Energy/Industry Environment Industrial Technology Manufacturing

IKEA to Spend 1 Billion Euros on Tackling Climate Change

June 4, 2015

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June 4, 2015 – There are few homes in countries where IKEA is present where you won’t find some piece of furniture that comes from the Swedish home furnishings giant. I know our downsizing from our house to an apartment included a number of visits to both the virtual and bricks and mortar store closest to us here in Toronto.

In my experience with IKEA I questioned their excessive packaging. I had concerns about where the company sourced its wood products and if the forestry being practiced worked on a sustainability model. I found out that I wasn’t alone in expressing these concerns. The company’s own internal polling showed that only 41% of its customers thought it was both socially and environmentally responsible. That was well below a company goal of 70% by 2015. But even if a majority of customers thought IKEA was not quite up to the standard of being socially and environmentally responsible, it didn’t stop them from coming back. Last year alone the company global revenues approached 30 billion euros.

But this week CEO, Peter Agnefjall, announced a global corporate initiative to tackle climate change and challenged other companies to do the same. Agnefjall stated it was no longer going to focus on getting better polling data from customers about its image but instead would aggressively help to combat global warming. In the end whatever IKEA did would not impact prices to customers. It would, however, in the words of the CEO, be “good for customers, good for the climate and good for IKEA too.”

The equivalent of $1.13 billion U.S., 1 billion euros will be spent. How?

600 million euros for new wind and solar power installations. That’s in addition to the 1.5 billion euros already spent since 2009. IKEA has installed 700,000 solar panels on its own property, and it owns or operates 314 wind turbines, mostly in North America. By 2020 the company intends to generate 100% of its operational energy needs from these clean sources.
400 million euros from its charitable foundation dedicated to helping areas of the world most immediately impacted by global warming including The Alliance of Small Island States where rising sea level attributed to climate change is seen as a significant and immediate threat.

The company in making its corporate social and environmental responsibility pledge intends to put in place sustainable forestry practices by 2020. Today lumber in IKEA products comes largely from 5 countries: Poland, Lithuania, Germany, Russia and Sweden. By 2020 every tree harvested in these places will be replaced.

IKEA has also undertaken a sustainable cotton initiative in partnership with the World Wildlife Fund. It is helping more than 100,000 farmers in India, Pakistan, China and Turkey to implement sustainable farming practices including halving the amount of water consumed to grow cotton, and reducing pesticide, herbicide and chemical fertilizer use. These practices have resulted in reduced costs and greater income for the farmers.

IKEA is also tackling packaging in an effort to eliminate unneeded material and therefore reducing CO2 emissions. It is also tackling transportation CO2 emissions by becoming more efficient in the way trucks, trains and ships receive and deliver products. Wooden pallets have been replaced with space-saving and lighter paper pallets. Fill rates in containers and trucks have less air and more product increasing from 63 to 70%.

To reduce CO2 emissions from customers coming by automobile to IKEA warehouses the company is making increasing investments in eCommerce for online purchases, and providing home delivery wherever it operates so that customers don’t have to make the drive to buy IKEA products. And more and more IKEA is offering shuttle services in cities to bring customers and not cars to their warehouses. Those buses are powered by biogas made from cafeteria waste in IKEA stores.

IKEA’s Chief Sustainability Officer, Steve Howard, (one wonders how many companies have a person with this type of title today) is quoted in the British Financial Times stating, “carbon is a significant risk so if you can eliminate that risk, or a good share of it, that’s a good thing….if every business and organization did what we did, we would flip electricity generation into being renewable-based by 2020 or shortly thereafter.”

Calling on many more companies to emulate IKEA’s initiative and investment in carbon reduction.