Two years ago I had my first conversation with Stefan Karlsson, the Sustainability Compliance Manager for IKEA Purchasing Service (China) Co., Ltd. We talked about how IKEA was rethinking its business operations in order to green its global supply chain – and as the world’s largest go-to for affordable furniture – you can imagine how big a job that is. Right away, I could tell Stefan, and IKEA, was on to something big: encouraging hundreds of their suppliers to drive innovation and promote sustainability.
A goal, an opportunity and a partnership
IKEA isn’t unique in that it strives to provide affordable furniture. However, it is unique in that it strives to make products in ways that are good for people and the planet. That’s why in 2016, the company set a goal of encouraging its direct suppliers to become 20 percent more energy efficient by August 2017. As part of this target, IKEA initiated the Coal Removal Project – reducing coal use as a direct source from the energy portfolios of over 300 local supplier factories in China.
Right off the bat, Stefan saw an opportunity. Government regulations in China were mandating local manufacturers to clean their operations and IKEA knew it could help its suppliers become more efficient and cleaner by leveraging its size and technical know-how.
“If we can get a better understanding of how our China-based suppliers are performing, we can help them change their practices and share success stories to inspire others to do the same,” Karlsson told me. Ready to do just that, he turned to EDF Climate Corps for collaboration.
Two years and four EDF Climate Corps fellows later, a number of IKEA suppliers have successfully removed coal and are seeing a combination of both energy and greenhouse gas (GHG) savings, with others positioned to do the same. And today, EDF and IKEA released a detailed case study on our partnership over the years – what worked well, where we struggled to implement our solutions with suppliers and the results – in order to encourage other companies to be a sustainability leader.
Making your business more efficient (and save money)
In addition to the case study, I recently spoke with Stefan who offered a few tips for companies looking to green their supply chain which I’ve summarized here. I was extremely impressed by how Stefan and the fellows approached this project, and the savings they identified. But what’s particularly encouraging to me is that these efforts can be scaled not just within other IKEA supplier factories, but among other companies looking to do the same.
- Talk with your suppliers. The biggest challenge was getting suppliers on board. “It isn’t easy walking into a company and explaining to its stakeholders that their current business plan needs to be changed,” Stefan explained. “It’s delicate work.” Connect with them first to get a comprehensive understanding of the current situation and opportunities for each supplier individually. See where they are in the process: what has been done so far, what still needs to be accomplished in the future and why certain initiatives haven’t been taken. Be very clear as a buyer why these projects are important because this helps create the necessary understanding and buy-in. Once on board, encourage suppliers to take action by suggesting projects and initiatives they should move forward with. And lastly, facilitate a continuous dialogue by scheduling follow-ups and encouraging new suppliers to participate early on.
- Make the business case. In Stefan’s experience, it’s not unlikely for smaller supplier companies to be hesitant about switching from coal to energy alternatives, fearing costs will incur. But in reality, it’s often the opposite. And, for some IKEA suppliers, benefits other than cost savings were even gained. The key is making this clear to suppliers. To show make the business case here, in-depth cost analysis were conducted, giving suppliers’ data on the financial returns from switching to more efficient technologies. And other payoffs came too. For example, by removing coal, more space is opened up in the factory, creating room to set up new production lines that will increase overall output. Other times, product quality was enhanced. Many local governments also offer incentives in the form of compensation. Once a few successes have been made, share these stories with other suppliers to get them on board and you’ll see their reluctance to consider cleaner technologies drop immediately.
- Create autonomy. The buyer company (in this case, IKEA) has limited bandwidth to help suppliers with ongoing impact mitigation, which is why suppliers must be equipped with the knowledge and resources needed to spearhead projects on their own. Stefan found that for IKEA to get this sense of autonomy, two factors are needed: education and motivation. To get suppliers on their feet, and prepared to see projects through until completion, the EDF Climate Corps fellows worked with Stefan to develop a book of successful case studies; a framework for tracking and reviewing the progress of sustainability projects; and an action plan for upgrading systems over the next few years.
Several innovative projects are taking place behind IKEA’s walls, and we’ll continue to see more in the future. Who wouldn’t want an opportunity to improve their bottom line and environmental footprint? I’m amazed by IKEA’s ability to not only set the sustainability bar high for its suppliers, but how they give suppliers the means to achieve their goals.
At the end of our last conversation, Stefan said something that resonated with me: “This is tough work, but if we work together we can get it done” – “we” being the business community. If you ask me, he’s right. By working together businesses can share data, best practices and resources necessary to create change at a larger and faster pace.
I congratulate IKEA on its sustainability work and I challenge other companies to do the same!
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