An In-Depth Analysis of Sustainable Supply and Procurement at IKEA

This report provides an in-depth analysis of IKEA's sustainable supply and procurement practices. It begins with an introduction to the role of sustainability in procurement and supply chain management, emphasizing its importance in cost management, profitability, and brand image. The report explores IKEA's sustainability policies, including diverse supplier bases, fair employment practices, and pollution control measures, and discusses how these policies affect both procurement and supply chain management. It examines the issues, concepts, and trends in green logistics, highlighting how IKEA minimizes the environmental impact of its logistics activities. Furthermore, the report analyzes IKEA's corporate social responsibility (CSR) practices, including its investments in renewable energy and its efforts to promote sustainability throughout its operations. The report concludes by summarizing IKEA's commitment to sustainability and its impact on the company's growth and development.

Sustainable Supply and
Procurement

TABLE OF CONTENTS
INTRODUCTION ..........................................................................................................................1
Role of sustainability in procurement and supply within Ikea....................................................1
Sustainability policies affecting procurement and supply chain management...........................4
Issues, concepts, theory and trends that emerge in green logistics.............................................7
Corporate social responsibility (CSR) and sustainability practises of Ikea .............................10
CONCLUSION..............................................................................................................................12
ILLUSTRATION INDEX
Illustration 1: Role of Sustainability ...............................................................................................2
Illustration 2: Sustainable procurement and supply chain policies .................................................5
Illustration 3: Green Logistics.........................................................................................................7
Illustration 4: Green logistic framework..........................................................................................9
Illustration 5: Triple bottom line model.........................................................................................11

INTRODUCTION
Sustainability is on of the most crucial requirement of every organization. It focuses on
constant development of the organizations while managing the rate of growth of business unit.
Supply chain procurement helps in developing an effective impact on the growth and
development of the organization. The global growth and development demands the business
units to enhance the supply chain activities and procurement measures such that it creates a
definite impact on cost management and profitability of business unit (Bose and Pal, 2012). This
helps the company in enhancing its competitiveness in order to create high growth and
development prospects.
Procurement of goods and supply chain management are effective internal functions of
the business. These strengthens the business activities and helps it in creating wide impact on
cost management activities. Sustainable procurement and supply chain management are the key
components of responsible business practices (Molino, 2013). These can help the business to
save money, reduce carbon and other environmental impacts, manage risks, improve
competitiveness and build a business’ reputation.
The present report will focus on analysing business practices of Ikea and the measures
that the company has adopted in order to manage and maintain the sustainable procurement and
supply chain practice within the business. Ikea is a well established global unit which deals in
designing, manufacturing, marketing and sales of furniture. It is one of the leading brands of
furniture in the world which has a vision to create better life of people. IKEA has invested €1.5
billion towards sustainability, energy, procurement and also in green logistics. The report will
analyse and discuss about the policies and procedures which the company has adopted in order to
enhance the sustainability in business by developing environmental friendly practices.
Role of sustainability in procurement and supply within Ikea
Procurement and supply chain decisions are crucial for the organization as it supports the
internal business operations. The Cost effective procurement of goods and services helps the
business in managing its cost of production which helps the business unit in creating a wide
impact on overall growth and development. According to Preuss, (2009) sustainable procurement
deals with social and environmental factors along-with financial factors in making procurement
decisions. It involves looking beyond the traditional economic parameters and making decisions
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based on the whole life cost, the associated risks, measures of success and implications for
society and the environment (). The sustainable procurement policies of the business helps in
developing an effective impact on the profitability of the business while enhancing its brand
image within the market. Ikea works with large number of suppliers to improve its energy
efficiency and the sourcing of raw materials. The organization has also decided to invest a sum
of around €1.5b in renewable energy technologies (IKEA: Sustainable life at home, 2015). One
of the main objective behind this is that the company wants to lower down the use of non-
renewable energy resources by working with various kinds of suppliers. Sustainability plays a
major role in procurement activities of the business.
The role of sustainability in the procurement operations of Ikea are discussed henceforth.
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Illustration 1: Role of Sustainability
(Source: Self attempted)

 Cost cutting measures: Sustainability in the procurement process of the business unit
helps the companies in enhancing the growth and development prospects within the
organization. . A common mind set of an individual with the process criteria and
management is that this is a costly measures. However sustainable business practices
helps the business in developing its economic factors by focusing on the environmental
and social factors (Seuring and Müller, 2008). This helps the business unit in enhancing
the growth measures within the economy. In order to develop sustainability within
business Ikea has adopted effective means of business processes such as lean
management, total quality management, Decrease wastage and water costs etc. These
measures has helped the business unit in enhancing its operations while managing the
cost of the company. Innovation: This process demands the business unit to develop the practices such that its
effectively helps the business units to integrate sustainability in manufacturing process
and designing as well. Ikea has developed and designed its business practice to integrate
and design the process to enhance sustainability within the organization. It has adopted
sustainability in its product design and process in order to again wide success within the
economy (Vachon and Klassen, 2008). This has helped the business in enhancing
innovative and creative measures to address the needs of the company. The organization
has incorporated ongoing efforts to increase service levels, cost reductions, and asset
utilization. All these measures helped the business in developing its process and making
it competent enough to incorporate innovative ways of working. Consumer perception: The common presumption of the business unit is to enhance the
profitability of business by creating wide prospects for sales. Ikea developed and
enhanced its process of manufacturing within the business in order to create a wide and
effective impact on the growth and development of business (Stavrulaki and Davis,
2010). This has helped it in developing the brand image within the market thus creating
wide impact on overall demand within the economy. The above mentioned measure has
helped the company in developing an edge within the market.
 Regulations: Sustainable procurement extends beyond compliance with current
regulations. Establishing a governance structure is essential for an organization seeking
sustainability. It helps the business in regulating its activities to enhance he growth and
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development of business unit. Ikea has changed its procurement practices to focus on
renewable sources. It has lower down the use of limited resources such as water and
energy. This has helped the business in developing partnership with regulatory bodies by
enhancing business practices for the overall development of society (Storey, Emberson
and Reade, 2005).
On the basis of above mentioned description it is evident that sustainability in business
operations of Ikea has lead the company in enhancing its operations and modifying ist practices
widely. The role of sustainability within the business has motivated the business in creating wide
impact on the overall growth and development. The initial cost of installation of the process was
high for the organization however the long run profitability aspects of the process makes the
process favourable for business growth in the competitive market.
Sustainability policies affecting procurement and supply chain management
Sustainability in procurement is an effective and long term process of the business unit.
This demands major alterations in the policies and strategies of the company in order to
efficiently accustom the process in business practice. Procurement is the process of obtaining
resources such ads raw material, energy water etc. to produce a particular product (Stavrulaki
and Davis, 2010). On the other hand, supply chain management is the flow of products within
and outside the organization. The policies of sustainability has affected both supply chain as well
as procurement. This has helped the business unit in enhancing the growth prospects within the
economy. The policies and measures adopted by Ikea to develop sustainable practices in
procurement and supply chain management includes maintaining diverse base of suppliers, fair
employment practices, Promoting workforce welfare, community development, pollution
control, ethical business practices etc (Stadtler, 2005).
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Illust
ration 2: Sustainable procurement and supply chain policies
(Source: How does Sustainable Procurement affect You. 2015)
The sustainability practices of the business has helps businesses in enhancing the growth
and development within the competitive market. The common practice of triple bottom line has
been adopted and practices by business units in order to enhance the growth measures within the
market. These practices has helped the business in developing effective measures of working and
enhancing growth prospects within the environment (Porter, 2008). The company has worked
towards developing its business operations such that it efficiently enhances the growth within the
market. Ikea has adopted common environmental management programs regarding
environmental management system (EMS). The certification programs such as ISO14001 and
EMAS has helped the business in developing a valuable impact on developing its brand image
within the market.
The policies of sustainability has affected both supply chain as well as procurement.
Further, at the time of procurement, the company looks for obtaining only those resources which
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are not harmful for environment. Ikea has changed its procurement practices and now it mainly
focus on renewable sources. It has lower down the use of limited resources such as water and
energy. To some extent it is very costly for Ikea, but this will be very beneficial for the company
in long run (ENERGY & RESOURCES, 2015). Such kind of practice will also assist in getting
competitive advantage but increasing the sale of Ikea. The sustainability practices has affected
the supply chain management of brand (Storey, Emberson and Reade, 2005). Further, now it has
to look after the transportation of raw material as well as finished products. The company now
use only those sources of transportation which creates less pollution and emission of other
harmful gases. By working with its suppliers, Ikea has changed its practices of sourcing and has
laid emphasis on sustainable sourcing (Khan, Christopher and Burnes, 2008). It has also started
to lower down the load on vehicles during transportation so that less gases can be extracted
(IKEA: Sustainable life at home, 2015).
Most of the companies in modern era, do not considered the fact that what kind of impact
does its operations have on environment. To survive in long run and achieve higher profits, it is
required by every business to use sustainable practices in its overall operations (Vachon and
Klassen, 2008). There will be some modifications and change which will be required but it can
be stated that this change will help organizations to create good image in the minds of customers.
Procurement and supply chain management has always been one of the most important part of
Ikea's business strategy. Further both has contributed a lot in the success and growth of the
organization.
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Issues, concepts, theory and trends that emerge in green logistics
Logistics is defined as the process in which good and services are transported to the end
user or customers. The concept of green logistics is termed as the process in which a company
measures and try to minimize the impact of its logistics activities on environment. As per the
recent trend, most of the businesses have adopted the policy of going green. The reason behind
this is that it assist companies in getting competitive advantage over other market players. The
concept of green logistics ins to enhance the growth and development of business such that co-
ordinating the activities related to logistics so that the company is able to attain the business
objectives and consumer needs at minimum cost (Hildeman and Carlsson, 2014). It focuses on
examining ways of reducing externalities of logistics and achieving a more sustainable balance
between economic, environmental and social objectives.
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Illustration 3: Green Logistics
(Source: Green logistics, 2010)

The concept of green logistics has been developed in recent years as most of the
organizations were forced to lower down the negative impact of their operations and activities on
environment. According to the theory of green logistic there are many factors which has forced
businesses such as Ikea to adopt the practises of green logistics (Sustainable life at home, 2015).
One of the major factor among those was the pressure from competitors. Most of the competitors
of Ikea have started using the green logistics as an integrated part of their business strategy. The
government has also played a major role in encouraging Ikea to lower down the impact of its
operations on environment (IKEA: Sustainable life at home, 2015). Ikea has developed an
effective measure to encompass the organization, people, process, and technology together in
order to attain the organizational needs and requirements. Ikea is effectively focussing on
balancing the following processes efficiently:
 Goods transport
 Storage
 Inventory Management
 Overall materials handling
 Related information processing
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The above framework helps in defining the process of logistics, transportation modes and
flow of information that are shared by the businesses in order to attain the effective results for
the company. The impact of logistics on weather change has called for increasing attention in
recent years, partially because increasing controls on pollution and safety improvements have
alleviated the other environmental problems (Hrelja, Isaksson and Richardson, 2012.). The
transport system of the business is also expected to operate in controlled manner in order to
reduce carbon emission and energy as well. Thus, the organizations are forced to reduce the CO2
emission and the pollution cost during transportation (People & Planet Positive, 2015). Some
internal factors which has encouraged Ikea to use green logistics as a part of its process.
Customers are now aware of the fact that the operations and activities of most of the organization
has become a major threat to environment (Khan, Christopher and Burnes, 2008). The pressure
from suppliers side for growing use of sustainable resources has significantly increased. The
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Illustration 4: Green logistic framework
(Source: Framework, 2010)

employees of Ikea are encouraged to adopt green logistics as a part of its overall business
strategy.
While there are many advantages associated with green logistics, it has some major issues
related to cost, time and reliability. Ikea has always tried to lower down the cost of its production
so that it can deliver low price products to people in market. With the application of green
logistics, transportation cost of the company has been increased (Molino, 2013). Another
challenge which has been faced by Ikea is related to reliability of products in terms of delivery
on time. Ships and railways has always been considered as one of the worst way of delivering
things. Majority of the time goods have never reached on time, when it was delivered through
trains and ships. Air and truck shipments are considered as two of the sources which creates very
high pollution.
As far as the green logistics of Ikea are concerned, the company first removed all the
wooden pallets form its entire supply chain and have started using paper pallets instead of them.
The benefit of this was the company is able to successfully decrease its CO2 and transportation.
Corporate social responsibility (CSR) and sustainability practises of Ikea
Corporate social responsibility is the process adopted by the companies which helps the
organizations in developing an effective impact n the growth and development of the business by
enhancing the responsibility towards environment and society. This is the most effective measure
to enhance the brand image of the business by developing significant impact of business
operation on the growth and development of society and economy as well. The sustainable
business practice focus on developing an effective impact of the company on overall developed
of business unit within the economy.
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