Since it was founded in 1948 by 17-year-old Ingvar Kamprad in the small Swedish village of Angunnaryd, IKEA has grown into a sprawling flat-packed furniture empire with more than 300 stores in 37 countries and online sales bringing in more than €21.5bn in revenue. Having taken the top spot in the global furniture market, the company is looking to transform itself into a ‘better’ company by putting sustainability and energy efficiency at the top of its corporate agenda. Power Technology speaks to IKEA global sustainability manager Steve Howardabout switching over to renewables,selling solar panels and other steps towards a low-carbon future.
Adam Leach: Ikea recently described sustainability as a chance to make "a new and better" company. How will you achieve this?
Steve Howard: It’s about looking at everything you do and making your business fit for the 21st century. It means investing in energy efficiency and your own supply of renewable energy. It means eliminating waste, transforming the sustainability of the materials you use and developing products and services that improve people’s lives and contribute to a better future.
AL: Which renewable power generation methods are IKEA currently considering?
SH:We firmly believe that renewable energy is good for our business and we consider all technologies that meet the required payback period. In the last few years, we have invested significantly in wind and solar generation but we also install geothermal systems in our stores where it makes sense to do so. Biomass is also an important renewable energy source for IKEA. Almost 80% of the heat energy consumed in our own manufacturing operations comes from waste wood.
AL: In addition to investing significant resources in solar power to fuel operations, IKEA is also selling solar panels in its stores. What other business opportunities have opened up?
SH: We know that our customers want to live more sustainably, but won’t compromise on quality, functionality or price. And we believe they shouldn’t have to. We want to make sustainability affordable and attractive to as many people as possible. Home solar systems are a fantastic way for people to cut their household bills and generate clean energy. An average UK family can cut their electricity bills in half with a solar installation and after around seven years they will have paid back their costs and can generate renewable energy for free for decades.
The Department of Energy & Climate Change has developed a tool that will help developers calculate the sustainability of biomass feedstock .
LED lighting is another great example. LEDs use 85% less energy and last 20 times longer than incandescent bulbs. Together with our suppliers we have invested in highly efficient production. This has enabled us to significantly reduce prices, which means it now takes under a year to earn back the price you paid for the bulb and then you continue to save money and energy for years. We are changing our whole lighting range to LED by 2016.
AL: What progress has been made towards the target of increasing energy efficiency by 20% by the end of 2015?
SH:Preliminary figures for the last financial year show we are making good progress. Since 2010 we have saved around €66m by investing in energy efficiency in our stores and distribution centres.
AL: What action has the company taken to embed an energy efficient mindset across the company?
SH:As a low-cost company, economising with resources is part of our roots. Energy
efficiency is something that you need to continue to work at each day and each store has its own energy goal and we review progress towards this every two months. In many countries energy consumption is one of the measures used in assessing overall store performance.
We have also identified more significant investments that can make a big difference. For example, we’re rolling out energy-efficient lighting, including LED lighting, to around 200 of our stores and other facilities. We plan to invest around €100m, which will deliver a 15% energy saving per store and total annual cost savings of €15m.
AL: How have suppliers responded to the Suppliers Go Renewable initiative and how has IKEA supported the suppliers in transitioning to renewable energy sources
SH: We want to work long term with our suppliers, and always look for partners that share our values and commitment to sustainability. Suppliers Go Renewable is a great example of how you can achieve results by working together. Preliminary numbers for the last financial year show good improvements in energy efficiency and carbon efficiency at tier 1 home furnishing suppliers compared with FY12.
AL: How have customers responded to the company’s drive to become 100% renewable by 2020? Have new customers become attracted to the company as a result of the strategy?
SH: We know that our customers care about sustainability and issues like climate change and they want and expect companies like IKEA to be part of the solution. We invest in renewable energy because we want to have a positive impact on the planet, because it makes good business sense and because we want to meet the expectations of our customers.
AL: It was recently reported that the company would consider adopting an internal carbon price in order to incentivise a shift away from fossil fuels. How might that drive sustainability?
SH: We have an ambitious strategy to invest in energy efficiency and renewable energy and have made good progress so far. We are looking at the possibility of implementing an internal carbon price to understand whether it could help us go further and faster. It’s still early days for us, with many aspects to consider before deciding whether this could be useful for us.
AL: Should governments be offering greater support to incentivise businesses to make their operations more sustainable?
SH: All parts of society have a role to play in tackling key sustainability challenges. Businesses can do a lot today, but policy leadership is also crucial in some areas. For example,strong policies to tackle climate change will provide the stable, long-term framework needed for business to transform their operations and invest in the products and services for the future.