Ikea nears three-fold increase in sustainable product sales
The world's biggest furniture retailer Ikea has almost trebled the sales from its 'sustainable life at home' products, while also announcing a new €1bn financial framework to promote projects that fall within its People & Planet sustainability strategy.
The Ikea Group Sustainability Report for the 2016 fiscal year, released last week, revealed that sales for the group's 'sustainable life at home' product line had reached €1,802m in 2016 compared with €641m in 2013, taking the company 70% of the way to its target of achieving a four-fold increase in sales by 2020.
As part of Ikea’s People & Planet sustainability programme, the company is striving to promote sustainable living to its customers while also revamping how it sources energy. Alongside the release of the CSR report, Ikea also announced the new €1bn support fund, taking total funding for sustainability initiatives to more than €3bn.
“We have made significant progress towards our People & Planet targets, but there is still more to do. We want to lead with passion and purpose towards a more sustainable and equal world,” Ikea’s chief sustainability officer Steve Howard said.
The sustainability funding has seen €1.5bn invested in wind and solar projects since 2009, with new wind farms in Poland and the US becoming operational this year. The company has also allocated €600m for further investments into renewable energy. The company’s flagship goal to produce renewable energy corresponding to the amount of energy it uses by 2020 currently sits at 71%.
Elsewhere in the report, Ikea confirmed it had just missed its 2015 target to reduce emissions from its own operations by 50% from a 2010 baseline, reaching a 49% reduction in 2016. The company is yet to set a new target for emissions. Ikea’s quest to become 30% more energy efficient in its operations by 2020 varies wildly. In retail stores 15% improvements can be found, while distribution centres have managed a 28.6% improvement.
The retailer's People & Planet Positive strategy also places an emphasis on making consumer lives more sustainable. Alongside offering the 'sustainable life at home' products, Ikea now offers residential solar arrays to consumers in three countries, and transformed its entire lighting range to LEDs in 2016, selling almost 80 million bulbs in the process.
The company is also engaging with direct suppliers to encourage them to become 20% more energy efficient by August 2017 compared with a 2012 baseline. Currently, they have signified a 19% improvement. Suppliers have also been encouraged to reduce carbon emissions by 20% and currently sit at 17.3% in reductions, although the target year for this improvement was 2015.
Through these funding streams, Ikea has committed to securing the long-term future of its supply chains by investing in suppliers that are active in recycling, renewable energy development and biomaterial developments.
As of 2016, Ikea now sources 61% of all cotton and wood used in its products from the Better Cotton Standard and FSC certified suppliers. The company is also striving to phase-out oil-based expanded polystyrene (EPS) in IKEA flat packs, replacing it with fibre-based, fully recyclable materials.
By 2020, Ikea hopes that 100% of the material in its plastic products will be renewable or recyclable, yet as of 2016 this figure sits at 24%. However, 98% of all home furnishing materials – including packaging – are either renewable, recyclable or made from recycled material.
Ikea has also made progress to ensure that 100% of the palm-oil used in products such as candles, home furnishings and food ingredients comes from certified sources. Currently, 96% of all palm-oil used by Ikea can be traced back to certified suppliers. All of Ikea’s seafood is also certified, although there is no certified crayfish available globally.
However, a 2020 target to reduce waste by 10% is proving “challenging” to the company. The report revealed that, as of 2016, Ikea produced 560,650 tonnes of waste - a 16.5% increase in total store operation waste from 2013. However, 89% of this waste was recycled or incinerated for energy recovery.
Ikea has cited the opening of 12 new stores and a focus on the recyclability of waste – rather than the volume – as reasons for the waste increase. A spokesperson told edie that the company will place a “stronger focus” on reducing waste volume.
“This increase is due to the fact that we opened 12 new stores in FY16, as well as other market specific reasons,” the spokesperson said. “Our focus to date has been on increasing the share of waste that is recycled, rather than decreasing the amount of waste produced.
“Now, we will ensure a stronger focus on reducing waste relative to the volume of goods sold, and are embedding the target at the country level.”
The report revealed that a “significant proportion” of store waste – which accounts for more than three-quarters of the company’s operational waste – derives from damaged goods from transport. To mitigate these damages, the company launched Recovery Direction in 2014 and repackaging machines can now be found at 250 stores and in 80% of its distribution centres.
For 2016, 29% of damaged products were repackaged, and a further 60% that were unable to be repackaged were placed into sales at discounted prices.
Ikea’s chief sustainability officer Steve Howard has recently called on governments to deliver, “long, loud and legal” policies to aid companies with the transition to a low-carbon economy. Howard claimed that companies that don’t embrace the low-carbon transition would “wither away”, while those attempting to drive change would need to communicate with policymakers to create enabling and long-lasting frameworks.
This isn’t the first time that Howard has reached out to policymakers in an attempt to drive this transition. At the Business and Climate Summit in June, Howard urged policymakers to craft “well-designed policies” that would allow the retailer and fellow businesses to build on the largely independent platform that has been established in transitioning to a “carbon free 21st century”.