Steve Howard: IKEA-Style Sustainability

We want our business to have a positive impact on the world and be energy and resource independent. We want to help millions of customers live a more sustainable life at home. We want everybody that helps in the value chain to have a better quality of life.

Democratic design is one. The original business idea was that quality and design shouldn’t have to equal high price. We’ve got people obsessed with how you improve the product, improve performance, improve quality and improve on price. And we use scale and really good knowledge of materials and manufacturing techniques to constantly lower prices.

I’ll give you an example. On a storage system, you don’t want a big heavy solid door, you want a door that’s robust. By putting in high-density fiberboard over honeycomb paper, we give you fantastic rigidity. It performs exactly how you want a door to perform, but you’ve totally dematerialized it. From a sustainability point of view, you’ve taken out material by in some cases 60, 70, 80 percent. And we can pass on the price advantages to the customer.

Resource scarcity is a massive issue. We have fantastic numbers of people coming out of poverty around the world, billions of people in emerging markets surging out of poverty from Brazil to China. That means supply has finally met demand, and we can see increasing and volatile commodity prices. So the next decade’s business is going to be shaped by who’s really efficient, where they get sustainable raw materials from, and the way they make their products. And who can close the loop and fully recycle things, and who can dematerialize their offerings as much as possible.

Climate change is a biggie. That’s why we’re into renewable energy and expanding renewables in our supply chain as well. It’s done because it’s just the right thing to do, but it also future proofs you. We make long-term business decisions. Most businesses don’t, I think, really look that far ahead.

Some of this is in the DNA of the company. Coming out of Sweden we come from a frugal farming community. You earn before you spend. You save for hard times. You build walls out of stone you collect from the field, with a huge amount of effort involved for a long time. That is very much the IKEA mindset — long-term thinking. So the company has always earned the money before it’s spent it, saved money for a rainy day and invested it in growth. The company’s financially robust, with money in the bank. We own our stores. We own the land they’re built on. You can be as sustainable as you want to be from environment and social [standpoints] if you can ensure your commercial success.

On people: We have four cornerstones in our overall strategic plan for our company: growth, people, sustainability and costs. People are our greatest assets. We believe in people and fundamentally recognize everybody’s talents and want everybody to have long-term personal growth. [We plan to] double in size by 2020. If you don’t keep your best people, how do you staff that growth? So people are fundamentally important.

And then being a meaningful company. If you don’t have a very well-framed business idea but just put up a store, it’s hard to think what’s enduring about the business, its contribution to society.

If we look at changes in the world [such as] climate change — to be energy independent, that’s part of future proofing. Owning our own zero carbon electricity generation is a robust long-term financial strategy as well as a values-driven sustainability strategy.

And looking at how can we live in an already resource-scarce world. How do you dematerialize your production? We can grow volumes with a very small increase in the actual raw materials. We switched from using particleboard to using high-density fiberboard. It’s a mini revolution. We need doors to be robust. A door doesn’t need to be heavy. So we dematerialize the door as much as possible. In a world where we see more people coming out poverty — which is fantastic — where you see a doubling of consumer demand in a little more than a decade in an already resource-scarce world, that is a strategy for future proofing. Efficiency has become mission critical. It was always important, now it’s mission critical.

Next is to look at sustainability in the raw materials themselves. Going forward, we need to absolutely secure sustainable raw materials. So we push to create better cotton. We’re working with others to ensure forests meet Forest Stewardship Council sustainability standards.

Have a really strong alignment on the value chain, so you’re aligned from the values point of view, not just paying lip service. Securing good conditions in factories, you [find] you get ancillary benefit. What we can really see is that when you improve factory conditions, when you improve people’s working conditions, it delivers better quality and overall management performance. That’s part of future proofing as well.

I’m really optimistic that we can solve all of these challenges and create a fantastic world, a world where we’ve aligned the environment, the economy and society. But I’m concerned about how long it takes to get it done. I think, unfortunately, we’re now in a situation where we’re probably going to have some surprises.