How would assess IKEA Group’s People and Planet Positive sustainability plan? Is the plan likely to help the company transform its business? Are the plan’s targets too limited, appropriate, or too ambitious?
IKEA has established a “People & Planet Positive” strategy that aims to provide a company with a sustainable supply chain. The IKEA Group’s fundamental business strategy has grown increasingly focused on sustainability. Howard explained, “Sustainability is a key driver of growth, and it is now an integral component of our decision-making process—we have shifted our mentality throughout the organization.” IKEA’s leadership sought transformative change by hiring Howard and putting him in charge of the Sustainability Office. This allowed the company to better foresee and manage sustainability challenges. IKEA’s Chief Sustainability Officer Howard Larsen reported the People & Planet Positive strategy during his first six months at the company. The company has three primary goals: giving consumers the opportunity to live more sustainably at home, becoming more independent as a company in terms of resources and energy, and keep improving the lives of those living in communities served by IKEA.
There were four teams under Howard’s leadership: (1) Communication, which developed IKEA’s strategy for sustainable communication; (2) Innovation, which developed innovative sustainable solutions; (3) Business which developed sustainable business systems; and (4) Marketing that devised strategies for retaining clients. These groups collaborated with the operational units to put the People & Planet Positive plan into action. Nearly 500 IKEA Group employees were directly responsible for implementing various areas of the company’s sustainability goals.
I believe that IKEA Group’s People and Planet Positive sustainability plan could make a big contribution to transforming the company’s approach regarding the environment and sustainability. I see the plan as assessable, and it is possible to fully achieve the goals stated in the plan in a long-term period.
How do you feel about the progress IKEA Group has made in implementing this plan?
IKEA Group made significant investments in energy conservation in its manufacturing, distribution, and retail activities. Energy efficiency measures costing €21 million were implemented from 2011 through 2013, which led to an estimated savings of €40 million. In addition to investment in wind farms, the company has already installed solar panels at its retail locations and has begun using biomass as a power source in its manufacturing plants. IKEA has highlighted the role of improving wood procurement in terms of its sustainability. The company has already established the standards for working and protecting the environment for the partners sharing products and services.
The Sustainability Manager of the IKEA Group states that IWAY is an effective business discipline. The company incorporates IWAY into the business and ensures supplier compliance by having internal auditors in all business sectors. Suppliers in high-risk areas were audited on an annual basis, while others were audited every two years. Suppliers who did not follow IWAY’s guidelines were eliminated.
How does IKEA’s sustainability strategy align with its business model? What are the overlaps? What are the conflicts?
Since September 2013, Peter Agnefjäll, president and CEO of IKEA Group, has been optimistic that the company’s expansion strategy will not conflict with the company’s environmental goals. Obtaining wood created a number of issues in terms of sustainability. In this way, clearing forests for plantations and removing virgin trees put many people’s lives at risk.
A second consequence was the negative effect of maintaining natural forests on biodiversity and ecological processes and the reduction in biodiversity associated with turning natural habitats into lumber plantations. Three, deforestation, a consequence of the desire to convert forests into farmland and pastures, significantly contributed to global climate change by lessening the capacity of plants to sequester atmospheric carbon. In particular, China, which had substantial timber trade deficits, was concerned about wood availability due to deforestation. Thus, IKEA has made a significant step toward implementing a sustainable policy in manufacturing. I think that in the future, there will be more opportunities for the company to establish environmentally friendly manufacturing processes.
Which option(s) should IKEA Group pursue to address IKEA’s Wood Supply Chain sustainability? Which has the highest leverage for IKEA?
The IKEA Group’s wood supply chain confronted specific challenges since the company looked to get wood and wood items near its shopper markets to diminish transportation costs. However, its development plans centered on developing markets with immature wood supply chains that did not meet the company’s exacting supportability measures. Since the IKEA Group practice massive procurement of wood, the priority issue for the company, as well as for the ecosystems and environmental activists, is to properly manage its wood supply chain.
For wood-based items, crude materials are the foremost costly component. In 2013, the IKEA Group collaborated with 384 wood providers from 50 nations. Wood from forests or reclaimed wood started the company’s supply chain. In spite of the fact that IKEA Group generally rented 500,000 hectares of timberland in regions in Russia and Slovakia, almost all of these timberlands were possessed and maintained by third parties.
Essential processors, such as sawmills, board producers, and the mash and paper businesses, utilized forest-grown timber as a crude fabric. Sawmill and plywood mill byproducts were frequently transferred to board mills, which created board material. In industries, lumber and board material were transformed into components. After that, furniture producers turned wood and particleboard components into furniture pieces, shipping roughly half of the boxed components specifically to IKEA shops and the leftover portion to IKEA offices.