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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"IKEA deserves praise for the work of phasing out hazardous substances in its products. We have also found that the work on forestry issues is pursued with great commitment and know-how." 1

- Uta Bellion, Greenpeace International, in 2004.

"Done in a sensible way, social and environmental work is good for business. It is good for business because our customers will feel reassured that they are doing business with a company that shares their views and values. And it is good for business because it can also support cost efficiency. Using resources and raw material efficiently, saving energy, improving working conditions at our suppliers and through that getting more motivated people, will have a positive effect on costs and therefore support our business objectives." 2

- Andres Dahlvig, Group President, IKEA Group, in 2005.

"Our ambition is to always strive forward and become better. This also applies to our co-operation with suppliers. All social and environmental activities help us and our suppliers produce more efficiently and profitably." 3

- Andres Dahlvig, Group President, IKEA Group, in 2005.


In October 2005, IKEA Systems BV (IKEA), the Sweden-based global furniture giant, showcased 42 products made of unique, environmentally friendly materials. In 2003, IKEA had asked 28 designers to design sustainable products using environmentally friendly, recycled materials. After working on the products for about two and a half years, the designers came up with innovative furniture using fishnets, recycled packing crates, bamboo, Indian newspaper, saw dust, recycled plastic etc.

One such product was the PS ELLAN, a dining chair priced at US$ 39.99, designed by British freelance designer Chris Martin. The chair was made of wood-fiber composite, which is a blend of wood chips and recycled plastic. The chair could be broken down into six parts, so that it could be packed flat while being transported.

The chair could be put together without any screws being used. Due to the use of recycled material, the chair was priced significantly low and the flat packaging saved on transportation costs. Another instance in Vietnam showcased IKEA's proactive approach to being environmentally friendly. IKEA received several complaints from customers that the fabrics stored in rattan4 boxes smelled of diesel.

Warehouse employees also reported a smell of diesel when they opened the containers with rattan products. One of IKEA's product technicians set out to find out the reason for this and contacted the technician at Vietnam, from where the products originated. It was found that for over hundred years, it had been the practice to boil rattan in diesel in order to make it flexible and that IKEA's supplier in Vietnam had been following this method.

Looking for a better alternative to diesel, the supplier and the technicians from IKEA tried out several materials before settling on a blend of water and palm oil. Rattan that was boiled in water and palm oil at a temperature of 95F did not have a bad odor. Moreover, the process was eco-friendly and safe.

At the same time, IKEA ensured that the palm oil used in the process was not obtained from endangered tropical forests but from responsibly managed forests in Malaysia. These were just a couple of instances that highlighted IKEA's efforts to conserve the environment and minimize the use of wood in its furniture. IKEA, the world's largest furniture retailer, specialized in stylish but inexpensive furniture in Scandinavian designs.

IKEA's Environmental Practices: Making Good Business Sense - Next Page>>

1] IKEA, Social and Environmental Responsibility Brochure, 2004.

2] "Social and Environmental Responsibility: President's Message," www.ikea.com, 2005.

3] IKEA Social and Environmental Responsibility Report, 2005.

4] Rattan refers to several species of palms which grow in the tropical regions of Asia, Africa and Australia. The diameter of rattan ranges from few millimeters to seven centimeters. Rattan is widely used in making furniture as it is durable and can be molded.


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