Ikea Case Study
For a long period of its operation in the market, IKEA has been striving for decreasing its impact on the environment and increasing its contribution to a sustainable society and environment. The company has taken many efforts and invested much time and money into the development of practices that can allow achieving such goals and making the products safe both for consumers and nature, in general. On the one hand, such efforts were taken by the company to meet all the regulatory requirements and be able to sustain its operation in the market without facing any fines and penalties or losing consumer loyalty and trust. On the other hand, they are the reflection of the IKEA management’s desire to sustain a healthy society and environment by showing an example of safe corporate activity. Therefore, the purpose of the IKEA sustainability report is to show the outcome of its corporate actions that were taken to meet the goals and provide stakeholders with information on the company’s current achievements. In other words, it may be suggested that it is used as evidence of the fact that IKEA declares that the company is willing to contribute to the development of a sustainable environment and society. Also, it demonstrates that the company implements its plan and makes actual steps toward the achievement of its goals.
The operation of IKEA is regulated by two types of environmental regulations. On the one hand, there are legal requirements that consider what types of natural resources, particularly wood, may be used in the process of production. On the other hand, there are regulations regarding the content of hazardous substances in the already manufactured products, for example, formaldehyde and heavy metals.
To assess compliance with the environmental/sustainability regulations, it was possible to apply two approaches. First, in order to check the requirements regarding the use of resources, suppliers and manufacturers could have been required to provide documentation on what type of wood they used and where it came from. Second, in order to assess the content of hazardous substances, regular samples from every batch could have been taken and analyzed by third-party laboratories with the view to ensuring independent results.
For the purpose of information collection and analysis, IKEA applied the strictest requirements to every market, in which it operated. Also, instead of analyzing the actual batches, the company evaluated the methods used in the process of manufacturing.
Currently used purchasing strategies include cooperation with suppliers that get materials from replanting forests and the ones that are well-managed. This way, IKEA eliminated the threat of using insecure and hazardous materials in its products.
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Targets for Improvements
The staff working for IKEA was the primary target for improvement under the newly adopted strategy. The company decided to utilize the approach known as train-the-trainers. According to it, IKEA selected the key management personnel from individual departments and suppliers and sent them for training that had lasted for several days. Afterward, these employees would return to train other people in the company and work on providing environmental and sustainability training. Eventually, stakeholders, including consumers, we’re also consulted concerning IKEA recycling procedures and the assistance of the staff in answering their questions.
To be able to implement its sustainability and environmental targets, the company accessed certain external sources of information. First of all, IKEA collected the data on regulations in different markets and set the strictest ones, as well as the basic criteria, for each of its products. Secondly, the company collected the information on the materials used by suppliers and manufacturers, with which it cooperated, to ensure their safety for human health.
In 2008, IKEA set efficiency targets to increase the on-site recycling in its stores, decrease the exhaust pollution due to insufficient logistics, eliminate contents of formaldehyde and heavy metals in the products, lower the use of PVH, make the products more efficient in terms of space used required for transportation, and use less electricity in stores in kWh. These goals were planned to be achieved by 50-80%. However, recently, in 2016, they were set to be met completely, while the adverse impact was to reach zero.
Performance Improvement Strategies
To achieve efficiency targets, IKEA made a decision to resource to external help. The company established relationships with environmental agencies that provided staff for training IKEA employees on the matter of sustainability. Besides, it learned all the governmental environmental regulations and applied them to its operation in order to achieve high-efficiency targets. Finally, the company used its new strategy as an additional motivation for employees since it was positively perceived by them.
To apply continuous improvement strategies, IKEA did not give up the train-the-trainers strategy; it did not stop conducting training for the staff, which later educated other people in the company. Besides, it helped suppliers and manufacturers adjust their production facilities; it was a timely initiative. Finally, IKEA set a long-term goal of increasing its efficiency by renovating and improving its stores and manufacturing facilities.
Ideas about environmental and resource efficiency management did not originate from top managers only. Instead, the company highly encouraged employees and consumers to share their ideas. The new strategy was taken well, and people were motivated by it. Besides, other stakeholders that were influenced by the activity of IKEA, including governmental and non-governmental organizations, also contributed to the new approach of the company by suggesting ideas and providing training for employees.
To conduct evaluation and monitoring, IKEA, first of all, applied the strictest standards and legal requirements for its production procedures and materials used. Secondly, it started cooperation with various agencies on the matters of evaluation, staff training, and consulting.
The outcomes on efficiency targets were reported to the key personnel and stakeholders via annual reports. Currently, such reports are available online; it is another approach that is used by IKEA in an attempt to decrease the use of paper by replacing it with digital technologies.
Strategies and improvement plans were evaluated in two different ways. First, they were assessed against sustainability and environmental regulation in order to achieve the highest efficiency. Secondly, the materials and production and selling facilities were evaluated in terms of their impact on the environment. Conclusions made were used to improve the plans and set new objectives, for example, the goal of increasing on-site recycling.
New efficiency targets were set based on the results of the evaluation of the current efficiency, sustainability, and environmental impact. New tools and strategies were applied in accordance with the need for them. Specifically, when IKEA started using the Natural Step Strategy, it referred to third parties, including governmental and non-governmental agencies, to provide training and other assistance.
Successful strategies were promoted by financial and professional benefits. As it is indicated in the case, the trainers were selected from among the staff. Therefore, active participants were able to do the job that was new to them. At the same time, consumers were also rewarded by receiving money for recycling the old furniture at IKEA stores.
By adopting the environmental and sustainability-oriented strategy, IKEA has made a long-term investment that contributed to its success in the market and high revenues. Over the period from 1990 to the present day, it has managed to design and implement its sustainability goals effectively by investing time and resources, as well as turning for help to the third parties. Also, a major driving factor that motivated their goal was the interest of the management and the employees, who took the new strategy positively, in decreasing the adverse effect of the company’s operation on the environment. Therefore, by focusing on sustainability rather than profits, IKEA has managed to strengthen its market position and win the customers’ loyalty and support.