Building on last week’s learnings and introduction to Interface, read “Stubbs, W., & Cocklin, C. (2006). An ecological modernist interpretation of sustainability: the case of Interface Inc. Business Strategy and the Environment, 512-523”. Research and find one other example of a global firm where sustainability is operationalized, provide specific examples that highlight your findings and that reflect on your readings.

Copyright © 2006 John Wiley & Sons, Ltd and ERP Environment

* Correspondence to: Wendy Stubbs, School of Geography and Environmental Science, PO Box 11A, Monash University, Vic 3800, Australia. E-mail: wendy.stubbs@arts.monash.edu.au

Business Strategy and the Environment Bus. Strat. Env. 17, 512–523 (2008) Published online 20 July 2006 in Wiley InterScience (www.interscience.wiley.com) DOI: 10.1002/bse.544

An Ecological Modernist Interpretation of Sustainability: the Case of Interface Inc.

Wendy Stubbs* and Chris Cocklin School of Geography and Environmental Science, Monash University, Australia

ABSTRACT This article seeks to extend understanding of how sustainability is operationalized in firms by considering the example of Interface Inc. In particular, we assess the sustainability policy and strategies of Interface Inc. within the frame recourse of an ecological modernization (EM) perspective of sustainability. One question of particular interest is whether organiza- tions are able to implement an EM-aligned worldview through their own internal capabilities or whether changes to the wider socio-economic system are required. The analysis of Interface’s experiences suggests that, at this stage, an organization cannot fully adhere to an EM perspective of sustainability; its success is also dependent on changes to the wider socio-economic system in which the firm operates. The critical factors in implementing sustainability that emerged from the Interface case study are discussed. Copyright © 2006 John Wiley & Sons, Ltd and ERP Environment.

Received 15 November 2005; revised 10 February 2006; accepted 1 March 2006

Keywords: corporate sustainability; system sustainability; firm-level sustainability; ecological modernization; socio-economic

change

Introduction

S USTAINABILITY IS EMERGING AS A KEY ISSUE FOR ORGANIZATIONS IN THE 21ST CENTURY. ACCORDINGLY, many organizations are incorporating elements of sustainability into their business practices and the number of firms tracking and reporting their social and environmental performance is increasing.

Nevertheless, our understanding of how sustainability is ‘operationalized’ in firms is weak. To date, research into corporate sustainability has focused on classifying types of environmental strategy, understanding why organizations ‘go green’ and investigating the correlation between financial performance (profitability) and environmental performance (Sharma, 2002).

This article seeks to extend understanding of how sustainability is implemented in organizations by investigat- ing how Interface Inc., a global carpet manufacturer, is restructuring its operations, and evaluating the company’s policies and strategies with reference to an ecological modernization perspective of sustainability. One question of particular interest to us is whether Interface can implement its perspective of sustainability through its own internal capabilities or whether it is dependent on changes in the socio-economic system. Some scholars suggestAldin VelicText

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that firms cannot be sustainable in isolation from the system of which they are part (Gladwin et al., 1995; Jennings and Zandbergen, 1995), but the level of dependency between the firm and system is not well understood. The Interface case study sheds some light on this issue.

The next section addresses theory relevant to the understanding of the role of private corporations in sustain- ability. In particular, we review the ecological modernization (EM) perspective of sustainability. We then explain the research methods and discuss the main findings. We conclude by examining the implications of Interface’s experiences for organizational practice.

Conceptualizing Sustainability

While there are multiple, conflicting views of sustainability (Robinson, 2004), they can be summarized according to three broad worldviews: deep ecology, ecological modernization and the neoclassical perspective. Each represents ‘broad camps in which many schools of thought and subtle variations flourish’ (Gladwin et al., 1995, p. 881).

The neoclassical worldview is the dominant paradigm today (Cotgrove, 1982; Egri and Pinfield, 1996). Economic growth is the driving force of national priorities, for growth generates the wealth for investment, employment and research and development (O’Riordan, 1976). Proponents of this view believe that the ‘limits to growth’ are very distant or non-existent (Beckerman, 1974, 1995; Simon, 1984; Simon and Kahn, 1981). Free markets and technol- ogy can, and will, solve any issues of environmental degradation through the substitution of natural capital with human-made capital and the development of new technology and processes to deal with pollution and waste. Typically, organizations only pursue environmental reforms if it is in their self-interest (Purser et al., 1995), if legislation dictates, due to pressure from stakeholders, and/or to gain or retain organizational legitimacy (Bansal and Roth, 2000).

Deep ecologists believe that the earth’s resources are finite and inadequate to sustain unlimited growth. Unlim- ited economic growth threatens the survival of all life on the planet (Daly and Cobb, 1994; Douthwaite, 1999; Lovins et al., 1999; Meadows et al., 1972; Schumacher, 1973). Deep ecologists believe that the current level of resource consumption is unsustainable and are skeptical that technology and free markets can address issues of environmental degradation. Wackernagel and colleagues (2002) suggest that human demand has exceeded the biosphere’s regenerative capacity since the 1980s.

In the 1980s and 1990s ecological modernizers began to challenge the green fundamentalist view that there is a zero-sum trade-off between economic prosperity and environmental concern (Hajer, 1995; Jacobs, 1991; Jänicke, 1990; Weale, 1992). While ecological modernizers do not promote an end to economic growth, neither do they believe that growth can go on forever in a finite world. Jacobs (1991) argues that economic growth per se is not responsible for environmental degradation. The pressure on firms is to increase profits, not necessarily to increase the use of resources or emissions of waste. In theory, financial growth could still occur even if physical expansion were environmentally constrained. Jacobs (1997, p. 9) reinterprets the environmental problem as one of economic restructuring: ‘.-.-. a shift onto a new path of economic development in which technological advances and social changes combine to reduce, by an order of magnitude, the environmental impacts of economic activity’. This is achieved by using less environmentally damaging materials (such as renewable energy), improving the productiv- ity of inputs through new technological and organizational processes (such as energy efficiency and ‘clean’ or low pollution technologies) and shifting the composition of output from products with high material intensity (such as manufactured goods) to those of low intensity (such as services) (Gouldson and Murphy, 1997; Jacobs, 1997).

EM is people centered (improving human welfare) and environment centered (maintaining the integrity and variety of non-human nature) – a prosperous economy depends on a healthy ecology and vice versa (Gladwin et al., 1995). Consumption in developed countries must be scaled down and population stabilized to ensure an equi- table distribution of resources across developed and developing nations and to maintain the integrity of natural and social life-support systems.

In an EM world, the costs of environmental and social degradation are internalized, through Pigouvian taxes (Daly and Cobb, 1994; Pigou, 1962) or ecological tax reform (von Weizsäcker and Jesinghaus, 1992). The aim of these tax reforms is to shift the tax burden from ‘goods’, such as income and labor, to ‘bads’, such as ecological damage and consumption of non-renewable resources (Costanza et al., 1997).

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As the subsequent discussion will show, Interface’s approach to sustainability embodies many of the concepts articulated by the EM view. In particular, Interface acknowledges, quite explicitly, that it operates within a capital- ist system, but that this does not necessarily imply continuing environmental degradation. Also in concert with the EM worldview, Interface perceives a role for technology but also points to the need for wider, systemic change in social and economic systems. The basis for these suggested systemic changes lies partly in critiques of conven- tional economics. Neoclassical economic theory is criticized for being incompatible with sustainability due to its inability to deal with externalities (Jacobs, 1991; Pearce, 1978); it treats environmental resources as ‘free’ – ecosys- tem services and natural resources are not valued (Costanza et al., 1991; Pearce et al., 1989); discounting the future encourages short-term consumption of natural resources (Daly and Cobb, 1994; Pearce et al., 1989) and consum- erism is essential in the neoclassical paradigm whereas, ‘as far as sustainability is concerned, consumerism is a large part of the problem’ (Dresner, 2002, p. 171).

Starik and Rands (1995, p. 909) argue that sustainability can only be achieved if it is addressed at five levels: the individual, organizational, political–economic, social–cultural and ecological levels. Achievement of sustain- ability at any of the levels ‘requires simultaneously recognizing and addressing the actions of and interactions with entities at each of these levels’. This article investigates Interface’s level of interaction with, and dependency on, entities at other levels to achieve sustainability.

Research Methods

The case study method (Yin, 1994) was used to further understanding of how organizations implement sustain- ability. Case studies are an appropriate method for theory-building when understanding is weak (Eisenhardt, 1989). Interface Inc. was chosen because it is considered a leader in restructuring its business operations around sustain- ability (Doppelt, 2003; Elkington, 2001; Griffiths, 2000; Rowledge et al., 1999). Interface Australia was chosen as the principal interview site because the researchers are based in Australia, it is the Asia Pacific headquarters and it operates a manufacturing facility. An added advantage in working at the ‘branch level’ is that it afforded the opportunity to assess how effectively the head-office philosophy of sustainability is transmitted through the organization.

In-depth, semi-structured interviews were the primary source of information. Data were also gathered from annual reports, quarterly earnings announcements, press articles, sustainability reports, Interface’s website (www. interfaceinc.com) and books and journal articles (Anderson, 1998; Doppelt, 2003; Dunphy et al., 2003; Elkington, 2001; Griffiths, 2000; Rowledge et al., 1999).

Seven interviews were conducted with Australian employees during October/November 2003. Interviews with three staff from head office (Atlanta, GA) were conducted in March 2004. The staff were drawn from all functional areas within Interface (operations, manufacturing, sales and marketing, finance and IT, services and management) to elicit a wide perspective on Interface’s sustainability initiatives. Anonymity of the interviewees was maintained throughout the research process. The tenure of the interviewees ranged from six months to 30 years. Interviews lasted from one to two hours and were recorded and transcribed. The transcribed interviews were emailed to the interviewees in order to validate the data.

The interviews were coded using the Nvivo software package. Codes were derived from the data based on the actual words or terms used by the interviewees or by summarizing the concepts discussed by the interviewees into themes (Strauss and Corbin, 1998). Memos were created in Nvivo to document themes arising from the data. Table 1 summarizes the key themes with samples of the coded data.

A case database and the Nvivo database maintained a chain of evidence. A draft of the case study write-up was circulated to interviewees. This process increased the reliability and validity of the research study (Yin, 1994).

Drawing conclusions from a single case study is inherently risky (Lawrence, 2002) and a single case study approach does not allow for generalization to a population (Blaikie, 2000). However, Hillebrand and colleagues (2001, pp. 654–655) argue that the detailed analysis of one individual case may be used as the basis for theoretical generalization.

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Sustainability at Interface Inc.

Interface is the world’s leading manufacturer of modular carpet. In 1994 Interface made a commitment to become sustainable. It created a seven-point plan (‘seven fronts’) to achieve this: eliminate waste, achieving benign emis- sions, using renewable energy, closing the loop, using resource-efficient transportation, sensitizing stakeholders and redesigning commerce (see Table 2).

Sustainability and Profits

Interface’s vision and mission statements refer to cherishing nature, restoring the environment, maximizing all stakeholders’ satisfaction and making the world a better place. This perspective is aligned with the EM paradigm,

Theme Sample data from interviews

Sustainability and profits ‘The ultimate purpose of a corporation surely is something more than just making money. It has to make a profit to exist but it doesn’t exist just to make a profit. What we are learning at Interface is that higher purpose for bringing people together.’ ‘I think the dilemma is that as resources deplete, those that can operate with the least amount of resources are going to be ahead of the game. As energy costs, internalized or externalized, continue to rise . . . those that are using less energy will be ahead of the game and will profit.’ Offsets, sustainable and ‘Ultimately, yes, the whole of the supply chain has to be sustainable or we’re not sustainable. restorative We are our supply chain. Not many companies think of it that way but we do.’ ‘We can’t really do it unless the transportation industry comes around but in another way we can. We can create the offsets. Our transportation system is not very far from climate neutral today with the trees we are planting and the projects we are sponsoring to create the offsets.’ Technology and ‘When we started this journey the technology didn’t exist. We are a product of the first consumption industrial revolution and we are trying to create the next industrial revolution with the cyclical processes, driven by solar energy and so forth. Linear being replaced with cyclical processes – take nothing, do no harm.’ ‘So we try to create more happiness with less stuff. And the stuff we do consume, we consume with the right kind of technology. Then we might be able to support a much, much larger population.’ Closing the loop and ‘We talk leasing every week of our business lives, but trying to get customers on board is just a redesigning commerce nightmare because they don’t value the longevity of the products as highly as we do, as highly as they should.’ ‘We don’t lobby, not yet at least, we haven’t taken that approach . . . we’re beginning to lobby for lifecycle assessments to be written into law. I don’t know whether we can pull that off. We are a tiny voice in the wilderness down here in Georgia.’ Institutionalizing ‘When I joined Interface the sales and marketing people were largely disconnected from sustainability sustainability because there was no process for them to live and breathe it . . . it seems to me that much of the sustainability story in terms of its structure within Interface stops at the plant.’ ‘I think one of the most positive signs of improvement is the extent to which sustainability has become enmeshed in the business. We probably don’t talk about this stuff as much as we used to because it’s simply ingrained . . . [we’re not] challenged every step of the way.’ Challenges to corporate ‘The economic system is upside down, backwards. An enlightened taxation policy could sustainability change it very quickly. Quickly, I think, means in 20 years or something like that – phase in carbon taxes, pollution taxes and phase out income taxes. Shift taxes from good things to bad things. . . . You are not going to get business to internalize the externalities voluntarily.’ ‘I think that short-termism is probably a real challenge for sustainability . . . we talk about triple bottom line measures but there are still funds managers driving this short-termism and that seems to be in conflict with the long term sustainability focus.’

Table 1. Themes derived from the Interface data

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which is focused on improving human welfare and maintaining the integrity of nature. One interviewee stated that there is a higher purpose for corporations than just making a profit. Nonetheless, a view was expressed that sustainability ‘all comes back to dollars and cents’, which is more reflective of a neoclassical perspective. According to this manager, the more waste that can be eliminated, ‘the more we can put on the bottom line’. The ‘eliminat- ing waste’ front has resulted in cost savings of almost US$300 million since 1997. An additional perspective was articulated that pursuing sustainability and increasing profits is not a zero-sum trade-off. This reflects a belief that Interface can make profits out of ‘doing the right things rather than the wrong things’, in line with the EM per- spective that there is not a zero-sum trade-off between economic prosperity and environmental concern.

It is not surprising that these differing perspectives were expressed. Interface’s vision statement reflects aspects of the EM perspective, but as a listed company (NASDAQ) shareholders and analysts expect Interface to maximize shareholder value. Acknowledging the challenges of implementing sustainability in a neoclassical world, Interface states that it will ‘show’ what sustainability is, not ‘be’ sustainable. A key challenge for Interface is how to mitigate aspects of the socio-economic structures that are incompatible with sustainability. Interface addresses this issue through its threefold strategy – offsets, sustainable, restorative.

Offsets, Sustainable and Restorative

Interface concedes that it can only be sustainable if the whole supply chain system that it is part of is sustainable. Over 90 percent of the CO2 emissions associated with the life cycle of carpet occur outside of Interface’s manu- facturing process, including raw material extraction and processing, product transportation, installation and main- tenance, and product return and reuse. Since Interface has little control over the emissions from its supply chain, it offsets the emissions it cannot eliminate so that it can be climate neutral (see Table 3).

Front Description

Eliminate waste Eliminate the concept of waste, not just incrementally reduce waste. Benign emissions Eliminate molecular waste emissions – waste streams that have negative or toxic effects on natural systems. Renewable energy Reduce the energy demands of processes while substituting non-renewable sources with sustainable ones. Closing the loop Redesign processes and products into cyclical materials flow. Resource-efficient Reduce the transportation of products and people in favor of moving information. transportation Implement innovative packaging technologies, offset emissions from business travel and minimize emissions from in-bound and out-bound freight. Sensitizing stakeholders Engage stakeholders to create a community within and around the organization that understands the functioning of natural systems and its impact on them. Redesign commerce Focus on the delivery of service and value instead of material, so that Interface can recover used materials for recycling.

Table 2. Interface’s seven fronts of sustainability

Program Description

Cool CarpetTM Allows customers, through a small charge, to contribute to the climate neutral program (using emission reduction credits). Cool FuelTM Offsets CO2 emissions from business auto travel. Cool CO2 mmuteTM Offsets employee commuting emissions. Trees for Travel Offsets business air travel emissions through the purchase of trees. Green tags In regions where Interface cannot purchase renewable energy it purchases renewable energy credits to offset its energy consumption.

Table 3. Interface’s offset programs

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While the offset strategy ‘makes amends’ (Hawken, 1993) for the environmental harm incurred by the supply chain to produce its products, the aim of Interface’s sustainable strategy is to ‘do no harm’ by fixing the problems at source. In addition to its offset programs, Interface is redesigning its products to use renewable resources and to eliminate waste and emissions. It is developing a bio-based carpet that replaces oil-based fibers with fibers made from polylactic acid (PLA), sourced from starch-based agricultural products. Interface has developed a ‘biomimicry’ carpet called EntropyTM, using random and diverse patterns that mimic nature. This reduces waste in the installa- tion and maintenance processes. Worn or damaged carpet tiles can be easily replaced or rotated, reducing the number of carpet tiles that go to landfill. Interface is redesigning its manufacturing process and, as a result, it has reduced its greenhouse gas emissions by 46 percent and its solid waste to landfill by 65 percent.

Interface’s ‘restorative’ strategy is focused on influencing others to be sustainable. For example, Interface uses sustainability criteria to encourage suppliers to adopt sustainable practices. It participates in a number of global sustainability partnerships to ‘lead others forward’.

The Role of Technology and Consumption

Interface is investing in technology to reduce waste and pollution and decrease its usage of non-renewable resources and energy. It is replacing the technology of the first industrial revolution – extractive, fossil fuel driven, waste producing and focused on labor productivity – with that of the ‘next’ industrial revolution – renewable, cyclical, solar, waste free and focused on resource productivity. While the ‘biggest challenges are on the technology front’, Interface is confident that it can, in time, implement technological solutions to become sustainable. However, in line with an EM perspective of sustainability, Interface does not suggest that technology can solve all environmental problems. According to one interviewee, the issues of increasing consumption and population must be addressed alongside technological solutions. This supports the perspective of Starik and Rands (1995) that even with dramatic advances in technology it is unlikely that organizations will achieve sustainability because of over- consumption and overpopulation: organizations must address these root dilemmas to be sustainable. Interface’s acknowledgement of this issue has not yet resulted in explicit consumption-reducing initiatives. Schaefer and Crane (2005) argue that industry is unlikely to promote less consumption because firms require increasing mate- rial consumption to increase market share and market size. How Interface tackles this vexatious issue remains to be seen.

Closing the Loop and Redesigning Commerce

Interface is transforming its linear take–make–waste production model (McDonough and Braungart, 2002) to a circular closed loop system, in line with the EM paradigm. Since 1995, Interface has diverted over 70 million pounds of material from landfill through producing fabric that is made totally from recycled polyester and wool, introducing a carpet reclamation program and creating a recycled vinyl backing product.

The ‘redesign commerce’ front also contributes to reducing material (delivering service and value instead of products), in line with the EM perspective that sustainability supports a move towards solutions or service-based businesses (Hart, 1997; Hawken, 1993; Lovins et al., 1999). Interface introduced a service model in 1995 in the USA, called Evergreen Lease, whereby a floor-covering service is provided for a monthly fee. Interface takes back the product at end of life and recycles or repurposes the product. Interface retains ownership of the products themselves, along with the responsibility for recycling them. To date, limited success has been achieved with this service in the USA or Australia. According to the Australian interviewees, the Evergreen Lease has not been suc- cessful because most customers do not value the concept. It requires a ‘value shift’ such that companies and individuals value sustainability enough to purchase a leasing service rather than a product. Internal and external education and communication about sustainability is important in order that stakeholders understand these issues and can make decisions based on more than financial imperatives. Interface’s experience lends weight to Bansal’s (2002) findings that sustainable development needs to be institutionalized in the minds of organizations’ key stakeholders if it is to be implemented successfully.

The interviews conducted in the USA identified barriers in addition to the lack of customer interest and the ‘I want to own it’ mentality. The taxation and accounting systems do not support carpet leasing as they do not

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recognize a residual value for carpet, and lease instruments require a residual value. Changes to the taxation and accounting systems are required to support a service-based model, which in turn requires government support.

These issues prompt the question of to what extent organizations must interact with stakeholders to give effect to their sustainability policies and principles. One person from head office suggested that Interface is too small to influence industry and government stakeholders – a major shift forward would only happen if large corporations assumed greater leadership. Rather than direct lobbying, the firm’s approach is to work with coalitions that have more power to lobby government, such as the World Resources Institute and the World Business Council. Accord- ing to Starik and Rands (1995), ecologically sustainable organizations will influence governments to adopt policies and regulations that support sustainability. This requires political action individually or as part of ‘peak organiza- tions’. At this stage, Interface has chosen the ‘peak body’ approach to influence government stakeholders. Interface also stated that it may have to cooperate with competitors to solve sustainability issues (such as recycling to achieve economies of scale), but has not yet initiated action.

Institutionalizing Sustainability

The interviewees identified a number of factors that contribute to institutionalizing sustainability within Interface, including ‘relentless’ communication and education, the ownership structure, visionary leadership of the founder (Ray Anderson) and measuring and reporting sustainability progress.

The Interface data supports Doppelt’s (2003, p. 174) findings that relentless communication ‘is vital in develop- ing broad understanding and buy-in among employees and stakeholders’. Interface is increasing its communica- tion and social interaction between employees and other stakeholders. Staff are ‘hooking up’ with industry groups such as green building councils and supply cluster groups, and they are active in external sustainability conferences and committees. However, relentless communication is challenging. While communication is strong at the plants, it is not so strong within the sales and marketing groups. One person commented that the promotion of sustain- ability within the organization has ‘lost a bit of momentum’, and therefore people’s understanding of what Inter- face is doing ‘goes up and down’.

Resourcing the stakeholder projects is also a challenge, as suggested by one Australian manager:

The conflict we have got from some of the initiatives is balancing people’s time. If we have a lull then some time could be taken from the production line to form a group to go and work in the creek, for example. There’s been less of an opportunity this year to do some of those other activities that we have been doing in the previ- ous couple of years. So that would be the challenge now if someone came to me with an idea – how we would actually accommodate that given how much work we have got on at the moment.

This suggests that social sustainability initiatives are not factored into the staffing plan and therefore Interface’s social practices are not yet fully institutionalized in the business model. This type of trade-off was not raised when people were talking about the six environment-focused fronts. Interface appears to have made significantly more progress on embedding its environmental practices into its business model than its social practices. Interface has been working on environmental sustainability since 1994. In 2000 the social dimension of sustainability was placed at the core of Interface’s vision, alongside the environment and economic profitability (reflecting the EM approach of balancing the environmental, social and economic aspects of sustainability). While this has resulted in an increased number of ‘sensitizing stakeholder’ initiatives (the largest section in Interface’s 2003 internal sustainability report), its social practices are not as yet institutionalized in its business model.

Ray Anderson, the founder and now chairman, was mentioned many times in the interviews as a key driver of sustainability. Without his vision and leadership, Interface would not have undertaken, or continued, its invest- ment in sustainability. One interviewee suggested that the ownership structure facilitates the commitment to sustainability. Anderson owns 49 percent of class B shares, which gives him, together with other insiders, control over board appointments. His passion for sustainability – reportedly the driving force in his life – has kept Inter- face’s focus on sustainability, even during unprofitable periods.

Doppelt (2003) found that leadership was a key factor in transforming an organization’s culture toward sustain- ability. Anderson has been pivotal in transforming Interface’s structure and culture towards sustainability but this

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raises the obvious question of what happens when Anderson is no longer involved. The staff believe that sustain- ability is so central to how Interface operates that extracting Anderson from the business now would have little impact. They believe the key success factors are a commitment from management, buy-in from the staff and sustainability ‘champions’ who educate staff and drive change. The interviewees concurred that sustainability is ‘in the culture’. Ray Anderson’s transformational leadership was vital in Interface’s early days of implementing sustainability, but now that sustainability ‘is in the DNA of the company’ Interface is not dependent on a sustain- ability visionary.

According to Interface, a sustainable organization understands its impact on the environment and changes its behavior for the good of the environment, a view that is aligned with the EM perspective. To do this, it requires a measurement system to track its progress towards sustainability. Interface uses a triple bottom line (TBL) approach to measure its performance. As well as the standard financial indicators, Interface utilizes three main performance measurement tools. QUEST (Quality Using Employee Suggestions and Teamwork) focuses on waste reduction, EcoMetrics measures environmental outcomes and SocioMetrics measures social performance (Table 4).

Interface’s TBL approach is aligned with an ecological modernization perspective but there is pressure on the company from the financial market to focus on short-term financial results. One Australian interviewee suggested that a focus on short-term financial results is incompatible with a long-term focus required to achieve sustain- ability. According to one interviewee, the financial market analysts do not want to hear about sustainability. Another believes that the financial analysts will ‘come around’ eventually because sustainability produces a better bottom line.

Challenges to Corporate Sustainability

This article has discussed some of the challenges that Interface encountered in implementing sustainability: the lack of acceptance of its leasing product by customers; the short-term focus of market analysts; the preoccupation with financial performance criteria while social and environmental criteria are ignored by the market; the unsus- tainable level of consumption; and sustainability of the supply chain.

One interviewee stated that the taxation system was the major hurdle in moving from ‘offsets’ to ‘sustainable’ and requires direct government intervention. Five of the Interface interviewees expressed views about externalities that are aligned with the EM paradigm. If companies were forced to internalize externalities, then there would be a leveling of the playing field as customers could make decisions based on prices that incorporated ‘true costs’. Interface is internalizing ‘true costs’, but it has found that customers will not pay a premium for sustainability – if all else is equal sustainability can tip the sale to Interface. This supports Bansal’s (2002) claim that while people may care about the environment they are often unwilling to pay more for sustainability outcomes.

Result

Environmental sustainability (EcoMetrics) Cumulative avoided costs from waste elimination activities since 1995 $262 million Decrease in total energy consumption required to manufacture carpet since 1996 per m2 36% Percentage of total energy consumption from renewable sources 11% Reduction of total carbon dioxide emissions from 1996 baseline 52% Reduction in water intake per square meter of modular carpet since 1996 81% Amount of material diverted from landfill since 1995 66 million pounds Safety – reduction in frequency of injuries since 1999 57% Social sustainability (SocioMetrics) (2004) Number of employee/family social events worldwide 120 Average hours of training per employee 9 Contributions to external organizations $280 000 Employee volunteer hours in community activities 11 900 Percentage of women in management positions 30%

Table 4. Performance measures as at end of 2004

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Conclusion

This article sought to extend the understanding of how organizations implement sustainability, drawing upon an ecological modernization perspective. The Interface case study suggests that organizations can make significant progress towards implementing an EM-oriented perspective of sustainability but cannot fully adopt an EM model until the neoclassical socio-economic system is transformed. The theoretical implications are twofold: a sustainable organization develops internal capabilities to embed sustainability practices in its own business model (firm-level sustainability), and; a sustainable organization interacts with and lobbies stakeholders to achieve sustainability for the ‘system’ (system-level sustainability).

Firm-Level Sustainability

A number of critical factors for achieving firm-level sustainability emerged from the Interface case study. A sus- tainable organization incorporates sustainability in its vision and/or mission, which demonstrates the organiza- tion’s commitment to sustainability. In addition, it communicates to stakeholders the importance of sustainability. Bansal (2003) found that the individual concerns of a CEO can drive the change process to shape the organizational agenda around sustainability. Nonetheless, while skilled leadership is important, if sustainability is not embraced by the staff then it is unlikely that it will be embedded in business practices. A sustainable organization employs ‘relentless communication’ and ongoing education programs in sustainability concepts (such as environmental stewardship, biomimicry, closed loop systems, service-based models and stakeholder/community engagement) to get buy-in from staff and other stakeholders to transform business practices. Sustainability is embedded into the culture of an organization by incorporating sustainability concepts into the day-to-day operating procedures and business practices, rather than by implementing stand-alone sustainability initiatives (which can be ‘cut’ if financial imperatives dictate).

Technology is a critical factor in achieving environmental sustainability, particularly in transforming the linear ‘cradle-to-grave’ production model to a circular closed loop system that eliminates waste through recycling and reducing petroleum-based materials and energy demands. Sustainable organizations will offer a service-based model. This allows them to keep control of products at end-of-life so that they can be recycled or repurposed rather than being sent to landfill. Organizations proactively educate their customers on the environmental benefits of a leasing service compared to owning the product. They lobby industry bodies to accept and advocate this approach to their members.

A sustainable organization takes responsibility for reducing, and eventually eliminating, the environmental degradation caused by its products and services throughout the lifecycle (sourcing raw materials, manufacturing, production, transportation, installation, maintenance and disposal). An organization will work with its stakehold- ers to fix the cause of environmental degradation throughout the supply chain as well as implementing offset programs, such as purchasing carbon credits and renewable energy credits, and planting trees. This allows an organization to be climate neutral in the short-term while working on solutions to redesign business processes and (co-)develop ‘clean’ technologies, in line with an EM perspective. Sustainable organizations implement com- prehensive measures of environmental and social performance and regularly report on environmental, social and financial outcomes.

System-Level Sustainability

The findings from the Interface case study suggest that there is a lot more to implementing an EM perspective of sustainability than changing internal business processes, practices and policies and deploying new technologies. For an EM perspective of sustainability to be fully realized, changes are required to the socio-economic system, which has far-reaching implications for organizational practice. The Interface case study highlighted a number of systemic factors that must be addressed for EM sustainability to be effectively implemented and these will give rise to new organizational practices. Sustainable organizations engage with key external stakeholders (for example, governments, industry bodies, supply chain entities, competitors, customers, media and communities) on issues

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such as reducing consumption, transforming the taxation and accounting systems to support sustainability and lobbying financial market stakeholders to track sustainability performance measures and adopt a longer-term outlook.

Implementing an EM perspective of sustainability at the systems-level requires a collaborative approach. For example, stakeholders co-develop a sustainability strategy and plan for the whole supply chain – which is consistent with elements of Hart’s (1995) product stewardship (bringing stakeholders into the strategic process) and sustain- able development (shared vision of the future) approaches – rather than each organization within the supply chain formulating a strategy and plan to address sustainability within its own organizational boundaries. Organizations work with entities at other levels (Starik and Rands, 1995) to reduce the environmental footprint of the whole system.

Organizations invest in infrastructure for a sustainable system, such as shared recycling facilities, renewable energy facilities, transportation, and research and development facilities to develop new technologies to reduce the environmental footprint. Sustainable organizations lobby governments, and other stakeholders, to participate in these ‘public infrastructure’ initiatives, in line with Hart’s (1995) perspective that cooperation between govern- ments and businesses is important for sustainable development.

A longer-term implication is that organizational structures and business practices will be redesigned to support system objectives rather than firm-level objectives – i.e. maximizing the outcomes for the whole system rather than the individual parts. While further research is required to develop these new structures, stakeholder networks (Sama et al., 2004; Sharma and Starik, 2004; Windsor, 2004) and industrial ecosystems (Korhonen and Snakin, 2005; Shrivastava, 1995; Tibbs, 1993) may provide building blocks.

Stakeholder networks rely on collaborative relationships between stakeholders who have objectives of ecological and social improvements in addition to conventional value creation (Windsor, 2004). In industrial ecosystems, organizations in close proximity coordinate their use of raw materials, energy and water and their waste-manage- ment practices.

Several scholars argue that the neoclassical model is inherently limited in its ability to effectively address eco- logical and social degradation (Daly and Cobb, 1994; Eckersley, 1992; Jacobs, 1991; Korhonen et al., 2004). By examining Interface’s sustainability practices, this article furthers understanding of how organizations could operationalize an ecological modernization approach. While generalizations cannot be drawn from single case studies, Interface’s experiences suggest that organizations can make significant progress in implementing an EM perspective of sustainability, but fundamental changes are also required to the socio-economic system of which they are part.

Acknowledgements

We gratefully acknowledge financial support from Monash University. We thank two anonymous reviewers for their helpful comments. An earlier version of this work was presented at the annual meeting of the Academy of Management, 2005, in Hawaii.

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