IKEA's Environmental Practices: Making Good Business Sense

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Case Details:

Case Code : BECG065
Case Length : 20 Pages
Period : 1992-2006
Pub. Date : 2006
Teaching Note : Available
Organization : IKEA
Industry : Furniture Retailing
Countries : Sweden

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Excerpts Contd...

Eco-Friendly Practices

Apart from developing a wide range of eco-friendly products, IKEA also adopted several eco-friendly practices, right from choosing the location of its new stores to using alternative sources of energy, waste management, and transportation. For constructing new stores, IKEA followed policies and procedures that ensured that the buildings were durable and sustainable. IKEA generally chose Brownfield land for its showrooms. Selecting brownfield land had two advantages. These sites were generally situated in densely populated locations, which was ideal for IKEA's business...

Making Suppliers Environmentally Responsibile

IKEA's products were manufactured at the facilities of 1600 suppliers spread across Europe, North America, and Asia. Almost two-thirds of IKEA's suppliers were in Europe, one-third in Asia, and about 3% were in North America.

The products were made by the suppliers according to IKEA's specifications. Purchasing was handled by 43 trading service offices under 16 regional trading areas.

IKEA's main activity was furniture retailing, which required huge quantities of wood. The company relied on its suppliers to obtain wood. IKEA realized that if the wood was obtained from illegal sources and protected forests, it could considerably damage its reputation...

Audit of Suppliers

Before the first delivery, IKEA conducted the first IWAY audit, which began with a meeting between the auditors from IKEA and representatives of the supplier. The auditors, accompanied by a representative from the supplier, conducted a tour of the factory. From time to time, the auditors questioned the employees of the suppliers to check their conformity with IWAY. The auditors also checked the general working conditions at the factory...

Forest Management

IKEA aimed at creating the minimum impact on Nature through its products, but with wood being its main raw material, environmental damage was inevitable. Forests were important as they held most of the world's bio-diversity and were responsible for balancing water cycles and maintaining a balance in the environment.

Only about one-fifth of the forests remained intact and were called intact natural forests. In several countries across the world, indiscriminate cutting of trees had resulted in environmental imbalance. IKEA obtained timber from 44 countries and took care not to use the timber obtained from intact natural forests. The long-term goal of the company was to source all the wood from well-managed forests...

The Benefits and the Challenges

IKEA cooperated with several organizations on environmental issues. In 2000, it initiated the Business Leaders' Initiative on Climate Change (BLICC). The aim of this initiative was to teach member companies how to measure, report, and reduce CO2 emissions. IKEA also entered into cooperation with the World Wildlife Fund (WWF) for projects in four areas - spread of information & education, supporting certification, responsible forest management, and promoting legal compliance...


Exhibit I: IKEA - International Expansion
Exhibit II: Four Principles of the Natural Step
Exhibit III: KPIS of IKEA
Exhibit IV: IWAY Standards*
Exhibit V: High Conservation Value Forests


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