IKEA (China) – Haorong Lu – 2018

Goals

IKEA, one of the largest multinational furniture retailers in the world is widely recognized for demonstrating respect and care for their employees, their communities and the environment. While their Sustainability Compliance Team had developed an Environmental Supply Chain Management System (ESCMS) with a focus on direct suppliers, they still needed solutions that would address environmental regulatory risks occurring at the sub-supplier level. The company enlisted EDF Climate Corps fellow Haorong Lu to identify those risks and also to develop strategies that could mitigate risk across their entire supply chain in China.

Solutions

In order to fully understand crucial points of the company’s ESCM and the full scope of regulatory risks, Lu conducted interviews across departments to develop a questionnaire that could provide information on the supply chain management status of direct suppliers. As a result of this study, he confirmed that while the majority of regulatory impacts happened within the networks of sub-suppliers, most direct suppliers also did not have healthy supply chain management systems. It became clear that this was due to lack of awareness and intent to implement.

To remedy this problem, Lu recommended the development of a supplier engagement plan to increase the knowledge of environmental risks and the importance of mitigation. He suggested that starting with the direct suppliers and encouraging them to lead by example would increase the overall effectiveness of the program.

Potential Impact

If implemented, Lu’s program could help IKEA mitigate environmental regulatory risks across its entire supply chain and avoid the associated financial loss. Additionally, the project would give IKEA clear advantages over competitors without strong ESCMS.