IKEA argues for businesses to go all-in on sustainability
Ask sportspersons what their ultimate aim is — from Usain Bolt and Serena Williams to Eric the Eel — and they'll tell you it is to win, finish top, or be the very best at what they do. Their achievements may not always match their ambitions straight away, but in their vastly competitive world, they nevertheless set their targets as high as possible.
Yet in the business world, arguably just as competitive, many companies rely on incremental improvements and short-term goals that are revised and updated every few years.
But some firms are bucking the trend for step-by-step climate action, ditching incremental targets in favor of long-term goals for a complete green overhaul of their business strategies.
This, at least, seems to be the view of IKEA, which has promised that by 2020 the company will have a net positive impact on the environment. Steve Howard, chief sustainability officer at IKEA, describes this tactic as "going all in" — although he certainly doesn't see it as gambling.
"Going all in is a mindset," he told a climate conference in London last week. "If you are going to eliminate carbon emissions, then you have got to set 100 percent targets."
Companies saying ‘we're not going to be half as bad as we are today' leave everybody confused.
His argument was that for businesses setting 90 percent targets, for example, many staff and colleagues instinctively will try to be part of the remaining 10 percent to preserve the status quo. Meanwhile, setting even lower targets of around 50 percent — or as Howard put it, saying "we're not going to be half as bad as we are today" — is not very aspirational and leaves everybody "completely confused."
"You've not declared what success looks like," Howard said. "If you set 100 percent targets, immediately you stop all research and development in historical technologies, products or services and you put all of your efforts into looking at the future."
Speaking to BusinessGreen after his speech, Howard said he was aiming to inspire colleagues in both business and government to drive change quickly. After all, following the Paris Agreement, there has never been greater momentum towards tackling climate change, yet still only 19 of 174 signatory countries so far have started the process of ratification. There is a growing sense that business will be in the driving seat when it comes to accelerating carbon reduction.
"There's that conversation in science: Do we have time?" Howard said. "If we really get going, we just have time. 1.5 degrees is an incredible challenge, and sub-2 degrees would be a major result for mankind, but that requires a mindset which is all about transformational change, radical decarbonization and new products and services instead of old techniques."
But in order to sell this idea to business and policymakers, he argued, "you need to make it about something businesses can get behind — innovation, investment and growth."
So, by 2020, not only does IKEA say its entire business will run on renewable energy, but that it will produce as much renewable energy as it consumes. Simply put, IKEA is investing heavily in its own solar and wind installations — $1.95 billion up to 2015 — so that it is entirely energy independent.
Crucially, not only are these initiatives important for the environment and stemming the tide of climate change, but it is good for business, said Howard. IKEA set the 100 percent renewable target because it wanted control of its energy sources instead of paying higher energy costs to utility companies.
"Within six years solar will be at a price point where, to get the same amount of energy, a barrel of oil would have to be $16," Howard adds. Or to put it another way: For oil to be cost-competitive with solar in six years, it needs to be at $16 a barrel.
IKEA now owns and operates 700,000 solar panels and 29 wind farms worldwide. In the Nordic countries the firm is already energy independent, while it is also on track to reach this target everywhere else by 2020.
Set ambitious targets, he said, and you accelerate change — just as IKEA has done with its LED lighting, which have an improved lifespan and energy efficiency compared to incandescent or fluorescent bulbs. As of this year, the home furnishings retailer has sold only LEDs in its stores — effectively banning the sale of halogens and other lighting technology — and plans to sell 500 million LEDs to customers by the end of 2020.
"We went from almost no LED sales, when it was very early technology five or six years ago, to 63 million — a huge success — last financial year," said Howard. "Then this financial year our projection is that we will sell 100 million. That is the kind of growth that gets business leaders excited. If you look at the similar potential we have on all of the wider range of energy technologies, you have to say the pace of change is accelerating dramatically. The businesses which back it at scale will unlock those opportunities."
Nevertheless, IKEA's ambitious sustainability aims and global leadership on climate change initiatives are arguably the privileges of a multinational business with the resources to back its efforts. Indeed, many global initiatives IKEA is involved with, such as RE100 and Science Based Targets programs, are very much focused on multinationals. How can smaller businesses play their part in taking on the climate challenge?
Howard believes wider use of carbon pricing will be important here, as more businesses will then have to start measuring CO2. But he also points to the relationship between large multinationals and smaller supplier companies as an opportunity to drive change. He says IKEA works closely with its suppliers to make progress on sustainability, with the average supplier having been on IKEA's books for nine years.
"Part and parcel of doing business with IKEA is driving improvement," said Howard. "The supply chains are very powerful — you can share best practice, you can co-invest, you can share education around techniques and you can give a gentle nudge through the procuring business to encourage people in the right direction. I think that's a huge lever for change."
IKEA's privileged position as a multinational company means it is also able to help scale-up smaller, start-up companies with new, creative ideas on sustainability. For example, earlier this year IKEA signed a 20-year plastic purchase agreement with Newlight Technologies. The company — which also has a partnership agreement with IT giant Dell — makes AirCarbon, a plastic produced via a process which captures methane-based greenhouse gases, meaning the resulting material actually has a negative carbon footprint.
"That long-term agreement will enable them to finance a large-scale plant to produce plastic from methane, so we can scale-up small businesses like that," said Howard.
In a sense then, perhaps IKEA is less the athlete and more like the team coach — setting high targets and helping to spur on industry partners to smash them.
Either way, Howard is clear on the IKEA's role and responsibility for driving change in business practices more widely. "You can partner with entrepreneurs and innovators, you can be a provider of finance and you can use your supply chain to drive change. I think you've got to try and use all of those tools at once."
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