In fact, each year it shares a very thorough Sustainability Report, which details its strategy, activities and results. In reading their latest report, one thing that stands out is its Sustainability Product Scorecard, which provides 11 criteria relating to how new products are designed and produced (see box).
That it has a Sustainability Product Scorecard is noteworthy in and of itself. However, delving beyond it, there are a number of best practices for marrying sustainability, innovation and growth.
Sustainability is embedded into the innovation process
This may seem like an obvious one; however, fewer companies embed sustainability into their innovation processes than we might think. Many include a broad sustainability category as a tick mark in their stage-gate governance, and some don’t include one at all. In reading IKEA’s Sustainability Report more closely, it’s clear that the Scorecard is not only used as a checklist for decision-making at stage-gates. It drives their thinking in terms of spotting opportunities, how products are designed and how they are produced.
Sustainability as an innovation opportunity, not a roadblock
Sustainability is often seen as a roadblock, creating costs and obstacles. However, by challenging assumptions, companies can create new proposition, product and service opportunities that drive growth. The most obvious one is in responding to customers’ various needs around sustainability, and the ability to differentiate products based upon total carbon footprint. In addition to this, though, it creates opportunities to collaborate with the entire supply chain, thereby expanding a company’s possibilities through its partners’ capabilities and assets whilst potentially reducing costs and mitigating development risk.
IKEA Sustainability Product Scorecard
Picking up on the last point, enabling customers to live a more sustainable life at home opens up a number of opportunities to create new product categories and differentiate existing ones. For example, IKEA has teamed up with Hanergy to offer solar panel packages in its UK market and is in the process of updating its lighting range to LED light bulbs as standard. It has also developed products such as white goods, space saving solutions and food storage containers to help customers use less energy and water, and to reduce waste. Enabling customers to have an impact on sustainability not only opens up growth opportunities, it also communicates real reasons to believe that a company is committed to sustainability. It demonstrates a value chain perspective on sustainability rather than a supply chain viewpoint. A value chain takes into account the customer, and by doing so a company can expand its sustainability impact beyond the point of sale.
“We will do our best to use sustainability as a driver of innovation and transformational change - from factory and farm, to store, to customers’ homes and all the way to our products’ end of life - and strive towards having a positive impact on people and the planet.”
(IKEA Group Sustainability for 2020)
It’s tempting to focus solely on the sustainability aspects of a product in the design phase. However, doing so at the expense of customers’ wider needs will most likely result in low take-up and miss the mark in the impact on their behaviours, and ultimately on the positive impact on the environment. Customers still have a wide set of needs regarding products, and except for the most diehard green advocates, they are unwilling to sacrifice them. IKEA recognises this, which is why it still addresses customers' needs for style and design, ease of purchase and use, and very importantly affordability. Affordability is one of the main needs that remains unaddressed, and creates an obstacle to helping customers take action – just look at households’ low take-up of renewable energy solutions in the UK, despite periodic incentives such feed-in-tariffs. For example, IKEA sold over 22m LED products, including 12.3m LED bulbs. In addition to designing LED lighting solutions that deliver on performance, IKEA took steps to make them affordable, and therefore accessible, to its customers.
Alignment and integration of sustainability strategy with corporate strategy
If sustainability efforts are isolated to one part of the business, such as product design or production, they’re unlikely to survive against other corporate priorities, particularly short-term sales and cost targets. In addition, the market and customers are increasingly sceptical about companies' sustainability credentials – they sense when sustainability is an add-on or PR attempt. A clear sustainability strategy that is seamless with corporate and brand strategies is essential to avoid a greenwashing tag, and to embed sustainability in the innovation process. IKEA’s approach reflects this understanding – the Sustainability Product Scorecard stems from the wider corporate, brand and sustainability strategies. In fact, IKEA has 11 guiding group strategies and sustainability is one of them, and it runs throughout all of the others.
Making a public commitment to sustainability, as IKEA has, will attract assessment and commentary from the public – from customers, non-customers, and other stakeholders. It will create reasons to believe for some audiences, while others will challenge a company’s real motivations and performance. Putting aside which audience you fall into regarding IKEA, their approach demonstrates valuable best practices on how to align commercial and sustainability objectives. It also demonstrates that these objectives are not inconsistent. Rather, sustainability can drive innovation and provide real opportunities for growth.
by Dennis Pannozzo