IKEA’s Sustainable Success: A Model of Environmental Responsibility and Corporate Growth

“Our strong commitment to the environment and sustainability is a part of our business plan and reflects our Swedish heritage,” says Joseph Roth, IKEA’s U.S. public affairs manager. “We’re always looking for ways to incorporate sustainable business practices into our operations because it is good business and the right thing to do.”

Sustainable Success

Founded in 1943, the Sweden-based company has expanded its U.S. presence since it entered the market in 1985 and created a buzz among consumers. In the course of the last 10 years alone, it has grown to include 38 stores in the U.S., and its annual revenue in the States has grown from $1.22 billion in fiscal year 2001 to $3.7 billion in fiscal 2011.

The company’s North America headquarters are located in suburban Philadelphia. It employs 12,000 people in the United States and has distribution centers in Perryville, Md.; Tacoma, Wash.; Tejon, Calif.; Westampton, N.J.; and Savannah, Ga.

Globally, the company’s fiscal year 2011 sales totaled $35.5 billion. The company has 131,000 employees around the world and more than 330 IKEA stores in 40 countries.

IKEA’s steps to sustainability begin inside the stores. It was the first mass retailer to phase out the use of plastic bags and the first mass retailer to eliminate the sale of incandescent light bulbs in favor of compact fluorescents and LEDs.

All IKEA stores have energy-efficient lighting, HVAC and water consumption systems. The company has converted from paper towels to hand dryers in restrooms, and all stores engage in composting and have aggressive recycling program, too. In fact, 80 percent of all waste – including wood, glass, paper and cardboard – is recycled.

In addition, IKEA’s furniture designs are flat-packed, which means the company can transport more products in each shipment and use fewer trucks. Flat packing also reduces waste. These sustainable initiatives are beneficial to the environment and to consumers, who see savings because of IKEA’s shipping cost reductions.

“The products themselves are designed with sustainability in mind,” Roth says. “Frequently, our designers try to be resourceful and manufacture from products that are not commonly thought of, such as wasted banana leaves or recycled wood chips. That way, we are creating something that is durable and sustainable. Because we are uniquely integrated and control the product pipeline from development to retail, we can inject sustainable practices at all steps along the way.”

Next-Generation Thinking

Sustainability extends to power generation and consumption. IKEA is in the process of installing solar panels at all of its U.S. distribution centers and nearly 90 percent of its U.S. stores. The generating capacity will total 38 MW, with an annual output of 103.2 million kWh of electricity. That is equal to reducing more than 71,000 tons of CO2, removing nearly 14,000 cars from the road and powering almost 89,000 homes.

Although these systems won’t generate all energy used by the stores, those installed at distribution centers should generate all needed energy. The only reason the company isn’t installing solar panels at all U.S. stores is logistics.

“Some of the buildings we didn’t build,” Roth says. “We acquired or retrofitted them, and they don’t support solar panels because of factors like skylights, rooftop AC systems or not enough roof area. But regardless of what is on top of the roof, all of our stores are as energy efficient as possible.”

Solar power is not the only renewable energy IKEA is pursuing. For all new store developments, locations are being evaluated for their geothermal potential. Thus far, one geothermal project has been completed at IKEA’s Denver-area store, which opened last fall.

Prior to construction of the 415,000-square-foot store, 130 5.5-inch-wide by 500-foot-deep holes were drilled to accommodate a system of pipes to hold heat-transferring liquid. This liquid circulates through underground loops to warm or cool the store. The store itself was then constructed on top of the geothermal system.

“This was first new store in the U.S. where a geothermal system was deemed to be feasible,” Roth says. “That store also has a solar panel system and is practically energy independent.

“Around the world, we have completed about 15 to 20 geothermal projects,” he adds.

In the U.S., geothermal and solar systems are likely to remain the company’s focus. Globally, it has purchased some wind turbines to help with power generation. But since IKEA knows it will need to purchase energy as well, it tries to purchase energy generated by renewable sources wherever possible.

Newly constructed IKEA stores are built with various recycled materials. Other sustainability measures take place inside the stores, such as the use of non-volatile compounds in paint. Six IKEA U.S. locations were built and certified to LEED standards. They include stores in Oregon, Ohio, Florida, New York and Massachusetts, as well as the company’s Pennsylvania corporate office.

IKEA has accomplished much during the last few years, and it will be a challenge to match or exceed what it has already done in the sustainability realm. But it has much to do. The company’s long-term goal is to have all of its energy coming from 100 percent renewable sources. It is at 50 percent now, so the company has plenty to achieve in the coming years, and Roth says it is on track to accomplish it.

“By the end of fiscal 2015, we will produce renewable energy equivalent of at least 70 percent of the energy we consume,” Roth explains. “By the end of fiscal 2020, the IKEA Group will produce as much renewable energy as we consume in our operations.”

As the company presses ahead, it is determined to continue to create a clear vision internally and externally that will help it operate sustainably, and help customers to live more sustainable lives. As part of this effort, IKEA is crafting a consistent and effective in-store messaging campaign to ensure that shoppers are aware of its sustainability initiatives and its work with organizations that benefit children and the environment, such as UNICEF, Save the Children and American Forests.

“We believe that our customers place a high value on sustainability, and that it matters to them if the places where they shop engage in strong environmental practices,” Roth says.

“We believe we have made great strides in that area and look forward to continuing to do so, setting a good example and empowering cust­omers to be more sustainable,” he adds.