IKEA's Sustainable Supply Chain Leadership

The IKEA Group has demonstrated its sustainability leadership by consistently increased its commitment including the realm of sustainable supply chain planning. In previous years they led the retail space with their investments in renewables and efficiency and in 2018 they addressed the elephant in the room by committing to make all of their 12,000 products from renewable and recyclable materials by 2030. In this article the focus in on IKEA’s supply chains, reforestation and packaging.

IKEA uses IWay, a code of conduct with precise environmental and social requirements for sourcing and distributing products. IKEA is investing more than $1.1 billion to create a sustainable supply chain that encompasses forestry, recycling, renewable energy, and biomaterials. This is not just good for the planet it is a smart business in as far as these investments reduce risks and stabilize costs. A sustainable supply chain reduces the impacts of shocks, preempts disruptions and ensures long term access to materials. As a public facing brand IKEA’s sustainable positioning also contributes to differentiation that offers reputational benefits. “We are going all in to transform our business, to ensure that it is fit for the future and we can have a positive impact,” said Peter Agnefjäll, Ikea Group president and CEO.

SUSTAINABLE SOURCING

The two primary materials that IKEA uses are wood and cotton. As of 2014 more than 85 percent of its cotton complied with standards that limited water, pesticide and fertilizer use. Today 100 percent of the cotton used is sustainably sourced. IKEA is massively investing in sustainable forestry and they are working with organizations like Global Forest Watch. They have made steady progress in the last four years. In 2014 approximately 40 percent of the wood used by IKEA was sustainably sourced. As of 2016 approximately 61 percent of the wood IKEA used came from sustainable sources, in 2017 that number rose to over 75 percent and within the next couple of years it will be 100 percent.

“Sourcing wood from sustainable forests is not only good for the brand but for the business,” said Pierre Francois Thaler, co-CEO of EcoVadis, a global supply chain sustainability ratings firm. “Ikea, being such a large consumer of wood, needs to ensure the sustainability of their own operations if they want to keep supplying wood-based products.”

REFORESTATION PROGRAMS

Deforestation is not just an ecological concern it is also a very serious business risk. To help mitigate these risks IKEA participates in a number of reforestation programs. The American Forests plant-a-tree program will help them reach their overall goal of planting more trees than they use. IKEA does not source wood from diminishing tropical forests because these woodlands are essential to the health of the planet.

IKEA was among the leaders in the recently released 2018 Wood Furniture Scorecard. This is a comprehensive assessment of wood sourcing policies as determined by the National Wildlife Federation (NWF) and the Sustainable Furnishings Council (SFC).

SUSTAINABLE PACKAGING

Packaging is another key area that IKEA is taking seriously. The furniture company has committed to eliminating single-use plastic products from its in-store restaurants by 2020. The company is also developing alternatives forms of packaging including a fully biodegradable variant made from mushrooms. The mycelium “fungi packaging” is manufactured by Ecovative and their packaging is part of IKEA’s wider initiative to reduce waste and increase recycling.

The problems of plastic waste is a global concern. Plastic, Styrofoam and polystyrene are major environmental problems because they are made from fossil fuels and they do not break down for thousands of years. As much as 14 million tons of polystyrene ends up in landfills each year. Much of our plastic waste has ended up in our oceans and this has proven to be devastating to wildlife.

IKEA has developed an integrated approach to measure and manage risk, including in the areas of sourcing, reforestation, and packaging . The retail giant is spurring innovation alongside traditional approaches and best practices. Together these efforts have significantly reduced the footprints of key business components and as the gold standard in the big box sustainable retail space IKEA is an example for businesses of all sizes.