IKEA – Scandinavian Viking or McDonald’s Furniture Giant?

By Elena Smirnova

The environmental crisis and various social problems we are facing today have prompted multinational corporations to develop people and planet-centred business strategies. The CSR (Corporate Social Responsibility) dimension of business is becoming increasingly important due to the demanding requirements on the social and ecological consciousness of private sector. According to the renewed strategy for CSR 2011 of the European Commission[1], CSR could be defined as “the responsibility of enterprises for their impact on society”. According to the 2019 GlobeScan/SustainAbility Leaders Survey, the Swedish furniture giant IKEA with the annual revenue of 41.3 billion USD[2] is one of the global leaders in terms of CSR.

Yet the question naturally arises: How does IKEA, known for its low-cost furniture, balance between profitability and sustainability?

IKEA launched its strategy in early 1990s in response to a number of scandals related to child labour, the use of materials causing serious diseases, illicit logging in Indonesia and Russia, as well as poor working conditions in a number of countries. However, these scandals paved the way for the CSR strategy development of IKEA, as well as prompting IKEA’s cooperation with non-profit organisations dealing with social and environmental issues. Within this strategy, the company prioritised children’s rights promotion and eco-innovation projects, as well as wood and cotton initiatives. The low cost nature of the company has paved the way to renewable energy development and flat-pack design products for saving both transportation and energy-use costs, thus increasing profitability of the company along with building an image of sustainable business.

IKEA indeed contributes to achieving Sustainable Development Goals, and the company manages to be socially responsible because IKEA’s CSR is embedded in its business strategy. For instance, 60% of the IKEA products are based on renewable materials, while almost 10% of them contain recycled materials. Moreover, certain new designed products, such as TOFTLUND rugs or KUNGSBACKA kitchen, are made entirely from recycled materials (recycled PET bottles). At the beginning of 2020, IKEA banned single-use plastic across all its stores.

IKEA’s partnerships with UNICEF, Save the Children brings fruitful results by providing education opportunities, promoting children’s rights (notably in India and Pakistan), and conducting research on the children’s play, thus also encouraging people to buy IKEA’s products for children. One example of UNICEF and Save the Children corporate partnership with IKEA is the Soft Toys for Education campaign of 2003-2016, in which IKEA made a donation of €1 for each soft toy sold in November-December during the holiday period. It helped to provide 12 million children in 46 countries with an access to education, as funds were used for training courses, facilities and educational materials[3]. Since 2002 IKEA has been working with WWF on responsible forest management, water management, sustainable cotton production, as well as innovation and advocacy projects.

Nevertheless, various obstacles hinder the implementation of IKEA’s sustainable strategy. Although IKEA managed to mitigate the outcomes of scandals and achieve significant results in terms of sustainability, it still struggles with the need of growth inevitably entailing the necessity of massive logging, timber purchase from suppliers violating regulations and cutting down precious 600 hundred year old forests, as well as the necessity of promoting constant consumption, and an increase in CO2 emissions. Moreover, tax evasion strategies of IKEA pose a lot of questions regarding the sustainability of the company using various schemes to mitigate the burden of taxes for its own profits.

On the road to sustainability, IKEA faces multiple problems mostly related to balancing between sustainability and profitability, and in certain cases, the profit side of its strategy seems to be prevailing.

By Elena Smirnova

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The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official positions of Kairos Europe, its partners or their employees.

[1] European Commission. A renewed strategy 2011-14 for Corporate Social Responsibility. Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of Regions, 2011.

[2] “IKEA – Statistics & Facts”, Statista, accessed February 13, 2020, https://www.statista.com/topics/1961/ikea/.

[3] Bressa, Rudi. “IKEA Foundation. 88 million euros for children’s education in 13 years” Lifegate, January 26, 2020, https://www.lifegate.com/businesses/news/ikea-foundation-88-millions-children.

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