IKEA is a Swedish-founded, Dutch-based global retail behemoth. Offering low-cost, visually appealing furniture in well-designed highly-coordinated warehouse spaces, it’s little wonder IKEA is the world’s largest furniture retailer and has been for the last decade.
In recent years, the company has put sustainability front and centre, releasing its ‘People & Planet Positive‘ roadmap, a document outlining its 2020 sustainability strategy. Some of the objectives outlined in the report include:
- sourcing 100% of its wood, paper and cardboard from more sustainable sources, defined as recycled or FSC® certified wood
- using cotton sourced from “more sustainable” sources, such as Better Cotton
- that 90% of products will be more sustainable with substantiated environmental improvements
- that as a global business it produces as much renewable energy as it consumes.
With over 400 stores worldwide, roughly 170,000 employees, 915 million customers each year and sales revenue exceeding EUR 34.2 billion (USD $37.6 billion in FY2016), we wonder: Good intentions aside, can IKEA ever be sustainable?
First, some background.
IKEA was founded in 1943 by Swedish entrepreneur Ingvar Kamprad who, at 17-years-old and after receiving money from his father for academic performance, launches the retail business. According to the historical timeline on the IKEA website, the business initially sold consumer products such as pens, wallets and jewellery. Five years later, Kamprad makes the historic decision to include furniture in the range and several years later, published the now-iconic IKEA catalogue. He would later open a showroom in Älmhult, Sweden allowing customers to experience the well-designed low-cost furnishings for themselves. Not long after, the business begins to design and make their own furniture, due in large to risks of supplier boycotts. After an employee removes legs off of a piece of furniture to fit into a car, the concept of the flat pack and self-assembled furniture was born. From here, the rest, as they say, is history.
“The name IKEA is formed from the founder’s initials (I.K.) plus the first letters of Elmtaryd (E) and Agunnaryd (A), the farm and village where [Ingvar Kamprad] grew up. IKEA originally sells pens, wallets, picture frames, table runners, watches, jewellery and nylon stockings – meeting needs with products at reduced prices… ” it states on IKEA’s website.
Now a couple of years ago, I received an email from a PR agency working with IKEA Australia on an influencer program, known as IKEA Kollectively. It’s a nice feeling whenever a well-known company reaches out, but my mind is always on the job even when my ego is being stroked. My reply to Sophie the PR consultant was honest and direct (surprise, surprise):
I had a look at the info you sent and of course had to do my own research.
Here’s where I am at:
On the one hand I like that IKEA’s items are affordable and that individual items can be replaced if broken etc. I like that there is a minimalistic nature of the pieces and that many really are well-designed and timeless.
On the other hand, my own experience with the furniture… means I was unhappy with the quality. I tend to be the type that focus on individual items and the uniqueness of a piece. This is not something IKEA is known for. It is, shall we say, mass produced. Something that does not gel with my idea of “slow” living.
So having said this, I am still happy to be a part of the influencer partnership as I know that I have the freedom to select pieces that I like. Now just so you know I am also extremely honest in my appraisals of businesses. It is a part of EWP mission: to be a part of conversations that are substantial and not just gloss over like a badly written advertorial.
So, while I might applaud some aspects of a brand/business/product/service, as a person who highly values critical thinking, I am also unafraid to condemn and criticise.
If this is okay by IKEA, then we can move forward
Of course, Sophie was really understanding of my position and thought that it would be better if we worked together on an ad-hoc basis where they “could tap into sustainable stories and issues that [I’m] passionate about”.
For reasons I can’t put my finger on now, we never did end up working together.
IKEA: The McDonalds of the furniture world?
At the National Sustainability in Business Conference, I had the good fortune to catch IKEA Australia’s Sustainability Manager Dr Kate Ringvall’s presentation. Her passion and enthusiasm for her employer was evident: “Having spent many years in government, I finally found a place where my value set is met and IKEA is meeting those every day,” she shares with the audience made up of over a hundred of Australia’s sustainability thought leaders. She explains that sustainability is at the centre of IKEA’s business strategy and that it informs how the business designs and makes their products:
“At IKEA we make products with sustainability at their heart and we sell at a price that puts them well within the reach of the many people, and that’s really one of our goals. We call this ‘democratic design’, it’s that clever combination of form, function, quality and sustainability all at a low price, and it helps all of us, including our co-workers, live a more sustainable life at home.”
After listening to her brilliant talk and reading IKEA’s People & Planet Positive strategy, I come to the conclusion that as far as big businesses go, their sustainability mission seems genuine enough. But one thought still niggled at me:
Can a company that relies on a low-cost, high-volume business model that encourages mass-consumption ever be sustainable?
Critics are sceptical of IKEA’s sustainability commitment, pointing out that IKEA produces fast furniture that is inferior quality and that the low prices encourage impulse purchasing and disposability. Ellen Rupell Shell, author of the book, “Cheap: The High Cost of Discount Culture” writes: “IKEA designs to price, challenging its talented European team to create ever-cheaper objects, and its suppliers—most of them in low-wage countries in Asia and eastern Europe—to squeeze out the lowest possible price.”
It’s easy to see IKEA as the McDonalds of the furniture world. Even if the democratic design process is slow (five years of designing, trialling and testing according to Dr Kate Ringvall), its production system is scarily efficient. The assumption that people value their IKEA furniture less because it’s cheap may be true, but the idea of someone actually disposing of furniture the way they dump fast fashion seems somewhat far-fetched. The furniture may be mass-produced and affordable, but it’s definitely not $10 t-shirt cheap. It’s more likely that the furniture is fixed if broken, donated or sold on, not dumped in the trash. Anecdotally, the case of an IKEA bookshelf I purchased 12 years ago, now sits in my sister’s home office, still in great condition and still in vogue.
IKEA’s home decor products are, of course, another story. It’s easy to imagine these items – picture frames, bath mats, vases – being tossed out in the weekly garbage after breaking. It’s easier to replace than fix many of these cheap goods.
Now let’s consider the store. The antithesis of a McDonald’s restaurant, an IKEA store (really just a ginormous showroom) is designed to keep you there for as long as possible. A great customer experience to be sure, but it’s intentionally laid out to encourage customers to buy more than what they set out to buy. Most people don’t just get in and get out of an IKEA store. Most people meander, they look and admire, they take photos, they collect ideas, try, feel, sit. An average store is typically about 300,000 square feet or the size of five football fields. The store is set out like a stylishly-decorated rabbit warren filled with purposely curated display areas that captivate the visual senses and encourages you to purchase something you had no intention of purchasing, à la Gruen effect. You’re really just walking into a clever experiential advertising campaign and you’re powerless to stop it.
On the topic of power, it’s a good thing that IKEA’s sustainability goal is to produce as much renewable energy as it uses – stores this size are electricity-hungry and since they have over 400 of them, the combined carbon footprint of all its stores is astronomical and unsustainable.
On using sustainable materials
IKEA is working towards sourcing only renewable, recyclable or recycled materials. This is no easy task given the scale of its retail operations but one has to give them credit for a grand vision.
Currently, the business sources wood from 50 different countries, including Vietnam, Sweden, Poland, Russia, Lithuania and Germany. It aims to source 100 percent of wood, paper and cardboard from more sustainable sources, defined as recycled or FSC® certified wood by 2020. Since it consumes one percent of the world’s wood supply, this is a welcome step in the sustainable direction.
Another of its most important raw materials is cotton. In fact, it’s so well-loved, according to Dr Ringvall, the company uses one percent of the entire global cotton supply. The material can be found in many of its products, from sofas to mattresses, pillows and bedding. Although a natural, biodegradable fibre, the environmental and social impacts of conventionally-grown cotton is enormous.
“When grown conventionally cotton uses large amounts of chemicals and water and this practice often leads to significant health risks to farmers, soil erosion and water scarcity among others,” explains Dr Ringvall. “It also leads to higher costs as cotton is usually grown in developing countries and farmers struggle to make a profit. So many years ago, we decided to help tackle these challenges and made a commitment to improving the cotton industry.”
About a decade ago, the business launched the global Better Cotton Initiative (BCI) along with WWF and other like-minded organisations to help transform the way cotton is produced. “Our work started with 500 farmers in Pakistan in the beginning and they were really reluctant to change the way they grew cotton and their cultivation techniques. But after a year of education, of support and providing them with the means to make the changes, those farmers have really gone along and taken on the initiative.” Since its inception, the Better Cotton Initiative has provided training and education to roughly 110,000 farmers to help them improve the cotton cultivation process and learn sustainable farming methods.
“This initiative has enabled farmers to cut costs, improve their techniques and use less chemicals and water, increasing their profits, and as a result, they can afford a better quality of life for their families and schooling for their children.”
As of September 2015, all the cotton used at IKEA came from “more sustainable” sources. This means that the cotton is either recycled, or grown with less water, chemical fertiliser and pesticide while increasing profit margins for farmers. This result is owed, in large, to BCI. “We’re really proud of that progress because it’s been a difficult journey for all of us but our journey to improve the cotton industry doesn’t end here. We have projects in our sourcing areas to improve farmer’s profitability and reduce the environmental impact of cotton farming and inspire other retailers by sharing our experiences and initiatives. Our long-term goal is to transform the entire cotton market across the globe.”
There’s no talk of using organic cotton at this point. Like all decisions of a business nature, it boils down to costs and sustainable supply. In the business case of IKEA, it is likely that organic cotton doesn’t deliver on either. Still, organic is touted as the most people and planet-friendly form of agriculture there is and if IKEA were really serious about its commitment to sustainability, this should be the aim (full disclosure: I am a co-owner of a certified organic farm).
On community impact
Securing long-term sustainable materials is vital for this home furnishings retail giant, but according to Dr Ringvall, making a positive impact on communities where they source materials is important too. “We further extended our code of conduct which is an audit process of our procurement business unit and that goes through our value chain. We make sure that we’re a good neighbour, that we support human rights and we act in the best interest of the children that we may be impacting as well. We’ve been leaning that way since 2009. IKEA globally has been eradicating, as much as we can, child labour in our supply chains…”
IKEA’s five codes of conduct are known as ‘‘The IKEA Way’ within the company and include provisions based on various international conventions and declarations such as the United Nations Universal Declaration of Human Rights (1948) and the International Labour Organisation Declaration on Fundamental Principles and Rights at Work (1998). Each code of conduct covers specific business needs, from working conditions, prevention of child labour, purchasing and much more.
Having a code of conduct doesn’t stop labour, environmental or social issues from arising. Dr Ringvall is right. IKEA can only try as hard as they can to eradicate child labour. But it can’t guarantee it. Its codes of conducts just provide guidelines for minimum expectations required of employees, suppliers, co-workers and subcontractors. The onus is on the supplier and other third parties to ensure standards are being met and requires regular independent, unannounced audit visits to verify compliance. Leading non-profit ethical consumer advocacy group, Ethical Consumer found IKEA “to have a reasonable approach to difficult issues found within supply chains” and gave the business its best rating for Supply Chain Management.
It should be noted that IKEA doesn’t hold any other independent certifications such as Fair-Trade and B-Corp either.
IKEA is one of those forward-thinking global brands already embracing the circular economy. Known as “Circular IKEA”, the business is testing out the circular model with a new line of kitchen products, replacing raw materials with second-life materials. Its latest range of kitchen fronts known as KUNGSBACKA is a product that incorporates the circular concept. The particle board in a kitchen door, for example, is made from recycled wood and wrapped in a plastic film made from recycled PET bottles.
“Plastic is made out of oil and that is currently not a material we’re making use of in its second life form,” explains Dr Ringvall at the conference. “It’s a natural resource that we will run out of one day because it takes a very long time to break down. About 700-1000 years. That’s a long time that a resource is sitting there being unused. So we need to be mindful of how we use those resources and IKEA is really keen to do something different and use our resources in a second-life way.”
With millions of products in stores around the world, and close to a billion people shopping at IKEA each year, a business decision to incorporate waste and recycled plastic in their products can have a huge impact and accelerate positive change. “The changes that we make and that we consider in our supply chain and the way that we approach sustainability with our customers will make a difference. We’re really passionate about that.”
“Ideally we would like to move to a place where we’re making products from the waste we create. We divert 70-80 percent of our waste as a company across the country. That’s a big amount of resources that we could be using that we’re currently not for a whole range of reasons.”
If there is consumer demand for KUNGSBACKA, IKEA hopes to roll out more circular designed products. A company can design a sustainable product, but if consumers don’t want it, it’s a waste. Fingers crossed for KUNGSBACKA.
On using renewable energy
One of IKEA’s other sustainability commitments is to be energy-independent, meaning that it wants to generate more renewable energy than it uses. The company hasn’t achieved this yet, particularly in Australia, but according to Dr Kate Ringvall they’re working towards it. “We have about 20,000 solar panels across the Eastern seaboard and we’re looking to include WA and Adelaide in that as well… We want to be producing as much renewable energy as we consume so that we can drive energy efficiency throughout the value chain.”
Since 2009, IKEA Group has invested EUR 1.7 billion in renewable energy, has committed to owning and operating offsite wind turbines and have installed around 750,000 solar panels on IKEA buildings and stores globally.
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On its ridiculously low tax bill
Now commitment to sustainability aside, let’s consider business ethics. IKEA’s minuscule Australian tax bill raises a lof questions. Like many other multinationals operating in Australia, IKEA pays very little corporate tax when one considers its revenue. According to The Guardian, in the 2015-16 fiscal year, IKEA recorded $1 billion of revenue and paid just $11 million tax. In the previous two years, IKEA didn’t pay any tax!
It gets worse. The following year, in 2017, IKEA reportedly paid the Australian Taxation Office (ATO) just $289,000 tax – despite selling $1.16 billion of flatpacks!
Viewing these figures, one can’t help but consider the ethicality of IKEA’s tax minimisation strategies. Is it tax minimisation or outright tax avoidance? Only a forensic accountant will be able to work that out. Hopefully, the ATO has some good ones.
While the company is by no means perfect (what business is?), it’s at least moving in the right direction. However, let’s make no bones about it – IKEA is a business. It’s committing to sustainability because it’s good business to do so. Like all businesses, it must balance financial objectives with its sustainability goals – it’s just that their business case for sustainability is a strong one.
Personally, its high-volume, low-price business model is unsettling, and when one considers the size of the company and the stock it sells, it’s hard to imagine how the business can possibly be sustainable. But then, IKEA didn’t invent industrialisation and mass-production – it’s just one of many companies playing the game of capitalism – and winning. The business has survived more than 70 years because it’s giving customers what they want. Are those customers wrong? You be the judge. It’s clear that IKEA’s business model is the reason for its success and it’s not going to change now; anyone who thinks or wishes otherwise is naive. Low prices are a part of IKEA’s DNA and they will continue to serve the price-conscious customer whether we criticise them or not.
While shopping at IKEA is no longer a part of my DNA and hasn’t been for more than a decade, I can understand why I did – and why many people around the world still do. If you’re strapped for cash, time poor, prefer a one-stop-shop with a variety of options to choose from, seek value for money, and happy to assemble your own furniture – then IKEA is for you.
But if you don’t want your home looking like everyone else’s or you’re suss on IKEA after reading this, I recommend trawling for secondhand furniture. Good places to start would be eBay, Gumtree and Craigslist and even your local Facebook selling groups.
One last note. I think many businesses transitioning to sustainable business practices should take a leaf or two out of IKEA’s sustainability playbook – just not it’s tax one. We need corporations operating sustainably AND paying their fair share of corporate tax thank you very much.
To learn more about IKEA”s People & Planet Positive sustainability strategy, click here.
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Title image credit shutterstock.com.