How IKEA has incorporated sustainability principles

Topics: Sustainability, Supply chain management, IKEA Pages: 7 (2924 words) Published: December 7, 2013
Introduction
Traditionally, most multinational companies see themselves as competing to survive. However, if this philosophy leads to unwillingness to co-operate, it can be self-defeating. Behind this concept is the idea of supply chain management, which is the network of organizations and individuals who are involved in producing and delivering products to the end users. Thus, a home furnishing company such as IKEA is a part of a supply chain that includes the suppliers of raw materials, component manufacturers, transporters, retail stores and end customers. In the past it was often the case that the relationship with the suppliers was competitive rather than co-operative. It is still the case today that multinational companies will try to achieve cost reductions and quality improvements at the expense of their supply chain partners, but a further dimension has been added sustainability. The aim of this essay is to examine IKEA’s sustainability report and evaluate its sustainability principles. It will explore how IKEA has incorporated its sustainability principles with its suppliers whilst maintaining and improving its strategic competitive advantage in the home furnishing industry. About IKEA

IKEA is a multinational company that produces home products including disassembled furniture, accessories, bathrooms, and kitchens at retail stores around the world. The company focused on disassembled design furniture at reasonable prices in the beginning and is currently the largest furniture manufacturer in the world. From IKEA’s headquarter in Sweden, it operates more than 265 stores in twenty-five countries and employs one 123,000 (Bartlett & Nanda, 1996, pp. 5-20). IKEA designs all of its products, which are mostly manufactured by independent sources, and sells them under its brand name through its own stores and a number of other distribution channels. IKEA owns almost all strategic business units that it relies on for its production, which is crucial for their profitability, since they basically rely on outsourcing their production. For example, it owns the industrial group Swedwood, the main source for the wood that to be used in the manufacturing of IKEA’s furniture, as well as the sales companies that run IKEA stores and the procurement functions. IKEA formed a separate company IKEA of Sweden that is responsible for the design and improvement of the products of the IKEA collection. Sustainable procurement policy

Sustainability is a development concept defined by the United Nations (1987) as meeting the needs of the present without compromising the ability of future generations to meet their own needs. Sustainable procurement policy emerged from this concept. It refers to a set of purposes, principles and rules that guide the work of an organization and put its social, environmental and economic values at the heart of a business to achieve its competitive advantage (Monczka et al., 2010, p. 136). IKEA’s sustainable report demonstrated that they are dedicated and striving to incorporate sustainability within their business relationships by implementing comprehensive principles in order to gain a competitive advantage as a first mover. Those principles expressed explicitly in their code of conduct, which called “IWay”, expressly cover all the three sustainability aspects social, environmental, and economic—and guide IKEA’s internal and external relationships and especially its supplier relationships. This policy is based on their vision “to create a better everyday life for many people” (IKEA Sustainability Report, 2010, p. 6). and is expanded with the 2015 Sustainability Goals that state that sustainability is a priority and should influence the whole value chain from product design to the end of a product’s life cycle. IKEA’s FY2015 Sustainability Goals are: to offer a range of products that is more sustainable, taking a leading role toward a low carbon society, turning waste into resources, reducing water footprint,...

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