Ikea might still be better known for cheap flat-pack bookcases than sustainability. But the world’s biggest furniture company is in the process of transforming itself to fight climate change. The latest step–a pledge of 1 billion euros (or $1.13 billion) for renewable energy and climate adaptation projects–is one piece of Ikea’s bigger vision to bring you the greenest Smörboll and Ödmjuk.
“We looked at this issue and said there hasn’t been enough positive advocacy from the business community,” says Steve Howard, Ikea’s chief sustainability officer. “It’s only now that we’re starting to see more businesses step up in this space.”
Over the next five years, the Swedish giant will spend €600 million on wind and solar installations for its stores and factories. That’s on top of another €1.5 billion spent since 2009; by 2020, the company plans to run on 100% renewable energy. To put these sums in scale, these figures are higher than what some entire European nations have pledged to the UN Green Climate Fund. Germany, one of the biggest donors, pledged €750m. It’s also a not-insignficant chunk of Ikea’s net profit in 2014: €3.33 billion ($3.79 billion).
Other companies, like Apple and Google, are also pouring billions into new renewable energy projects. Ikea, unlike some others, decided it wanted to own all of its own wind farms and solar panels. “We’ve said we’ll go a little bit further and directly own and operate the renewables ourselves,” says Howard. “We’ve now got a specialist dedicated team who manages our wind operations worldwide. We’re an independent renewable power company at the same time as a home furnishing business.”
Ikea already owns 23 wind farms and 700,000 solar panels. By owning the infrastructure, the company can protect itself against rising energy prices in the future. “As a long-term business, there are few certainties,” says Howard. “One of those certainties is we’ll be using energy in 20 years’ time. From a finance point of view, it’s like the perfect macro hedge. We take full control over our own energy.”
It also helps quickly trim the company’s carbon footprint. “I’ve often said that from a sustainability point of view you can always construct a business case for doing the right thing,” says Howard. “This delivers a deep return on investment. But it’s also the most enabling thing we can do to help grow renewable energy production worldwide at a time when we need to really rapidly decarbonize our energy systems. It’s a meaningful thing that we can do at scale.”
Still, while the move to renewable energy will help slash emissions, energy is only about 2% of Ikea’s total carbon footprint. The biggest impacts come from embodied carbon in materials–from plastic to metal–and in the energy that customers use at home for products like lighting or appliances. So Ikea is also redesigning what it sells to meet sustainability goals.
By September 1, the company will only offer LED lights, as part of a push that began two years ago to phase out halogens and CFLs. Ikea reports that this year, the LEDs they sell will save the equivalent amount of energy that’s used by a country like Ireland. They’re also redesigning other appliances, and slowly replacing virgin plastic with recycled or bio-based plastic, and virgin metals with recycled versions. Meatballs–an Ikea staple with a large footprint–now come in vegetarian versions.
As a company that popularized flat-pack furniture, Ikea is also still finding ways to save room and fuel in shipping products. By shipping stuffing separately from pillows and duvets, for example, they discovered they could save massive amounts of fuel in transportation. “We say we’re obsessed with efficiency as a business,” says Howard. “But even when you’re obsessed with efficiency, you can always find new opportunities. Low-hanging fruit grows back.”
Perhaps what’s most interesting is that Ikea is also trying to redirect the waste it creates back into new products. “We’ve actually closed some material loops,” Howard says. Cardboard collected at stores and distribution centers is now used as a filling for the core of some pieces of furniture, helping save wood. Plastic film used in packaging is turned into desk mats. And the company is also starting to work with consumers to help recycle old Ikea furniture.
At “Second Life” stores now being piloted in Belgium and France, customers can get discounts for reselling Ikea products. “A customer can send in a photo of, let’s say, a Billy bookshelf they no longer need,” says Howard. “It will be sold, and they’ll get a gift voucher they can spend or pass on to a friend. There’s a huge appetite now for secondhand, and there’s a really robust secondhand market for Ikea goods. We want to stimulate that further.” The company is also working on making its products–some of which have a reputation for falling apart–longer-lasting.
Ikea’s new billion-euro pledge also includes €400 million from its foundation arm in charitable spending to help families in developing countries deal with the effects of climate change (a sum that is about half of what the U.S. government spent in international climate change in 2013). The company made the announcement of their overall pledge in Bonn, Germany while world leaders met as part of the slow process of climate negotiations.
“We wanted to show that business is prepared to be at the table with meaningful actions for the solution,” Howard says. While Ikea says that it’s encouraged by some government progress, government can’t solve the problem of climate change alone.
“The scale of the challenge is huge,” he says. “It’s achievable–the solutions are available–but we need to move at pace and at scale. We need good government policy, but we need business innovation and investment. The government policy that’s being stacked up is not really enough to keep us within a safe climate.”
Howard is optimistic that climate change is still a solvable problem if the world acts quickly enough. “When we really look at the facts, they speak for themselves,” he says. “At the current rate of emissions, 1 billion tons a week of CO2 today, we use our entire carbon budget in the next 20 years for the planet. So urgent action is required.”