The drivers and barriers to sustainable

procurement of IKEA
(Transcript)

Presented by: Mohamed Abdul Fattah Alhusaini

Student’s Registration Number: Bi10oi
DLMM27 Module Author: Professor Neil Parkin
DLMM27 Module tutor: Dr Husam Alharahsheh
Date: 14 Oct 2023
Hello, my name is mohammed and today I will be discussing the drivers and barriers to
sustainable procurements of ikea.

let's get started:

Introduction:

There is a developing trend among organisations to adopt an all-encompassing and

integrated sustainability strategy. Consideration is given to environmental, social, and
economic factors simultaneously. These considerations begin before entering a business
partnership and continue throughout the administration of the supply chain through the
implementation of the sustainable procurement concept.

According to the Chartered Institute of Supply and Procurement (CIPS), "sustainable

procurement" is "the process by which organisations meet their needs for goods, services,
works, and facilities in a way that achieves value for money on a whole-life basis in terms of
generating benefits not only for the organisation but also for society and the economy while
minimising damage to the environment."

The implementation of sustainable procurement bears considerable importance and

numerous benefits. However, its uttermost importance rests in preserving the planet by
meeting current needs without jeopardising the ability of future generations and societies
to meet their own needs, both in time and space.

IKEA is an excellent example of a business that practices sustainable procurement. Firstly,

we will discuss IKEA's sustainable procurement drivers and barriers. Let’s provide an
overview of IKEA.

The Overview of IKEA Company:

The industry:
IKEA is one of the largest furniture retailers in the world, with 422 stores and an almost
9,500-item product catalogue. IKEA specialises in low-priced items that are recycle,
whenever possible, are sold in a 'flat pack' form for the customer to assemble in the
convenience of their own homes.

The establishment of the Company:

Ingvar Kamprad founded IKEA in 1943 at the age of 17 in Sweden. As early as the late 1950s,
the company outsourced its product design and manufacture to Danish and Polish firms.
Swedwood was subsequently established as the company's manufacturing subsidiary.

The company's strategy is to create a higher standard of living for many people. Constant
efforts are made to improve IKEA's value chain, which will ultimately result in the sale of
higher-quality and sustainable products at lower prices.
Drives to Sustainable Procurement

External drives:

1- The influence of the Customers,

IKEA has employed a variety of environmentally favorable strategies, such as
generating energy from wind, that have had a significant positive impact on the
environment and local communities, in response to consumers' growing awareness
and interest in sustainable development. In addition to consumer satisfaction, the
impact of a company's sustainable products may be felt over a longer period.
2- Rules and regulations,
IKEA prioritizes purchasing palm oil in an ethical and environmentally responsible
manner. By contributing to the Sustainable Palm Oil Roundtable (RSPO).
3- Investments:
Renewable energy investments, such as wind turbines and solar panels, and
operational waste recycling contributed to IKEA's 7.4% increase in revenue to €35.1
billion in fiscal year 2016.
4- Improving and preserving the company's reputation.
Gain a competitive advantage as IKEA optimizes the entire value chain, from the
procurement of basic materials to the delivery of finished products to customers'
residences, in order to produce cheaper, higher-quality goods at lower prices. The
proximity of material supply to production and/or production to sales markets is one
example.

Internal drives

1- The commitment of the management to applying sustainability standards:

IKEA's strategy of developing relationships with various stakeholders within the
organization has proven fruitful. IKEA plans to have 100% renewable resources by
2030 while expanding its business.
2- Environmental impact:
1- Efficient use of resources and resource regeneration:
By utilizing only responsibly sourced renewable or recycled resources and working to
establish and enhance responsible sourcing standards. For example:
IKEA has introduced a "People & Planet Positivity" sustainability strategy. Its
pursuance of sustainable cotton has increased agricultural efficiency, enhanced
cotton production, decreased the use of water, chemical fertilizers, and pesticides,
decreased expenses, increased farmers' profits, and averted water and soil pollution.
IKEA is also committed to fostering sustainable forestry throughout the industry,
above and beyond its requirements.
 2- Minimize transportation:
By procuring wood as well as selling wood products near consumer markets.

Barriers to Sustainable Procurement

1- Auditing suppliers and eradicating poor practices:

Through the manipulation of raw material sources by certain suppliers, for
example, the company was accused of selling meatballs containing horse flesh in
2013. IKEA has filed a police report against the implicated supplier, removed the
meatballs from the shelves across Europe, and issued an apology to customers.

Therefore, IKEA instituted strict Supplier Behavior Rules, also known as IWAY,
which are the preferred procedures for procuring products and services from
third-party vendors. Establishes social, environmental, and labor standards that
are acceptable for product procurement.

2- Suppliers’ limitation:
Sometimes, strict supplier monitoring, and enforcement of sustainability
standards result in supplier resistance, which leads to further supplier resistance
and a refusal to supply those companies.

Strategic harmony between IKEA and its suppliers fosters long-term partnerships
that result in higher quality, cheaper, and quicker delivery of products and
services.

3- Distribution and logistics problem:

The IKEA supply system has difficulty delivering bulky products to clients.
including refrigerators, dishwashing machines, and freezers.

The company investigated inventive distribution strategies, such as shipping

individual components to the consumer's location for final assembly.

4- Reducing product quality:

IKEA has experienced several supply chain issues over the years, which have
impacted quality assurance and product availability. In 2016, 29 million MALM
and other chests and wardrobe models were recalled due to sever tip-over
hazards. Not only do these product recalls disrupt the supply chain, but they can
also undermine consumer confidence in the brand and result in financial losses.
 5- Accumulation of product waste:
Instead of using wood pallets for packaging, IKEA packs their products on Loading
Ledge because it is more environmentally friendly, stronger, lighter, more
durable, recyclable, and cost-saving.
IKEA has also implemented a number of logistical initiatives, such as a program to
return cardboard containers to IKEA stores for recycling, in addition to
programmers to collect customer-returned furniture which are later recycled and
put on sale for half the price.

In conclusion,

IKEA is a multinational corporation with global production and distribution facilities, making
its supply chain extensive and complex. IKEA was an early pioneer in incorporating
sustainability into all aspects of their operation.

Thus, there are numerous internal and external drives that encourage IKEA to develop
sustainable procurement procedures, with the most significant being:

- External drives: customer influence, rules and regulations, investments, and

improving and maintaining the company’s reputation.
- Internal drives: Management’s commitment to applying sustainability and
environmental impact standards.

However, IKEA confronts numerous challenges and obstacles in implementing sustainable

procurement, including auditing suppliers and eliminating bad practices, limited suppliers,
the problem of distribution and logistics, reducing product quality and accumulation of
product waste. Despite IKEA's best efforts, these obstacles remain a significant obstacle on
the company's path to completely integrating a sustainable purchasing system.

Here are the references that have been used. Thank you for listening.
The References:

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2023].
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