IKEA Foundation: Supporting a Just Transition to renewable energy in the Global South

Pictured: Ikea's Greenwich store

At a Glance
Who: IKEA Foundation
What: Philanthropic initiative supporting a just transition to renewable energy in the Global South
Where: Indonesia, South Africa, and Vietnam
Why: To address the climate crisis and support workers and communities affected by the transition to renewable energy
When: Ongoing, with an initial commitment of $20m over four years

The Challenge

The global shift to renewable energy is essential to combat the climate crisis. However, this transition has far-reaching implications, particularly for the approximately 32 million individuals working in high-carbon industries. Without clear and comprehensive plans to reskill workers and provide alternative livelihoods, this transition can lead to economic, social, and political challenges for affected communities.

The Solution

The initiative spearheaded by IKEA Foundation and ClimateWorks Foundation seeks to address this challenge by developing Just Transition plans. These plans will be co-created with community voices and will encourage local climate action while ensuring that the transition to renewable energy is beneficial to all stakeholders involved.

How the Project Works

The initiative seeks to ensure a just, fair, and equitable energy transition, with an initial focus on Indonesia, South Africa, and Vietnam.

The IKEA Foundation has committed $20m in seed funding over four years to champion the development of Just Transition plans, co-created with community input, to support local climate action and facilitate a transition that benefits everyone involved.

The project operates through several key strategies:

1. Identifying Affected Groups: The initiative identifies groups impacted by the transition and assesses the economic challenges they will face, providing a holistic view of Just Transition plans.
2. Convening Dialogues: It brings together stakeholders, including government, labour unions, technology providers, utilities, and civil society, to engage in participatory development of Just Transition plans.
3. Supporting Communications: The project enhances the capacity for strategic communication, building compelling narratives about Just Transition at local, state, and global levels.
4. Enabling Community Initiatives: It supports community-driven initiatives by quantifying the economic and social benefits of Just Transition policies, thereby empowering communities to demand government action.

The Results

While the initiative is ongoing, it aims to achieve significant non-financial results. These include encouraging local climate action, promoting equity and economic development, fostering innovation, and building partnerships to drive a sustainable energy transition.

Business Benefits

The project’s benefits extend beyond the environmental sphere. It offers numerous advantages to the businesses involved, including promoting staff well-being, enhancing their competitive advantage, and positively impacting consumers who increasingly value sustainability.

Investment/Savings

While specific financial figures on savings are unavailable, the IKEA Foundation has committed a seed funding of $20m over four years. The return on investment will likely be measured in terms of social and environmental impact.

The Ikea Foundation had already committed €500m to climate mitigation and adaptation by 2025. This was an increase on the €368m spent between 2014 and 2020. However, the organisation announced in 2021 that it would spend an additional €1bn on initiatives supporting the low-carbon transition within five years.

Industry Context

According to the International Energy Agency, global renewable electricity capacity is projected to surge more than 60% by 2026 compared to 2020, reaching 4,800 gigawatts (GW), equivalent to the total power capacity of fossil fuels and nuclear combined.

The renewable energy sector is growing worldwide, providing increased funding, employment opportunities, and energy production. However, this transition is not without its challenges. Just Transition plans align with broader industry goals of reducing carbon emissions and promoting a circular economy, especially in high-carbon sectors like energy.