Sustainability

Company background

Ikea is a home furnishing company founded in Sweden in 1943 by Ingvar Kamprad. He used his initial and the village he grew up, Elmtaryd, Agunnaryd to name the company. Its mission is to "offer a wide range of well-designed, functional home furnishing products at prices so low that as many people as possible will be able to afford them." Ikea's vision also goes beyond home furnishing. The company sell ready-to-assemble furniture, kitchen appliances, home accessories, and Sweden food; meanwhile, they focus on sustainability. There was total of 458 IKEA stores worldwide. In the financial year of 2021, the global revenue generated by IKEA amounted to roughly 42 billion. 

Besides, Ikea allocated many resources to their sustainability to respond to unsustainable consumption, climate change, and growing inequality. For example, responsible sourcing, using renewable and recycled materials, etc. The company hopes to inspire people to make positive lifestyle changes by producing products sustainably. 

Case background 

In 2011, Ikea group's CEO created the role of chief sustainability officer responsible for implementing the strategy related to sustainability. Back in 2011, not many companies acted on implementing sustainability but proposed the idea of sustainability. Except for their operation, they need to follow regulators or organizations's rules to make their operation sustainable. So they announce its "People & Planet Positive strategy."

1. A more sustainable life at home for consumer.

2. Resource and energy independence for the company.

3. A Better life for people and the communities touched by IKEA.

Wood is the main material for IKEA to produce the furniture, 14 million cubic meters of round wood are equivalent to 1% of all industrial wood sourced on the planet. It comes up some concern when they sourcing wood. Many people's lives will be disrupted when it cut down the tree. 1.6 billion people worldwide rely on local forests for their livelihoods, including food, clothing, or shelter. Moreover, wood sourcing will affect natural habit and reduced biodiversity. It also aggravates global climate change and reduces long-term wood availability.

Ikea develop IWAY to achieve sustainability which is a IKEA way on purchasing products, materials and services. It stated minimum acceptable standards for working conditions and environmental protection t its manufacturing suppliers. Ikea also gives a guideline to the supplier regarding what kind of wood is more sustainable sources. Two standards below

1. Wood certified to the Forest Stewardship Council's (FSC) "Forest Management" and "Chain of Custody" standards

2. Recycled wood

FSC is a global organization that certified what kind of wood is sustainable sources, and recycled wood is a good source for IKEA. 

Every business decision in IKEA should follow "People & Planet Positive strategy" to help the company achieve sustainability. Besides, there are 4 potential options for Ikea to achieve a sustainable wood supply chain, owning more forests, driving higher procurement targets and standards, using more particleboard and using more recycled wood.

Achieve a sustainable wood supply chain

Ikea sourcing wood follows IWAY, FSC certified and recycled wood. Ikea has four potential options to achieve sustainability in the long term.

1. Owning more forests

It means that IKEA will purchase more forests and cut down the trees from their own forests. The source of the woods is more transparent, and Ikea can ensure the wood quality. The company can have higher control over the whole supply chain. However, it involves a high cost to maintain and purchase the forests. IKEA would be directly accountable for any criticism or legal responsibilities from NGOs or government, respectively when it comes to forest protection concerns

2. Driving Higher Procurement Targets and Standards

Ikea currently follows high procurement standards, which is the IWAY and FSC certified wood. It develops the customer's brand loyalty as they may appreciate IKEA products highly. It also sends a message to the public that the company is aware of the environment while the customer nowadays pays attention to environmental issues. However, higher procurement targets and standards may be hard for IKEA to achieve, it is a long process to get all the wood sourcing to follow the standards. It is also hard for Ikea to find other new suppliers to follow such high standards on short notice if any emergencies happen.

3. Using more particleboard 

It lowers the cost of wood sourcing activity because the cost of producing or sourcing particleboard is low. It also lowers the environmental impact because using particleboard can lower the product's wood usage and transporting costs since it is lighter than wood. However, particleboard Is easy to damage during transportation because it is not very strong or durable. Some customers may not accept particleboard because solid wood's quality is much better. 

4. Using recycled wood 

It achieves long term wood availability because the wood is keep recycling. Is can reduce the environmental impact because it mitigates deforestation. However, it needs a significant investment in recycled wood, the company need to put much money to make the recycled board being the raw material of the product. However, it encounters the same problem with particleboard because the quality is not as good as solid wood.

Address wood sustainability

To achieve long term wood availability, Ikea chose to use recycled wood. It conforms the current IWAY and guidelines for sourcing wood. Using recycled wood has the highest leverage because lowering the impact on the environment and decreasing the potential risk of legal responsibilities. It shows that using recycled wood can reduce the risk raised by options 1 and 2. Although it faces the same problem as option 3, the company can have a stable resource supply when using recycled wood.

Reflection 

We can see Ikea put its best efforts to achieve sustainability in their business. The company has the foresight to see sustainability will be an important part of the future business. Therefore, they implement different sustainability strategies while other companies only talk about it instead of implementing it. It also makes Ikea become the top of the industry, and not many competitors can compete with it. 

Ikea dare to implement sustainability while most businesses focus on their profit. The company focus on how their business activities may affect the environment or people's lives, and they find a different way to lower the impact. It is not easy for the company to balance the environmental, social, and economic factors to achieve sustainability. 

Last but not least, Ikea does what it commits to the public. They show their progress to achieve sustainability. As some companies may just ignore the public's concern, they just make the promise and do nothing. We hope that other company will develop their sustainability goal and work toward it. It will benefit the environment and people in the future. After all, we have done so many things which affect the environment. 

 

References

Number of traditional IKEA stores worldwide in 2020 and 2021

https://www.statista.com/statistics/1060053/number-of-ikea-stores-worldwide/

IKEA’s Mission, Culture and Value

https://ikea.jobs.cz/en/vision-culture-and-values/