How the circular economy is fuelling sustainable growth at Ikea

EXCLUSIVE: Ikea's aim of doubling sales by 2020 are not at odds with an embedded ambition to become more circular, according to the company's UK sustainability manager Hege Sæbjørnsen, who believes closed-loop solutions will be fundamental to future growth.

Addressing a packed crowd in the Resource Efficiency Theatre at edie Live 2018 on Wednesday (23 May), Sæbjørnsen said that building a circular economy into IKEA’s business model will be “fundamental” to the retailer’s ability to grow, remain relevant with customers and survive long-term in the ‘peak stuff’ era.

“A linear system is one that has made us the largest furniture retailer in the world with 175,000 employees, so we have inevitably been asked why we would want to change it,” Sæbjørnsen said.

“We want to be around for another 75 years and given the sheer scale of our business, wanting to not be reliant on virgin materials and to have a net positive effect is core to the business going forward.”

While Ikea’s UK and Ireland chains vie for ambitious financial and sales growth over the next two years, they are simultaneously restructuring their supply chain, product design processes and the way they approach customers with an ongoing target of becoming “a truly circular retailer”.

The company’s 2017 sustainability report highlighted that these processes were delivering tangible results. The report outlined a 5.8% increase in total sales for the financial year. Some of this growth, which totalled more than £1.8bn, was driven by services falling under the retailer’s its People and Planet Positive strategy.

Globally, Ikea has already trebled the sales from its ‘sustainable life at home’ products, while UK branches have increased overall sales by 57% in the last six years.

Ikea is now making some products, such as water bottles and storage crates, from plastic waste, and last year launched its first kitchen incorporating 100% post-consumer recycled (PCR) plastics and PCR wood. All products are now being designed using its ‘democratic design’ principles, which are founded in circular values.

Systemic change

The overall restructuring by Ikea is not just for internal corporate sustainability initiatives, but the “beginning of a total transformation” of the company’s business model, according to Sæbjørnsen.

“The reason behind our shift from not just sustainability but circularity is that it is fundamental to our long-term survival and ability to continue to grow,” she said. “We have a very ambitious commercial growth agenda, so when we look at the resources that we rely on, the responsibility we feel is absolutely enormous.

“That said, [becoming circular] is not purely an economic decision– we see the need to do this to remain relevant to customers over time and to serve their specific needs.”

As for customer interactions, Sæbjørnsen said that consumers “increasingly seeing the value in their things” has enabled Ikea to successfully trial furniture and textiles take-back schemes in the UK. However, she admitted that the infrastructure and partnership opportunities for collecting used goods to be reused, repaired or recycled is currently underdeveloped.

“This is not something that any company, even one as large as Ikea, can do alone; it is an absolute systemic challenge and opportunity,” she added. “When you focus on reuse and recycling, you suddenly have a unique opportunity as a retailer to work with consumers, local councils and other companies but the infrastructure is not yet there to scale this up.”

Sarah George & Matt Mace

Comments (1)

  1. Fraser Liscumb says:

    Good to see IKEA looking at a circular economy. If I was not retired I could think of a more 21st-century sustainability approach. Using innovation and collaboration using our RBIS approach that cut cost improves productivity.

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