Uber-Efficient IKEA Has More in Store

Uber-Efficient IKEA Has More in Store

The Swedish meatball of big-box retail is ready to market its macho environmental goals.

To some, IKEA is the Wal-Mart of the furniture world, a big-box, buy-in-bulk retailer wrapped in the bright blue and yellow of the Swedish flag. To others, the company named in an acronym after its founder Ingvar Kamprad and his childhood home and hometown Elmtaryd in Agunnaryd, is a paragon of sustainability.

The paradox is in part due to IKEA's strategy of pursuing environmental and social initiatives with hardly a thought to communicating either goals or results to the public. The company's first attempt at reporting, in 2003, followed over a decade of hard work on environmental actions, such as phasing out PVC (polyvinyl chloride), radically simplifying packaging, and putting together a strict environmental and social code of conduct for suppliers.

But IKEA's growing global presence -- 234 stores in 34 countries, 2005 sales of over $18 billion -- seems to have finally awakened the Swedish giant to the demands faced by multinational companies.

"We would present it this way: A part of Swedish culture is to be humble, and that’s also part of our culture -- not putting ourselves on a pedestal or patting ourselves on the back," says corporate social responsibility manager John Zurcher. "But we have also recently realized that many companies are much more transparent and visible about what they do, and we need to be more visible too. In the U.S., we have had a lot of discussion about the fact that in an IKEA store you really don’t get any communication about what we are doing."

Three-Year Plan

Like Wal-Mart, IKEA is a company obsessed with low prices. Founder Kamprad is a notorious cost-cutter, and current CEO Anders Dalvig is noted for his forays to global factories to advise the locals on efficiency. In addition, IKEA’s pride is its famous "flat packs" of boards customers are expected to take home and assemble into the same functional bookshelves and counters featured in stores.

But the company has also adopted the motto “Low price -- but not at any price,” a credo reflected in ambitious goals recently adopted for 2006-2009.

IKEA’s U.S. locations aim to reclaim 90 percent of store waste by the end of 2009 (the stores currently average 67 percent). All new stores need to be built to a certified green building standard. Organic goods -- starting with coffee, strawberry jam, blue cheese, tomato sauce, and schnapps, the Swedish aquavit -- will be phased-in to both IKEA’s restaurants and its “Swede” shops. In the same three-year goal period, the company plans to encourage 10 percent of its customers around the world to travel to its stores using public transport.

A partnership between IKEA and Flexcar in the San Francisco Bay Area already places pick-up trucks at IKEA to help public-transport customers get their flat packs home.

And because IKEA has realized that ambitious plans wither unless top management is involved and committed, Zurcher says, the company will give all its store managers environmental and social responsibility trainings before the three years is up.

The Formaldehyde Incident

IKEA’s “aha” environmental moment occurred in the late '80s, when sustainability was barely a blip on most companies’ radars. A popular IKEA children’s bookcase sold in Germany tested with unacceptable levels of formaldehyde. A media furor totally rocked the company. IKEA stopped production of the bookshelf and lost tens of millions of dollars from slack shelf sales and costs associated with finding the formaldehyde source, according to a report by The Natural Step (TNS).

It was a costly lesson, and it led to IKEA drafting an internal environmental policy as well as joining with TNS to help it implement goals such as stringent supplier and wood sourcing programs.

Although IKEA no longer works with TNS, certain lessons stuck. Instead of designing a few higher-priced environmentally marketed products, IKEA has concentrated on a step-by-step tweaking of its best selling products. Only recently has a group of global IKEA designers been given the explicit task to get wild and crazy with the “eco”- theme, resulting in its new “ps” line of products.

But while some ps products may be truly innovative -- a chair of rubber bands and metal rails, a carpet of industrial scraps, storage boxes of recycled Indian newsprint -- the stores are still devoid of information about the improvements.

“IKEA is considered a company that cares about the environment and worker conditions within the supplier chain, but they don’t really advertise or promote their initiatives that much.”

says Pontus Cerin, a researcher at Sweden’s Environment Institute. “They have their own systems and ways of doing things.”

Zurcher insists IKEA is changing. He said a program with American Forests hatched in June will demonstrate IKEA’s commitment to broadcast environmental credentials.

At point of purchase, IKEA will ask customers to donate $1 to plant a tree. Each store has a 30,000 tree goal, as 30,000 trees will offset estimated carbon dioxide emissions created by customers traveling to and from a single IKEA in a year.

Zurcher says IKEA is testing unfamiliar waters with the Plant-A-Tree program, which involves a new form of customer interaction.

“We’ve never asked our customers for money before,” he says. “It’s a bit of a mystery how fast we’ll raise the money.”

Zurcher says the program is only the first stab of a much larger campaign. “It’s all about communication, and that’s a strategy we have to take forward.”

This article has been reprinted courtesy of Sustainable Industries Journal. It first appeared in the July 2006 issue of that publication.