Thursday, July 5, 2018

IKEA's Sustainable Supply Chain Leadership

The IKEA Group has demonstrated that it is a sustainability leader. Over the years IKEA has consistently increased its commitment and it is now fair to say that they have gone all the way with their sustainability 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 in sustainable supply chain including forestry and companies developing recycling technologies, renewable energy, and biomaterials. This is not just good for the planet it is a smart business move. These investments will help with risk management while stabilizing costs. A sustainable supply chain 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.

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," Thaler said. "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."

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).

Packaging is another key area the 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 part of the wider initiative to reduce waste and increase recycling. The American company Ecovative manufactures the ecological alternative.

The problems of plastic waste has become a well warranted 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 assembled an integrated approach to measure and manage risk. The retail giant is also spurring innovation. Using tried and true formulas and best practices they have significantly reduced the footprints of key business components. As the gold standard in the sustainable retail space IKEA is an example for businesses of all sizes.

Related
IKEA Goes All the Way with Sustainability
IKEA is a Corporate Leader in Renewables and Efficiency

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