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IKEA’s Quest for Sustainable Energy

The world’s largest furniture retailer hopes to reach 70% energy efficiency by 2017.

By Bisk
IKEA’s Quest for Sustainable Energy

As companies realize the benefits of sustainable development practices both for the environment and for their bottom lines, energy efficiency is becoming a viable business strategy. One company that has made a commitment to this movement is IKEA, the popular home furnishing company. By researching ways to increase its use of sustainable energy sources, IKEA is realizing benefits in innovation, profitability and productivity.

IKEA plans to achieve complete energy independence by 2020. Specifically, IKEA aims to have 100% of its energy requirements come from renewable sources, essentially producing as much energy as it consumes. This goal includes the aim of 70% energy efficiency by 2017—a milestone the company is on track to obtain, according to its 2013 Sustainability Report. This ambitious goal will require more than $2 billion in investment through 2015, particularly into renewable technologies like wind and solar power.

Global Renewable Energy Country Graph

In the three years from fiscal year 2010 to fiscal year 2013, IKEA's energy efficiency in stores and distribution centers has increased by 8%, saving the company around 40 million Euros in total energy costs. Energy-efficient LED lighting has contributed a significant portion of these total savings. The company's Sustainability Report also indicates a commitment to use 137 wind turbines and over 550,000 solar panels in its drive to incorporate renewable energy technologies by 2020.

Sustainability in the Supply Chain

IKEA's energy efficiency efforts go beyond its retail stores and factories to its supply chain -- a complex network of approximately 1,000 different suppliers worldwide. Each supplier must be vetted as meeting IKEA's supplier code of conduct, or IWAY. This task is currently handled by 80 supply chain auditors who, by examining the stages of this chain at various points throughout the year, have improved supplier energy efficiency by 10%. While this efficiency improvement is certainly good from a business perspective for IKEA and the suppliers themselves, it also ties in well with IKEA's greater goal of evolving into a clean, environmentally friendly company.

The IKEA Group has also invested heavily in sustainable raw materials like cotton and wood, two core materials in its line of furniture and home goods. Almost one third of wood supplied to IKEA for fiscal year 2013 was either certified as sustainable by the FSC or recycled.

By 2017, IKEA hopes 50% of its wood, or 10 million cubic meters, will come from recycled wood or sources certified by the Forest Stewardship Council (FSC), according to the 2014 State of Sustainability Initiatives Review of the green economy.

IKEA has also worked closely with the World Wildlife Fund to obtain sustainability certification for over 30 million hectares of forest worldwide with the goal of adding 15 million more by 2017.

IKEA’s use of sustainable cotton has more than doubled from 34% in fiscal year 2012 to 72% in fiscal year 2013. Within the next two years, IKEA anticipates that all of its cotton will be sourced from sustainable producers.

Sustainable cotton producers follow standards of the Better Cotton Initiative (BCI), a sustainability effort that in 2012 accounted for 2% of world cotton production, the Sustainability Initiatives Review said. BCI production worldwide increased from 34,300 metric tons in 2010 to 623,000 in 2013, the review said.

The Sustainability Review credits IKEA’s commitment to use cotton grown under the BCI for 100% of its supply as part of the reason BCI cotton is expected to make up 30% of the world production by 2020.

By focusing on its supply chain in addition to an energy efficiency strategy in its factories and retail locations, IKEA is pursuing a strategy for long-term economic growth and a significant reduction in its environmental impact. While 2020 is a ways off, IKEA appears well positioned to meet its sustainability goals and, as such, serve as an example for other companies.

Green supply chain management is a vital component of any business. Green supply chain certificate courses can provide in-depth knowledge about this important part of supply chain management with topics that include essential strategies, carbon accounting and purchasing essentials.

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Category: Supply Chain Management