structure keep up with the speed of market innovation? What is slowing down the availability and use of the information that you have or provide? Market forces can and will shape change How can you take advantage of market forces

Management Challenges in the Next Decade Traditional “Command and Control” approaches are a disincentive for innovation – de-motivates employees; de-motivates companies Need to capitalize on the 1% that is leading the pack to spur continued innovation and improvement What can you do to reward, encourage, support that 1% while pulling up the laggards by the boot straps?

Management Challenges in the Next Decade Need to think “outside of the box” to accomplish meaningful change - question everything about the way it has always been – how is your information used? How could it be used? What limits are placed on the work that you do? Information is essential to progress on sustainability – there is a vacuum for credible information and resources to help the “consumer” and small and large businesses succeed How can you help?

We are on a Journey We started our Journey twelve years ago…….. We are proud of our accomplishments, but humbled by the challenges yet ahead Learn about our progress, priorities, and challenges at www.interfacesustainability.com

We Welcome You to the Journey