Natural Advantage of Nations

This book is about innovation, solutions, competitiveness and profitability. It is also about building environmental integrity and sustainability now and for future generations. It draws a bold vision for the future and tells us how to get there by building on the lessons of competitive advantage theory and the latest in sustainability, economics, innovation, business and governance theory and practice. The authors incorporate innovative technical, structural and social advances, and explore the role that governance can play in both leading and underpinning business and communities in the shift towards a sustainable future. The result is nothing less than the most authoritative and comprehensive guide to building the new ecologically sustainable economy. (more...)

In Section 1 we argued that no one part of society can address the scale of the sustainability challenge on its own. In a world where business, government and civil society all have significant roles to play, we need to find the best ways to move forward together. This section will focus on the role business can play in this process.
This section cannot emphasize enough the importance in business of seizing new opportunities, encouraging creativity and the ability to work effectively in teams to achieve innovation. Running a business requires skill and frequently demands long hours and significant personal sacrifice. If there was an easy way always to stay ahead of the competition, we would all be millionaires. But there isn't. Successful business people seek to remain up to date with the shifting market for their products and services and will come to see that sustainability provides numerous opportunities for unleashing creativity and innovation. Whilst this chapter, and the online databases it references, is designed to assist any business to do its homework faster, improve its strategic position, and unleash the creativity of its staff, this is not enough. Genuinely innovative and highly competitive businesses are always on the look out for new opportunities and ways to improve business. The frameworks and guides that follow will, we believe, help but at the end of the day someone has to have good ideas and be willing to take risks. In the end, success comes down to the determination and united purpose of those people involved. Is the risk worth the effort? Many companies, such as Close the Loop® and Interface, believe it is.
The story of the Australia based company Close the Loop® provides an insight into the sort of lateral thinking and risk taking that innovative firms need in order to truly succeed. Close the Loop® has achieved zero waste to landfill through technological innovation. They are the only company in the world that can recover all material and resource value from toner and inkjet cartridges. When they began, there was no machinery in existence to completely re-process the complex mix of metals, plastics, toner powder, electronics and inks. A team of Australian engineering companies, and Australian recycling experts like Dr John Scheirs formed with the goal of achieving zero waste to landfill from this complex and potentially hazardous waste stream, and ultimately returning the raw material output streams back to the manufacturer for reuse in new printers and cartridges, effectively closing the loop. They designed and built their now famous 'Green Machine' to process all-in-one toner cartridges, drum units, fuser assemblies, and more. Close the Loop® have continuously improved the machine based on hands-on experience, and will continue to learn and upgrade their processes through research and development (R&D) and continuous improvement. The inkjet cartridge processing line, built with the same philosophy, has just been completely rebuilt with consideration given to fast up scaling capacity again in the near future. 'Around 30 per cent of our current business is export -earning export dollars by processing cartridge waste from manufacturing plants in other countries', says founder and CEO Steve Morriss. Close the Loop® is now ready to offer their service of recycling all inkjet and Our customers have confirmed that there is a need for our service but getting the volumes to make it commercially viable was the next problem. By now, the original thought is the size and strength of a freight train and most problems are actually opportunities in disguise, the trick is being open enough to recognize them. Enter Planet Ark. We have co-created 'Cartridges 4 Planet Ark', Australia's leading multi-vendor, extended producer responsibility (EPR), electronics take-back programme. With year 1 coming to an end, the volumes are increasing nicely and combined with our contracts to import and recycle manufacturing scrap from several leading inkjet cartridge manufacturers, we have passed operational breakeven and are charging towards good profits. Today, we are working closely with our customers to plan our future direction in terms of reuse of output streams like ink, toner powder, metals, engineering grade plastics, etc., and even closing the loop in terms of designing with the end (recycling) in mind. The future is very bright for any business that provides sustainable solutions if you have big dreams, the drive to put them into action, and the determination to overcome any obstacle.
Steve Morriss, CEO, Close the Loop® Interface Ltd [1] is emerging as a well cited example of a company that from the outside appears to have taken significant risks, risks that most companies would not have contemplated. They have replaced petrochemical based carpets with carpets made from renewable biomass, such as corn waste, that can be recycled with little loss of quality. The new carpet is the first certified climate-neutral product in the world, that is, all the climate impact of making and delivering it has been offset before it gets to you. The carpet is so non-toxic you can eat it, if you had a mind to, thus eliminating occupational health and safety (OH&S) concerns. In the first four years of this business model and removing waste from its own operation, Interface more than doubled its revenue, more than tripled its operating profit, and nearly doubled its employment, all at the same time.
Overall they have achieved a 97 per cent total reduction in materials used, whilst providing a better service in every respect. They have gone further than the Factor 10 that most sustainable development experts estimate to be required to achieve 'sustainable development'. Interface Ltd is on the way to achieving Factor 100 and, in doing so, is placing itself in the right position to become the first genuinely 'Sustainable Corporation' on the planet.
Whilst such a radical change may seem risky, the strategies that Interface Ltd has adopted to achieve these results are, in fact, standard business strategies based on innovation. The key, in this case, is the company innovating to achieve sustainable development. The organization first identified new areas where they could save money. With strong leadership from their CEO, Ray Anderson, it then identified opportunities for win-win eco-efficiencies, resulting in gains that were quick and effective. As a consequence, Interface Ltd is saving approximately US$200 million per annum through its eco-efficiency initiatives, which is, in turn, financing all the remaining initiatives. Improvements then began affecting the company on a much more fundamental level. They were able use this money to embark on Eco-Design to create product differentiation. This led to the company's development of a new form of non-toxic carpets from renewable feedstocks drawn from agriculture.

Ray Anderson, CEO of Interface
This may seem groundbreaking, but in fact there is now great experience in all these areas of sustainability that companies can tap into. There is now even a new academic field of knowledge called 'green chemistry' that is amongst other things developing systematically an understanding of how to make everyday chemicals from crops and biomass waste. As previously stated, there is a now an emerging 'wave' of enabling technologies and innovations in understanding how we can re-design the industrial system in harmony with the environment. The changes that Ray Anderson initiated have also achieved something far greater than any of this. They have improved morale, made Interface a high profile company and, consequently, highly attractive to the top graduates. These changes have significantly altered the culture of the organization, unleashing positive changes throughout their operations globally. It is true, however, that during the period around the year 2000 Interface Ltd profits and stock price fell, but that was true of the whole carpet industry. In that downturn a number of carpet companies went out of business. Ray Anderson, the CEO of Interface, argues that the combination of the cost savings from eco-efficiencies plus the increased profile globally from Interface's genuine sustainability strategy is what kept them in business during this tough period.
Rob Coombs, Asia-Pacific President of Interface, writes of what the experience has been like from the inside of Interface in the Asia Pacific. He summarizes many of the key concerns, relevant to all companies, that have driven these changes within Interface. This testimony also illustrates some of the key points in this section of the book. Namely, that there are significant strategic business opportunities available -through the adoption of sustainable solutions -that multinationals and firms cannot ignore. As with all waves of innovation, however, companies need to be strategic in deciding where to invest. Furthermore, he honestly and openly discusses how a multinational, in this case Interface, can strategically position itself, in the Asia-Pacific region, to lead and consolidate in countries where there are market drivers for sustainable solutions (i.e. Japan and Australia), whilst awaiting the emergence of further market opportunities in Asia.
The business world is slowly coming to the realization that it needs to develop practices sympathetic with the natural environment in which it operates. The slumbering giant is beginning to understand that there are also a range of stakeholders affected by business practices and that there is a social contract that needs to be re-thought and redeveloped. This awakening brings with it many pressures; the need to rethink age old values and approaches to problems, the need to find solutions to previously unapproached technical barriers, and the need to create a new set of decision making criteria. For Interface in the Asia-Pacific region, the evolution of sustainable business practice has created another challenge: How to play an important part in the process of becoming a sustainable business within a large organization at the leading edge of the debate? How to support the position for which the company is known globally and how to live up to the position on a local basis?
Led by Ray Anderson, Interface has created a culture in which the drive to sustainability is an imperative. In doing so, the company has established a position as an early mover, an example to be used when looking for the route map to an environmentally better business model. With a vision to become sustainable and then restorative through the power of its influence by 2020, Interface has already established a clear measure of business success. It is moving towards this goal through the adoption of a strategy on seven fronts: eliminating waste, using only renewable energy sources, creating only benign emissions, closing the product loop, energy efficient transport, energizing people and changing the nature of commerce itself. Asia-Pacific represents 5 per cent of global Interface revenues and although the region is seen as a growth engine for the business, the relatively small scale of the division creates a series of challenges around the move to sustainability. How has Asia-Pacific embraced the philosophy and what has it done to support it? What are the challenges faced by a small division of a leading force in sustainable business development? In answering these questions it is important to note that the culture of sustainability within Interface globally is well developed, with a broad base of leadership created over the past six years. Whilst there are pockets around the company where knowledge and activity are lower than in others, no part of the business could operate without a long-term commitment to the vision for the company -it would simply not fit with the whole.
Let me start with some general observations. First, there is no Asia-Pacific! The size and cultural diversity of the region is such that there is no simple answer to these questions. The response differs by country. Second, we are driven by the corporate goal in many different ways and these ways are influenced by the communities around each site. In some communities the commitment to sustainability is greater than in others and therefore more conducive to active participation by Interface. The focus of the debate is influenced greatly the same way. For example, Japan has embraced, by necessity, the concept of recycling as a noble activity and it is promoted by government and within the business community. Thus, Interface is engaged in a wide range of activity in Japan around this issue, while discussion around renewable energy receives much less attention. A third observation is that the two countries across the region that appear most engaged are Japan and Australia. In most other countries, sustainability remains a very low priority and Interface operates with less external stimulus. As Ray Anderson would say, the stimulus from customers for more sustainable solutions is the greatest driver we have. With this less evident, Interface operates in a vacuum. No less committed but with the need for more self discipline to press forward. This discipline is self imposed by the measurement systems we have in place to monitor progress on quality, waste, sociometrics, ecometrics and environmental procedures and standards. The company's wide visibility of these measures assures that the focus is not lost.
In the Asia-Pacific division the progress across the seven strategic fronts has been in line with its place in the Interface world. That is, it is able to move forward independently in many facets of the effort. Yet there are some developments it is unable to embrace at the same pace as its larger divisional cousins because of the scale of the organization. There are also some areas in which the company actively centralizes investment and activity in order to maximize the speed of projects and the return on investment. Some examples from each of these three categories follows: the region has a strong track record in waste elimination, the cornerstone and enabler of the Interface programme. In both the Australian and Thailand manufacturing facilities, Interface has reduced dramatically all forms of process and material waste. In Australia, for example, waste per unit of production has reduced by 90 per cent since 1996, an achievement that has both funded other sustainability projects and helped to deliver greatly improved business performance. The waste effort has been driven in both facilities by people working in teams at operator level with strong supervisor leadership. It is very much a grass roots programme to reduce the company's environmental footprint. Equally, regional success in reducing harmful emissions has been encouraging. Since 1999 our annual greenhouse gas emissions have reduced from approximately 1650 metric tons of CO2 to 1450 metric tons, while at the same time we have increased our production throughput by 35 per cent. The source of these emissions is electricity production 63 per cent (indirect contribution) and the burning of natural gas 37 per cent (direct production). We have reduced and rationalized the use of solvents at our production facilities and even gone to the extent of identifying new cleaners with less solvent emissions for our Carpet Spot Cleaning Kits, admittedly a small component, but significant in the message we are trying to put out into the market place. In the short term we are evaluating the sale and use of 'Climate Neutral' products and services.
Interface has invested significantly in the region over the past six years in the education of its own people around the principles of sustainability. This investment has covered training programmes around the scientific basis for the philosophy, programmes of engagement and training around Interface's strategic methodology, communication tools for use with customers and other interested parties and the investment in managers dedicated to leading the Interface Asia Pacific sustainability effort. There has also been a wide ranging programme of engagement with the wider community.

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Probably most importantly, it has led to activity within the local communities in which we operate, with projects ranging from regeneration of natural habitat to the fostering of sustainable business opportunities within Thai village communities. Interface strives for a situation where the nature of commerce changes, from the linear 'take, make, waste' process based on 'making stuff', to a cyclical process in which the transactions become service based. This will result in the customer leasing the benefits of the product rather than purchasing the physical properties that provide them. In Australia and Japan, Interface has developed leasing programmes involving the leasing of carpet (or the functional benefits of it), where Interface retains ownership of the product, maintains and then reclaims it at the end of its life to ensure landfill is avoided. The success of the programme is growing, but so far has been limited by customer acceptance. Long established procurement methodologies are embedded in many organizations and will take time to change.
These are some areas in which Interface Asia-Pacific has independently engaged in sustainable development. We have also made progress in other ways but at a slower pace. For example, the adoption of renewable energy sources has been less widespread than in other Interface locations, mainly due to the lack of availability of the source. Local infrastructure is not available to the same extent in support of this objective. The company is actively seeking alternatives to fossil fuels, and remains committed but frustrated with the lack of realistic options available. Then there are the areas in which Interface Asia-Pacific has, through necessity, left major development to central bodies within the company. Closing the product loop represents the greatest technical sustainability challenge faced by Interface, a company whose product is founded on numerous petro-chemical based raw materials historically designed not to separate during or even after use. Creating products that use post consumer product as raw materials that can then be recycled (not just down cycled) into their own raw material stream at the end of their life, is a goal that has the undivided attention of many people within the company. Great progress has been made in Asia Pacific with many of the raw materials we use. Locally, Interface has been active in working with outside companies to research ways to reduce and re-use waste streams. Internally, we have developed a process that could recycle backing material and reduce landfill quantities by 80 per cent. Globally, Interface is inching ever closer to the end goal. The resources required to undertake the major technical developments required in this area have been centralized in the United States. Local part-recycling initiatives are underway, but the large scale break through projects will probably be undertaken elsewhere, before results are implemented here. So, where is the scope for improvement? Well, as staff turns over in a five year period, we have a need to regenerate some knowledge and vigour around the subject and with some new champions in place. Any long-term programme needs regular stimulus and re-growth: there is a need to redevelop tactical activity to support each of the seven fronts, to re-focus leaders and the company as a whole on the importance of the journey the company is undertaking. There are also some strategies which require greater focus, notably the transportation initiative and the drive for renewable energy sources. As the low hanging fruits have been picked we now need to be more innovative. We are a small part of a large company fully engaged in a long journey. We are learning more from mistakes than we are from successes. The region is in the great position of being able to draw on the resources of a larger parent whilst enjoying the freedom to develop its own initiatives as well. Trying to keep pace with the vision and determination of Ray Anderson, to create the world's first sustainable enterprise, is no easy task. But we wouldn't have it any other way.