Ikea: Stock Market Pressures Hinder Sustainability

Ikea’s private ownership helps the company act sustainably, according to the firm’s CEO, in a case study prepared for the launch of Climate Week NYC.

“What is good for our customers is also good for us in the long run. We are not on the stock exchange, so we can act long term,” CEO Mikael Ohlsson wrote, in a case study on CleanRevolution.org, launched yesterday by Climate Week NYC secretariat The Climate Group.

CleanRevolution.org features case studies from four businesses and four governments as part of the group’s Clean Revolution Campaign, which aims to help the world’s most influential business and government leaders to take transformational action on climate change. The organization is aiming to make the website the world’s most comprehensive source of information on business and governmental best practices on climate change. Both the United Nations and the World Bank endorse the website.

In its case study, Ikea said that its history and ownership model have created a strongly values-based organization with a social mission, and that the company has avoided the “short-term profit obsession” of a listed firm. The Ikea Group is owned by the Stichting INGKA Foundation, and all Ikea Group companies are held by INGKA Holding B.V.

Ikea quoted Jack Welch, the former CEO of General Electric, as saying, “Shareholder value is the dumbest idea in the world. [It] is a result, not a strategy. Your main constituencies are your employees, your customers and your products.”

Ikea added, “While many current-day CEOs may agree in principle, the pressure of quarterly earnings reports can nevertheless push executives to favor short-term profits over long-term success.”

But the furniture retailer said its unique ownership model allows it to take a long-term view on costs, investments and products. “The approach has resulted in some pioneering actions on the sustainability front such as setting a bold 100% renewable energy target and selling only energy-efficient lighting in its stores,” the company said.

“How has the long-term approach affected profits? FY2010 profits for IKEA Group have increased 6.1% to $3 billion.”

In its own case study, BT Group said that its status as one of the U.K.’s biggest energy users has helped the firm identify cost and efficiency savings as well as new, external business opportunities.

The website also features case studies from Indian wind turbine maker Suzlon; from Better Place, the Israel firm pioneering battery-swapping infrastructure for electric vehicles; and from New York City, Scotland, China and South Australia.