IKEA CEO: 3 ways to gain competitive advantage with sustainability

Furniture has a big impact on the planet — from the wood and other materials used to build it to the energy used to manufacture and ship it. And mass-produced “fast furniture” might be trendy and affordable, but it usually ends up in a landfill.

IKEA is trying to change that, according to Jesper Brodin, CEO of Ingka Group, IKEA’s largest retailer and franchisee. Notwithstanding its reputation as a maker of quick-buy furniture, the Netherlands-based company is on a journey to transform into a circular business, aiming to use only recycled or renewable materials by 2030 and eliminating all plastic packaging by 2028.

In a recent conversation with MIT professor Elsa Olivetti and others from the MIT Department of Materials Science and Engineering, Brodin said that operating sustainably isn’t just good for the planet — it’s also a competitive business advantage. “Through investments, and through different measures of strategy, we’re actually turning our climate model into one of IKEA’s biggest advantages,” he said.

Brodin said IKEA has “seen a spike in interest” in sustainability from customers: About 68% are “deeply concerned about climate change,” according to a 2023 IKEA survey of more than 33,000 adults across 30 countries. 

And suppliers want in, too. In fiscal 2023, 37% of the company’s direct suppliers operated with 100% renewable energy. “Our suppliers are asking us to do more,” Brodin said.

Here are three crucial parts of IKEA’s plan, with lessons for other retailers. 

Make it easy for consumers to buy sustainable products

IKEA’s sustainable living shop is the company’s fastest-growing business, a fact that Brodin said hasn’t surprised him. The sustainable living shop engages consumers by making it easy for them to purchase products — like blackout curtains or to-go containers made of glass — that allow them to incorporate sustainability into their lifestyles.

“One of the reasons why it’s successful, I think, is, of course, people do care,” Brodin said. “They want to be part of something. But it’s also because it saves them money.”

Brodin recalled the time IKEA decided to stop selling incandescent lighting. “The business case looked terrible at that time. It was simply too expensive and not commercial enough,” he said. But early adoption of LED light bulbs turned out to be a smart choice in the long run. In fiscal 2023, IKEA sold more than 58.1 billion LED light bulbs, which helped reduce customer energy consumption and emissions in the process.

Tackle difficult recycling challenges

IKEA aims to become circular by designing products that can be reused, refurbished, or recycled. Efforts so far have included using ceramic production waste to make new tableware and using recycled wood to make fiberboard. 

IKEA is also innovating the recycling of mattresses — traditionally an extremely challenging item to repurpose that typically ends up in a landfill. Almost half of the material used in mattresses is foam, which is conventionally made from fossil fuels, doesn’t biodegrade, and contains chemicals that can seep into the soil. 

IKEA is leading a new initiative requiring that its new mattresses incorporate materials from derived from mattresses collected for recycling. The company hopes that by 2025, it will have at least 20% recycled and/or renewable content in the polyols used in foam production in its mattresses. (Polyols, a main ingredient in foam, can be partially replaced by natural oil polyols from renewable sources such as soy, castor oil, and rapeseed.)

“There’s a couple of beautiful things with that,” Brodin said. The project brings IKEA closer to net-zero energy consumption if electrical transportation and renewable energy are factored in. “It’s quite good business … and it gives us an opportunity to feed in another type of material to our new branches.”

Create and participate in secondhand markets

The market for secondhand furniture is gaining steam — especially among students — and is projected to grow 6.4% in 2024.

It’s a great way to keep furniture out of landfills, said Brodin, who recalled helping set up his daughter’s apartment at the University of Copenhagen. She and her friends were interested in secondhand furniture, and it made him think about how IKEA could get more involved in the market, given that there are shoppers of all ages who want to furnish their homes affordably and sustainably.

In fiscal 2023, some 212,000 customers used the company’s Buy back & resell program, which gives old or unwanted furniture a second life.

In addition to that program, the company is testing a peer-to-peer marketplace in Madrid and Oslo called IKEA Preowned to allow customers to buy used IKEA furniture from and sell it to one other directly. Artificial intelligence helps streamline the process for sellers by recommending what price they should set for particular items, Brodin said. 

Separately, IKEA tries to make it easier for secondhand buyers by offering free spare parts, such as screws, knobs, and hinges, for any items purchased online. 

Currently, the company isn’t charging a commission fee on IKEA Preowned sales, but it is considering introducing a “humble fee” for the service in the future.

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