Anda di halaman 1dari 7

Sustainability Report of the company

IKEA

Introduction:
Ikea is a Swedish multinational company, which is a market leader in
selling ready-to-assemble furniture, appliances and accessories. As of
January 2008, it is the world's largest furniture retailer. IKEA has its core
competency in modern architectural design. The interior design work of
IKEA is famous for being eco-friendly and for its simplicity. It is a
renowned firm when it comes to cost control, operational efficiency, and
continuous product development. All these measures allowed IKEA to
control its prices even during global expansion.

History of Sustainability Management:


In 1990, after the formaldehyde scandal, IKEA started using the
framework of Natural Steps as a basis of its environment plan. The
plan was implemented to focus on the structural change.
In 2000, IKEA introduced IWAY, which focused on IKEAs way of
purchase. This was done to introduce the code of conduct to the
suppliers.
In 2001, IKEA has stopped providing plastic bags to its customers and
offers only reusable bags for sale.
The IKEA restaurants offer reusable
plates, knives, forks, spoons, etc. Toilets in few IKEA washrooms have
been outfitted with dual-function flushers.
In August 2008, IKEA also announced the creation of GreenTech. The
major focus will be on solar panels, wind turbines, alternative light
sources like LED, energy efficiency and water saving. IKEA wants to
commercialize the green technology and make it a source of their income
within 3-4 years.
To cater to sustainability, IKEA created the concept of product life cycle.
Following are the ideas for it:

Flat packing of products to ship more item at once

Products should be easier to dismantle and recycle.

Focusing on environment friendly forests and cotton, the two


major raw materials required by IKEA.

On 17 February 2011, to achieve its goal of using only renewable source


of energy, Ikea announced its plans to develop a wind farm in Dalarna
County, Sweden.
In 2011, IKEA examined the consumption of wood and noticed that
almost half of its global pine and spruce consumption was for the
fabrication of pallets. The company responded promptly and started

using paper pallets and the "Optiledge system". The OptiLedge product is
made up of 100% virgin high-impact copolymer polypropylene and is
fully recyclable.

Current Steps Taken by IKEA Towards Sustainability:


IKEA are a global leader in the field sustainable development with their
IKEA People and Planet Positive 2020 Strategy. Following are few major
areas in which IKEA has contributed towards sustainability and each of
them is evaluated accordingly:
1. Wood Consumption: The major raw material for IKEA is wood.
Every year IKEA uses 1% of the worlds wood, which is
exuberantly high. On average 100 million furniture are sold every
year by the company. Among the consumption, only a quarter of
them are sustainable according to Forest Stewardship Council
(FSC) standards. They are planning to make 50% of them
sustainable by 2017.
To cater to the issue, IKEA has come up with following measures:
In July, IKEA bought its own 83000 acres of forest in
Romania to manage its own forest operations. This step is
taking on the grounds of increasing timber prices. Having
its own forest will reduce cost as well as they will have
access to sustainable woods for a long time.

IKEA is optimizing the design of its product to make the


best use of trees.

IKEA is reducing the use of solid wood in their products


to minimize the wood usage.

Most of the woods used by IKEA are recycled and by


2020 they want that all the woods used must either be
recycled or certified by the Forest Stewardship Council.

It has also bought forest in Estonia, Lithuania and Latvia,


which are of 10,000 acres.

Evaluation:
Depletion of the forest reserve is the major reason for
ecological imbalance and leading to an endangered
ecosystem. The steps taken by IKEA to conserve forest
are very minimal. Also, they have been accused of logging
trees in Russia as well as many parts of the world. They
were even banned in Karelia, Russia because of high

deforestation and cutting down of ancient old forests.

The company is relying only on FSC for its forest positive


strategy. They are thinking that if they increase the
quantity of FSC certified woods then it will end up
portraying them as an eco-friendly company who believes
in forest management, which may not be the case. Also,
FSC has also been accused for giving false accreditations.

Many of the NGOs including Greenpeace have accused


IKEA of doing false practices, which have been proven as
well.

So, on evaluating the steps taken by IKEA, we can


definitely say that they have started taking actions towards
sustainable growth but they need to pace up to achieve
their target of becoming forest positive.

2. Better cotton: Each year, IKEA uses almost 0.7% of all the
cotton grown around the world, mainly from India, Pakistan,
Turkey, China, Brazil and the USA. In September 2015, IKEA
announced that 100% of its cotton comes from more sustainable
sources. Cotton is one of the major raw materials used for making
furniture, bedding, towels, etc. Their major criteria for better
cotton are:
Lesser water usage

Lesser chemical fertilizers and pesticides

IKEA aims at making more sustainable cotton, which is affordable and


accessible. It also aims them to be better for the environment and the
people who grow it. For this, IKEA has invested around 1.34 million
Euros and helped around 110,000 cotton farmers adopt more sustainable
practices.
Conventional cotton farming requires large amounts of chemicals and
water, raising the overall costs and makes difficult for the farmers to earn
a living. Better Cotton Standard aimed at producing more sustainable
cotton by farmers is working towards Better Cotton. Since September
2015, all cotton used in IKEA products comes from these Better Cotton
Standard sources.
Evaluation:
The Initiative taken by IKEA for adopting sustainable cotton in
their product line is an excellent way for sustainability
management. The non-organic growth of cotton has several

ecological hazards including air, land and water pollution, and


decreased biodiversity leading to large ecological footprints.
Usage of organic cotton eliminates these hazards leading to better
ecosystem.

Cotton farming is becoming financially impossible for farmers as


conventional farming is leading to very low yield due to soil
depletion, dropping water levels and low technical knowledge of
farmers. So, the Better cotton Initiatives taken by IKEA are
helping farmers to earn more by reducing the cost.

This initiative has a mass effect as well because other companies


are also switching to sustainable cotton following IKEAs path.

Also, in the longer run it is more profitable.

Due to drastic weather change happening in the whole world,


sustainable cotton production is the future of cotton industry.

3. Towards a Greener Planet: IKEA is planning to spend around


$1.13 billion on renewable energy and climate change. Of that it
will invest 600 million Euros in solar and wind power installation.
IKEA is planning to produce as much energy as it is consuming
using the renewable sources of energy by 2020. The
manufacturing of products is done is IKEA itself. In 2014, IKEA
produced 410 GWh of wind energy, 90 GWh of solar energy, and
1,310 GWh of biomass energy.
SOLAR: IKEA is investing 100 million Euros on solar power within 5
years. 700,000 solar panels are already installed on IKEA buildings
worldwide.
WIND: Company is investing 500 million Euros on wind power. It owns
300 wind turbines.
Evaluation:
Usage of renewable source of energy is sustainable in the longer
run both for the company as well as the ecosystem.

As IKEA is manufacturing the equipment, it can be another


source of business for the company. Additional revenue can be
generated using the technologies used.

The usage of renewable source of energy reduces the carbon


footprints and helps in maintaining ecological balance. There is

no waste production of greenhouse gases.

Regarding the climate change issue, which the whole world is


facing, this is one of the mandatory steps, which every company
should take. IKEA is one of them.

Being economically very sound company, IKEA is investing a


good part of its profit for the environmental causes.

Currently 75% of IKEAs power usage comes from renewable


sources of energy. So, if there is any price change of the nonrenewable source of energy, IKEA will be least affected by it.
Hence, adding to its sustainability.

3.Usage of LED only lightbulbs: IKEA is the first US Company who


will sell only LED bulbs. In February 2014, Ikea announced that from
September 2015 onwards it would only sell energy-efficient LED
lightbulbs and lamps.
Evaluation:
This step will reduce the energy usage when applied on a mass
scale. LED lightbulbs use 85% less power compared to a regular
light bulb.

The global consumption of power is increasing at an alarming


rate. Such initiative will bring revolutionary changes in the power
consumption sector.

This business aspect is sustainable as it is a future requirement of


population. The LED lightbulbs lasts for almost 20 years. So, it is
a one time investment for the customers and cost-effective.

Pack of 2 LED bulb is of 400 lumen/40 watt is priced at $4.45


which is affordable for the population.

Overall Evaluation:
Looking at the holistic view regarding the steps taken by IKEA we can
definitely say that this company is aware about the environmental issues
and is taking sustainable steps to overcome them. From the ecological
economist point of view, one should look at the economic, social and
environmental point of view. Of them environment is the most important
part, then social and finally comes economic. Looking at IKEAs
initiative, the economic and environmental aspects are taking the right
direction but still a lot has to be done. Moreover, almost all the ideas
generated by IKEA revolves mostly around profit generation which is

good in the longer run but they need to focus on the environment part as
well especially related to the deforestation occurring world-wide. The
usage of renewable source of energy is an excellent aspect and they are
generating revenue as well, which makes it even more sustainable.