In another sign of the increasing importance of supply chain sustainability, IKEA has launched a new supplier program that will allow its 1,600 suppliers to consume 100% renewable electricity in their production. About two-thirds of IKEA’s climate footprint is connected to the supply chain. The program will be introduced in 2021 for direct suppliers in Poland, China and India – three of IKEA’s largest purchasing countries.
As I wrote just last week, P&G recently announced its new innovation center for supply chain sustainability. According to Supply Chain Quarterly, which has been tracking supply chain performance for the last thirteen years, we can expect to see the 2020s as a big decade for supply chain sustainability.
According to its sustainability strategy, by 2030, IKEA aims to be a circular business built on clean, renewable energy and regenerative resources, decoupling material use from growth. The goal is to end its dependency on virgin fossil materials and fuels. This includes drastically reducing GHG emissions across the IKEA value chain by at least 15%, and achieving the remaining part by removing CO2 from the atmosphere and storing it through better forest and agriculture management within the IKEA value chain, and prolonging the life of IKEA products and renewable materials.
To support suppliers in achieving the renewable energy goal, IKEA will provide local solutions, such as bundled framework agreements and Power Purchase Agreements to enable suppliers to purchase renewable electricity from the grid. This, according to IKEA, can cover the electricity demands of the supplier, which cannot be generated on-site. The company is also offering to finance renewable energy generated at suppliers’ on-site locations.
Once the target is reached, IKEA estimates that 670,000 tonnes CO2 emissions per year will be avoided, equivalent to approximately 3% of the total climate footprint of the IKEA value chain.
Last year, IKEA joined the 1.5°C Supply Chain Leaders Initiative, where leading companies share their commitment and learnings from engaging their supply chains to limit climate change to 1.5°C. The initiative is hosted by Exponential Roadmap Initiative which is an official partner of Race to Zero, a campaign that is rallying the world’s largest alliance of non-state actors to take rigorous and immediate action to halve global emissions by 2030.
IKEA has also established IWAY, a mandatory supplier code of conduct that sets clear expectations for environmental, social and working conditions, as well as animal welfare, for all suppliers and service providers that work with IKEA.