In 2019, IKEA experienced retail sales upwards of EUR 41.3 billion, a new record for the Swedish home-furnishings behemoth, seeing customer sales rise 6.5 percent in 12 months – while decreasing its climate footprint by 4.3 percent.
Often, what it takes to achieve rapid business growth is seen as being at odds with what it takes to transform a business to become more sustainable, but through rooting its steps forward in wise investments, circular business models and thinking about how to make an impact beyond its own value chain, IKEA is successfully coupling the two. Here, Landscape News caught up with the company’s head of climate Andreas Ahrens to learn about the process.
Tell me a bit about sustainable changes made within IKEA since we spoke last year.
There been several things going on. Our commitment is to become climate-positive by 2030, reducing more greenhouse gas emissions than the IKEA value chain emits, while growing our business. This will require investments. So in November, we announced the EUR 200 million investment in renewable energy at our direct suppliers, and also how we will work with better forest management practices and restoring degraded land. So it’s not only how we reduce emissions, but also how we remove carbon from the atmosphere and store it.
How is the renewable energy component broken down?
If we look into the total IKEA footprint, the footprint from our suppliers is 11 percent, or almost three to four times larger than that of our retail stores. And it’s the suppliers that produce the products we love from IKEA. They consume electricity and also need fuel for production processes, for example steam and furnaces for glass production. So we are looking at how we can transform their energy consumption to renewable energy by 2030 and also phase out coal- and oil-based fuels by 2025. This changes both how we procure electricity – from green certificates to power-purchase agreements or on-site solar panels – and how we transform boilers and furnaces from using coal or oil to biomass or biogas or even be electrified.
We’re sitting on IKEA furniture right now. Can you describe a bit about how these stools represent the company’s sustainability ethos?
I’m really happy that we’re sitting on wood. We love wood. More than 70 percent of our products are made of wood-based products – be it solid wood like what we’re sitting on, or particleboard or paper – and 91 percent of the wood we use is sustainable. Electricity is the biggest driver for how these products are made at our suppliers, and we’re again working with them to purchase renewable electricity or change the boiler plants that provide the factory with heat.
The second point is that we want to store carbon in land, plants and products. If we work with the circular economy and prolong the life of this wood, it will be able to store carbon-dioxide safely away from the atmosphere for hopefully generations to come. This a carbon sink that we’re sitting on here.
It’s a very comfortable carbon sink. There seems to be a growing portion of the private sector trying to be climate positive. Could you say a bit more on the momentum around this?
Many private sector stakeholders or businesses have decided to become climate positive. The situation today, though, is that different companies have different approaches to what that term means. Therefore, IKEA sees a need for a global definition of it, both for transparency to our customers, so that we can trust what climate positive means, but also to drive the agenda for limiting global warming in the right direction.
For us, this means that we need to reduce our value chain emissions, not only in the stores, but also in everything from materials to transport to product end-of-life, keeping it all in line with the recommendations in the IPCC 1.5-degree report – cutting all emissions in half by 2030, including storing carbon through forests and other land use.
And then, how can we reduce emissions beyond our supply chains? There we see a huge potential in working with our customers. If we sell you a solar panel – which is now available for consumers in seven markets – that helps to charge your phone or power your TV, we can also address your footprint.
It’s the same with our suppliers. The supplier for this IKEA stool we’re sitting on, it maybe produces other wooden furniture for other companies. If we help transform their whole factory to run on renewable energy, that means we can reduce emissions of other companies as well.
So to go back to my first point, in a process facilitated by the World Wildlife Fund, we’re now working on setting a global definition of being climate-positive, to secure we are aligned with science in a way that is measureable and provides transparency.
IKEA has chosen not to offset its emissions. Why?
It’s a very controversial topic. When we look at the IKEA climate footprint, it’s due to our business and how we operate. If we invest in carbon offsets, it means that we’re investing in activities that are not part of our business’s root cause of impact. It becomes more like an accounting mechanism. Reducing our actual footprint is our real responsibility. We need to secure that part first. With that said, a company can still, and should, do philanthropic work to support poor and vulnerable communities and to restore degraded land and improve ecosystems. But it can never act as a discount to a company’s climate footprint. These are separate.
What example do you hope this sets for other companies?
Many businesses have different prerequisites. What we’re trying to share is our approach: how you can, as a business, make a total transformation, not just in the stores and how we source energy, but also in redefining the circular business model – going from just producing, buying and selling to repairing and repurposing. And again, then there’s also renewable energy, going toward plant-based foods, choosing more wood over metal, biofuels, selling more solar panels and LED bulbs for homes. You can transform a whole business in line with the limits of the plant, and that is what we’re hoping to provide.
What would you say to businesses concerned about the profit turnover during the transition period while becoming more circular and sustainable?
Coming back to the EUR 200 million we invested, we’re investing it first and foremost to make a difference, and I think that’s critical. We already invest in quality, availability, price reductions, etc. – it’s a part of normal business development to invest. And we saw the same thing for investing in climate, that it’s part of business development. In terms of making it possible, we shouldn’t be increasing operating costs. It’s more about enabling capital investment costs and investing in new and innovative technological solutions that can become available for many others too.
Which parts of IKEA’s transition process have proven challenging?
Our supply chains are long and complex. Addressing the industries that provide our materials – such as steel, plastics, textiles, etc. – are a big challenge, especially if you are not a big player or few alternatives exist. There is also the dimension of human rights, with attention to land ownership and tenure rights, and ensuring it’s respected when we source biofuels, for example. If we want to source biofuels from somewhere, we can’t be displacing people who would have otherwise been growing food there instead. Another human right is the right to clean air, which is why we’re working to phase out fossil fuels and reduce pollution. But if we go electric, where does the electricity come from? Is it coming from renewable sources such as wind and solar, or is it coming from other sources? And agriculture, with emissions coming from fertilizer and so on, this also impacts the right to clean food and air.
Not to make it complicated, but we have to see how all of these things are connected, so we don’t sub-optimize in any way. At the same time, it needs to be simple for people in the company to be able to take action. We have to make it simple for the many, complex for the few. It’s like an iceberg – the tip is what’s visible, but most of it is hidden beneath the surface. In order to make it simple for many, we have to be the ones to see from the holistic perspective.