This paper discusses environmental ethics in the business decision-making process through a number of different ethical frameworks, including utilitarian, deontological, virtue ethics, eco-centrism, and pragmatic. Throughout this paper, the company Interface, Inc. is used as a model to explore the implementation of a pragmatic environmental ethical approach on strategic business decisions. Before customer awareness of the environment, Interface’s processes had no regard to the environmental impacts it created. However as the pressure increased from customers and legislation, Interface adjusted its business model to include decisions based on a pragmatic environmental framework. As a result, Interface has revamped its original business strategy to focus on the long-term success of the company. Today, Interface has become a leader in sustainable strategy through the use of a decision making process that utilizes a pragmatic environmental ethical lens.
Fifteen years ago, environmental issues were not considered part of the business decision-making process. Since this time, there has been a shift towards evaluating environmental elements as a strategic opportunity for an organization. By integrating aspects of the environment into the discussion, business leaders can make sustainable decisions. According to the World Commission on Environment and Development (WCED), a sustainable decision is one that will “meet the needs of the present without compromising the ability of future generations to meet their own needs” (WCED, 1987). The criterion for making a sustainable decision tends to be based on legislation and consumer pressure (York 99). Sustainable decisions have the potential to develop a competitive advantage for an organization. For the purpose of this paper, competitive advantage is determined by cost savings or from increased revenues due to differentiation.
Typically, when making a strategic decision business leaders depend on financial measures to predict the estimated outcome. However, this poses a problem when evaluating environmental issues because the monetary value of all impacts cannot always be calculated. As a result, environmental issues are analyzed through a moral perspective in the business context (York 103). This moral perspective is referred to as environmental ethics. Environmental ethics expand the moral perspective beyond just humans to include the entire ecosystem. The concept of environmental ethics not only justifies the moral value of nonhumans, but also evaluates solutions for conflict within the environment (Gudorf 3). Environmental ethics can be interpreted by a number of different ethical frameworks: utilitarian, deontological, virtue ethics, eco-centrism, and pragmatic. However, determining which of these frameworks construct a clear approach to making sustainable business decisions poses a challenge.
The utilitarian framework evaluates a situation based on consequences, both positive and negative. Using a system similar to a cost-benefit analysis, utilitarian ethicists determine the correct action based on maximizing satisfaction to affect the greatest number of individuals (Gudorf 6). The utilitarian framework extends its boundaries to include all sentient beings when assessing environmental issues. The argument is that “we must avoid “speciesism” by bringing the pain and suffering into our realm of moral concern” (York 101). If analyzing a business decision through a utilitarian environmental ethical approach, the consequences can become too heavily focused on one individual party, such as the livelihood of an animal. This can result in a negative outcome for the other involved parties, such as industry (York 101). Overall, the utilitarian environmental ethical approach can be used to determine small, peripheral decisions; however, the evaluation of strategic decisions with this approach proves poor.
The deontological framework evaluates a situation based on a duty or obligation of an individual that is universally determined by society. This poses a problem when assessing an environmental situation because deontological ethicists agree that no nonhuman “possess[es] these qualifying features” and are therefore “denied any direct moral standing” (Gudorf 7). Though many people believe that humans have a duty to the Earth, it becomes difficult to quantify the duty associated with a specific strategic plan. However, when analyzing a business decision through a deontological environmental ethical approach, it can be difficult to determine the direct value from the disconnected metropolitan setting of most businesses (York 101). As a result, the deontological ethical framework does not adequately evaluate the inclusion of environmental issues in the business decision-making process.
Another framework that interprets environmental ethics is referred to as virtue ethics. Virtue ethics evaluates situations based on the moral intentions of the actor versus the act itself. In order for this framework to address environmental issues, the actor must achieve fulfillment from preserving the environment (York 101). If this does not become a habit of the actor, environmental issues will not be considered during the evaluation of a situation. As a result, the virtue environmental ethical approach would be a difficult framework to implement while analyzing a sustainable business decision.
Eco-centrism is another ethical framework. This framework looks at all species within the ecosystem as a whole when evaluating a situation. In this theory, “humans are nothing more than the components of their relationship with nature” (York 102). Environmental issues are the main concern of this framework; however, regardless of how open-minded business leaders are in their practice it is unlikely that one will adopt the idea that the only role of humans is to support the ecosystem. With this view one may conclude, “all business activities are immoral and should cease” (York 102). Therefore, the eco-centrism environmental ethical approach would not be practical in a business decision-making process.
The last ethical framework is referred to as pragmatism. This framework integrates multiple perspectives of stakeholders into its analysis. Similar to the virtue ethic framework, theses perspectives are derived from the moral intentions and culture of the stakeholders. Since the world is constantly changing, these perspectives evolve to accommodate the “broader community’s perspective” (York 103). The pragmatist perspective on the decision-making process involves: choosing a solution that creates value in the future as well as one that “aligns with the person we want to become” (York 104). Applying a pragmatic approach to environmental ethics can lead to sustainable business decisions because new ideas are constantly evolving, leading to innovation in processes while considering the long-term effect (See Figure A in Appendix). It is possible that business leaders do not consider the environment “worthy of consideration;” however, other “facts” such as regulation, pressure from end users, and rising costs in operations would still lead to an sustainable decision (York 105). In addition, utilizing a pragmatic environmental ethics approach to the decision making process would allow businesses to measure financial impacts of its decision taking into consideration the environment (York 106). To do this, the business leaders can estimate the economic added value (EVA) of reduced operating and employee expenses as well as increased innovation (York 107). The EVA of a business due to a sustainable decision provides evidence of cost savings and increased revenue, creating a competitive advantage for the organization within the market. Overall, the pragmatic approach to environmental ethics is far superior to the other ethical frameworks presented in this paper.
In 1973, Ray Anderson founded Interface Flooring Systems. His goal was to produce the first free-lay carpet tiles in America. Though they were priced about 50 percent more than traditional carpet, the concept of “selective replacement” was new in this commercial industry. This concept allowed consumers to replace individual carpet squares as they became worn versus replacing the entire carpeted surface. Interface’s innovative concept quickly grew within the commercial industry, generating a net income of $1.2 million after only six years (Oliva 2). As a result, in 1983 Interface “went public on Nasdaq” and five years later Interface, Inc. was “established as an Atlanta-based holding company” (Oliva 2). Throughout the years, the company’s growth has continued due to “more than 50 acquisitions” (Company Sustainability 2013).
As environmental protection became a hot topic, the public began to ask questions to industry leaders. At this time the carpet industry, “discarded roughly 4.7 billion pounds of carpet annually, of which 96 percent went into landfills throughout the United States where the material was destined to sit for up to 20,000 years” (Oliva 2). In 1995, Interface and its suppliers alone extracted and processed 1.224 billion pounds of material. Of the 1.2 billion pounds of material, “approximately 800 million pounds were petroleum based, coming from either oil, coal, or natural gas, and two-thirds of this 800 million pounds was burned to convert the remaining third into products” (Oliva 2). As a result, stakeholders desired to see a change in Interface’s strategy – more specially, they wanted the company to create environmental protection policies. However, Anderson did not have a response. As pressure continued to accumulate from consumers, Anderson searched across numerous mediums to find a solution. Hawken’s The Ecology of Commerce became Anderson’s source of inspiration (Oliva 3). He responded to the customers questions by saying, “I am dedicating the rest of my life to creating a company that can grow and prosper without doing harm to the earth. The first Industrial Revolution came out wrong. We have to work it out another way, one that is not at the expense of the earth. Somebody needs to do it. Why not us?” (Oliva 4). Anderson’s realization changed the company’s future.
In 1995, Anderson appointed Hartzfeld as the vice president of sustainable strategy and together they developed a new vision: “To be the first company that, by its deeds, shows the entire industrial world what sustainability is in all its dimensions: People, process, product, place and profits — by 2020 — and in doing so we will become restorative through the power of influence” (Company Sustainability 2013). Through research and development, Interface discovered strategies to emulate natural systems that were found to be most effective and efficient. It was from this point on that Anderson and his fellow business leaders implemented a pragmatic environmental ethical approach to strategic decision-making at Interface.
The team attempted Interface’s transition to a pragmatic environmental ethical approach by the development of the Evergreen Service Agreement. Interface developed this model to not only sell carpet to its customers, but also to provide a long-term service including maintenance, replacement, and removal of carpet (Oliva 6). Overall, this agreement provided sustainable, cost-saving opportunities for both Interface and its customers. It offered the following benefits: “one-source supplier, comprehensive floorcovering services, cash-flow efficiency, financial reporting advantages, and an opportunity to become a partner in the sustainability movement” (Oliva 7). However, the concept of the Evergreen Service Agreement did not resonate with many customers due to the high price (Oliva 11). Though in the long run this service would save the customer money and promote involvement in sustainable practices, evaluating the “facts” as consequences in the future was not part of the customers’ ethical decision-making process. Due to the lack of early success with this concept, Anderson used the pragmatic environmental ethical approach to define areas that Interface could use to reach its sustainable vision as well as encourage others in the industry to follow suit.
Anderson and his team identified seven areas in which Interface could track and measure its progress towards its sustainable vision. The areas they identified included: eliminate waste, limit emissions, renewable energy, close the loop, resource efficient transportation, sensitize stakeholders, and redesign commerce (Company Sustainability 2013). To address the first area, eliminate waste, Interface developed a program called Quality Utilizing Employee Suggestions and Teamwork (QUEST). Taking into account the cultural intentions of each employee team member, QUEST established goals to transform Interface into a zero-waste company (Oliva 4). Interface uses advanced technology to limit emissions from its 200 smokestacks throughout the world and continues to actively monitor and clean them, eventually leading to the complete elimination of toxic substances (Oliva 4). To address renewable energy, Interface desires to attain 100 percent renewable energy in all of its facilities. The fourth strategic initiative was termed by Interface: close the loop. This phrase means to transform all its processes into cyclical processes versus linear (Oliva 4). Closing the loop would not only reduce waste, but also reduce material and operational costs in the long term. According to Interface, transportation includes the movement of “people, products, information and resources” (Oliva 4). To address this strategic decision, Interface redesigned its packaging, produced products closer to customers, and strived to “move information instead of matter” (Oliva 4). The last two areas Interface addresses are related to its stakeholders and other key players in the industry. In order for these initiatives to reach its potential, all stakeholders have to be on a level playing field, including “employees, suppliers, customers, investors, and communities” (Company Sustainability 2013). Sustainable practices cannot only involve one entity; therefore, Interface has a goal to encourage other entities to consider environmental ethics when making decisions.
Each of these areas was specifically determined based on a collaborative approach using facts to assess the future consequences. These areas allow for a metric to be used to evaluate the EVA and measure progress towards the goal. In addition, these seven areas differentiate Interface amongst its competitors, creating a competitive advantage. This way of thinking is most closely aligned with the pragmatic environmental ethical approach to decision-making.
These goals were implemented between the years 1994 and 1997 and still continue be successful today (Oliva 5). To track the progress of its goals, Interface developed an EcoMetric™ system that measures the social, water use, waste, recycled and biomass material use, and energy use aspects of the business processes. In 2012, Interface employees received, “9.6 hours of training/education” and “volunteered more than 11,000 hours of their time in their communities” (Company Sustianiblity 2013). Since 1998, Interface has reduced its water use per unit of product from 1.9 gallons per square yard to 0.4 gallons per square yard (See Figure B in Appendix). Between the years 1996 and 2012, Interface has reduced its waste to landfills from its carpet factories by 10.5 million pounds (See Figure C in Appendix). By reducing its waste to landfills, Interface has cumulatively avoided $438 million in costs (See Figure D in Appendix). Today, Interface uses 49 percent recycled and bio-based materials within its manufacturing processes (See Figure E in Appendix). Lastly, Interface has reduced its energy use per unit of product to 8,422 BTU per square yard in 2012 from 13,827 BTU per square yard in 1996 (See Figure F in Appendix). In addition, the current energy use is composed of 36 percent of renewable energy (See Figure G in Appendix). The progress achieved with increased environmental conservation can continue to be seen fifteen years later through the use of evolving ideas and ever-changing perspectives in the pragmatic environmental ethical approach to decision making.
Recently, Interface has transitioned to a new reporting method to remain the most transparent in regards to the life cycle of its products. In the past, Interface used the method of Life Cycle Assessment (LCA) as a tool to report the environmental impacts of its products. However, this method only evaluates environmental impacts based on the most significant impacts of processes from extraction to disposal (Company Sustainability 2013). To become more transparent in its reporting, Interface additionally uses Environmental Product Declarations (EPDs). EPDs are very similar to LCAs; however, they include all of the “ingredients” that are in the product and the accompanying environmental impacts of each ingredient from extraction to disposal. In addition, a third-party validates all EPDs that Interface produces for its products (Company Sustainability 2013). Interface is the first company in America that has implemented EPDs as a method of transparency and as a sustainable aspect of its business strategy. The decision for the transition to EPDs was a result of the implementation of the pragmatic environmental framework and creates a competitive advantage for Interface.
Interface continues to be one of the leading organizations in utilizing sustainable strategy to achieve a competitive advantage. However, without readjusting its business model to include decisions based on a pragmatic environmental framework, Interface’s reputation had the potential to be damaged. Today, Interface can be seen as a model to understand the impact of how environmental facts can affect future consequences, specifically in the business decision-making process.
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