IKEA’s Goal: Both Affordability & Sustainability at the Home
IKEA Group releases its 2012 sustainability report today. The 58-page document attempts to answer a question many ask themselves at the site of the ginormous blue and yellow temples of retail prowess: can a megastore selling cheap furniture and home furnishings in 300 stores around the world become a beacon of sustainability?
IKEA believes its global force of 139,000 employees have an important role across the world, according to Steve Howard, the company’s Chief Sustainability Officer. Sitting next to IKEA’s CEO Mikael Ohlsson, Howard has for two years had a central role in transforming the company’s supply chain, products and the retailer’s focus on becoming an even more values-driven company. I went into our phone conversation highly skeptical. After all, how can a company known for particle board furniture, exurb locations--not to mention the giant bags of frozen Swedish meatballs--change everyones hearts and minds to think more sustainably, from IKEA’s suppliers to consumers? The answers lie everywhere from energy efficiency to supply chain management to improved design.
“We’re not just buying RECs or ‘green energy’,” Howard said as we started our phone conversation. IKEA has been strategically investing in solar and wind energy. Over 300,000 solar panels are on top of IKEA’s stores and distribution centers; while at best a solar installation can provide up to 15 percent of an individual store’s needs, they can come close to meeting 100 percent at a warehouse. Add the additional punch of wind power to the point where some of IKEA’s wind farms qualify as small or medium power installations, and the company now generates 34 percent of its energy needs via clean energy. By 2015 IKEA will invest $2 billion (€1.5 billion) in renewables--but the path is hardly easy. What Howard described as “policy uncertainty” and the permitting challenges IKEA faces means the company would otherwise be 20 to 30 facilities ahead of schedule. The quest to use more clean energy affects IKEA’s supply chain, too.
With over 1200 suppliers, IKEA has a complicated global supply chain. IKEA is encouraging those vendors to move towards renewables as well. With a goal to reduce its suppliers’ total carbon emissions 20 percent from 2011 levels by 2015, the company works with suppliers to meet their goals, even offering financing for solar projects if necessary. Compliance is also central to IKEA’s supply chain, too. Over 80 internal auditors verify data suppliers send to IKEA, and the company terminated business with at least 60 suppliers recently to a point where some stores had shortages of certain products. Howard, however, insisted during our talk that the company seeks to go above compliance and towards “shared value.” Transparency is part of the conversation: IKEA is helping suppliers build capacity so they have the capability to report on their own progress and develop their own long term strategies.
So can a lean supply chain offer value for customers? “We want to price innovation low,” Howard said, and to that end, IKEA is pushing the envelope on a bevy of products, from LED lights to white goods such as dishwashers to even shelving. Newer and more innovative products are usually more expensive and priced out of many consumer’s price range. But IKEA’s goal, insists Howard, is to roll out more efficient products so that the world’s emerging middle class, and even the poorest consumers, can afford them. Among developments in the pipeline are induction stoves that can cook twice as fast with half the heat; a cost-effective product line of LEDs meeting IKEA’s goals of eliminating all other types of bulbs by 2016; and new shelving such as the Besta (pictured above right) that use less wood but are actually lighter and more durable.
Hence a scan through IKEA’s newest sustainability report is full of goals the company wishes to achieve. Some may scoff at all of the 2020-based initiatives, but as Howard reminded me, companies, and the people working within them, are driven by goals. And never mind the 100% goals: “they give you no wiggle room,” Howard said. And some goals are harder than others. Howard said the company could not step up to its promises to improve on its sourcing of sustainably sourced wood--currently about 23 percent of it is Forest Stewardship Council (FSC) approved.
So as the global middle class grows, IKEA will increase its “sustainable” product line fourfold over the decade. Can this big box store really encourage sustainable consumption and improve the health of the planet and well-being of people? A lot can happen in seven years: the affordability-sustainability nexus will be an intriguing one to watch.
Published earlier today on Triple Pundit. You can follow Leon and ask him questions on Twitter or Instagram (greengopost). He will explore children’s health issues in India next month with the International Reporting Project.
[Image credit: IKEA]