Ikea Circular Economy Example

The Ikea circular economy case study highlights some of the key changes it is making to its business model

Gary Fox

Ikea Business Model Canvas

 Ikea Circular Economy Example

IKEA circular economy iniatives demonstrate how the Ikea business model aligns with several of the United Nations Sustainable Development Goals (SDGs). Here’s how IKEA approaches sustainability through various initiatives and strategic drives, along with a look at criticisms it faces in this area.

Key Facts About Ikea

. Company name:

Ikea

Founders:

Ingvar Kamprad

Launch date:

1943

Year founded:

1943

Company CEO:

Jesper Brodin

Headquarters

Leiden, Netherlands

Number of employees

219,000 (2023)

Ticker symbol

IKEA is privately held

Annual revenue

47 billion euros (2023)

Profit | Net Income

1.507 billion euros (2023)

Market Cap

IKEA is privately held

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History and Timeline of Ikea

SDG Goals and Sustainability Initiatives

1. Reuse, Repurpose, Recycle, and Upcycle

  • Reuse: IKEA encourages the reuse of its products through initiatives like its “Buy Back & Resell” service, where customers can sell back their gently used IKEA furniture to the store for resale or donation.
  • Repurpose: IKEA has developed projects that focus on repurposing products, although specific large-scale initiatives are less publicized compared to their efforts in recycling and reuse.
  • Recycle: IKEA is committed to using recycled materials in its products. The company aims to use only renewable or recycled materials by 2030.
  • Upcycle: While specific upcycling projects are not as highlighted, IKEA’s focus on using recycled materials indirectly supports upcycling by transforming lower-value materials into higher-value products.

2. Reduce

  • IKEA strives to reduce its environmental footprint by minimizing energy consumption and waste in its operations. The company has invested in renewable energy sources, including solar and wind power, to power its stores and factories. IKEA has also committed to becoming climate positive by 2030, aiming to reduce more greenhouse gas emissions than the IKEA value chain emits.

3. Recover

  • In terms of recovering energy or materials, IKEA has implemented measures to minimize waste across its operations. This includes the recycling of materials such as wood, cardboard, and plastic in its stores and throughout the supply chain.

Alignment with Specific SDGs

  • Goal 12 (Responsible Consumption and Production): IKEA’s efforts to use sustainable materials and improve resource efficiency directly align with this goal.
  • Goal 13 (Climate Action): IKEA’s investment in renewable energy and commitment to reduce carbon footprints aligns with actions to combat climate change.
  • Goal 15 (Life On Land): The company’s responsible sourcing of wood, the main raw material, aims at supporting sustainably managed forests.

Ikea Circular Economy Initatives

These initiatives are part of IKEA’s comprehensive efforts to innovate, reduce its environmental impact, and promote social equity across its global operations. Let’s delve deeper into these efforts:

Innovation and Technological Development

IKEA has been actively innovating to reduce its environmental footprint and enhance product sustainability:

  • Bio-based Adhesives: In Lithuania, IKEA has implemented the use of bio-based glue in its Industry board factory. This initiative not only reduces reliance on synthetic adhesives, which often contain formaldehyde and other harmful compounds, but also promotes the use of more sustainable, less environmentally damaging materials.
  • Recycling Technologies: IKEA is exploring new technologies for recycling fibreboard, aiming to improve the circularity of its products and minimize waste. This involves developing methods to efficiently reclaim and reuse materials from end-of-life products.

Climate Action Goals

IKEA’s commitment to climate action is evident in its ambitious targets and the progress made towards these goals:

  • Greenhouse Gas Emissions: IKEA aims to halve greenhouse gas emissions from its value chain in absolute terms by FY30, a critical step in mitigating climate change impacts.
  • Renewable Energy: Significant progress has been made towards using 100% renewable electricity across IKEA stores, with 25 retail markets achieving this goal. Additionally, 408 factories or suppliers now operate entirely on renewable electricity.
  • Product Use Impact: The climate footprint from product use at home has decreased by 13% compared to FY22 and by 52% compared to the FY16 baseline, reflecting the effectiveness of energy-efficient products and consumer engagement strategies.

Packaging and Waste Reduction

IKEA’s approach to packaging and waste highlights its efforts to minimize environmental impact:

  • Plastic Packaging Reduction: There has been a significant reduction in plastic packaging, with approximately 47% less plastic used in consumer goods packaging and a total reduction of about 44% across all packaging types compared to FY21.
  • Ceramic Waste Utilization: The new SILVERSIDA tableware range is made using ceramic production waste, demonstrating IKEA’s commitment to upcycling and resource efficiency.

Product Longevity and Recycling

To extend the lifespan of its products and enhance their recyclability, IKEA has introduced several initiatives:

  • Spare Parts Provision: By providing 23.2 million assembly parts, IKEA enables customers to repair and prolong the life of their products.
  • Down and Feather Recycling: The pilot program for the return and reuse of down and feathers in products like the GULKAVLE pillow and FJÄLLBRÄCKA duvet showcases innovative recycling practices in the textile sector.

Air Quality and Environmental Stewardship

IKEA’s initiatives also include enhancing indoor environments and promoting responsible sourcing:

  • Air Quality Monitoring: The launch of the VINDSTYRKA sensor helps customers monitor and improve air quality inside their homes, promoting health and well-being.
  • Sustainable Wood Sourcing: Achieving 97.8% of wood used in products being either FSC certified or recycled aligns with responsible forestry practices and biodiversity conservation.

Social Equity and Fair Employment

IKEA is also focusing on social equity and fair employment practices:

  • Living Wages: The deployment of the Responsible Wage Practices framework across the IKEA business indicates a commitment to fair compensation.
  • Social Enterprise Partnerships: Collaborating with seven social businesses to create a global collection provides employment opportunities for vulnerable and marginalized groups, enhancing social inclusion.

Criticisms Regarding Sustainability

Despite these efforts, IKEA has faced criticism regarding its sustainability practices:

  • Deforestation Concerns: There have been concerns and criticisms about IKEA’s impact on forests, with allegations of involvement in illegal logging activities or sourcing from controversial suppliers.
  • Scale of Consumption: As a major global retailer, IKEA’s business model is based on mass production and consumption, which inherently contradicts sustainability principles, despite efforts to mitigate these effects.
  • Product Longevity: Critics argue that the affordability and design of IKEA products may encourage a disposable mindset among consumers, although IKEA has been working towards increasing the durability and longevity of its products.

IKEA continues to work on addressing these criticisms and improving its sustainability measures, aiming to balance economic growth with environmental and social responsibility. This journey towards sustainability is a core aspect of IKEA’s strategy, influencing every part of the organization from product design to end-of-life handling, reflecting a commitment to a more sustainable future. See the Ikea Business Model for more information.

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