Question: explain how IKEA seeks to make theorganisationboth sustainable and resilient to change.

Note: based anwser onMarketing (relationship marketing, crisis management and measuring success)

case study:

Sustainable vision

Since it was founded IKEA has always had concern for people and the environment. The IKEA vision 'to build better everyday life for the many people' puts this concern at the heart of the business. IKEA has responded to the public's rising concern for sustainability in its choice of product range, suppliers, stores and communication. It has also spotted business potential in providing sustainable solutions. IKEA's concern for people and the environment encourages it to make better use of both raw materials and energy. This keeps costs down and helps the company to reach its green targets and have an overall positive impact on the environment.

To meet its vision IKEA provides many well-designed, functional products for the home. It prices its products low so that as many people as possible can afford to buy them. However, in creating low prices IKEA is not willing to sacrifice its principles. 'Low price but not at any price' is what IKEA says. This means it wants its business to be sustainable. IKEA supplies goods and services to individuals in a way that has an overall beneficial effect on people and the environment.

IKEA does not produce its own raw materials, but it needs these to develop its products. Consequently, it works closely with primary sector suppliers to ensure a sustainable impact on the people and the environment in which it operates. IKEA designs its own products. At the design stage, IKEA checks that products meet strict requirements for function, efficient distribution, quality and impact on the environment.

IKEA uses a tool - the 'e-Wheel' - to evaluate the environmental impact of its products. The 'e-wheel' has several checkpoints, which are divided into five phases: raw material, manufacturing, distribution, use and end of life (IKEA Group, 2019c). This also helps suppliers improve their understanding of the environmental impact of the products they are supplying (see Figure 1 https://www.ikea.com/ms/ms_MY/about_ikea/our_responsibility/products_and_materials/environmental_design.html).

Around 50 per cent of IKEA's products are made from wood or wood fibres. IKEA ensures that the wood it uses comes from sustainable sources. It also works to ensure that at the end of a product's life the wood can be recycled. IKEA creates many design solutions to minimise the use of materials. For example:

some furniture is made from recycled plastics

some rugs are made of material clippings that would otherwise be wasted

products such as water cans are designed to be stacked. This means that more can be transported in each load, reducing the number of lorry journeys and therefore lowering fuel costs.

Since 2015 IKEA has reached its goal of phasing out wooden pallets from its global transport network; it now uses only paper pallets and loading ledges. Cotton is used in many of IKEA's products. Because conventional cotton farming is often harmful to the environment and the people who grow it, IKEA works with the cotton farmers so that 100 per cent of the cotton used is from more sustainable sources certified by the Better Cotton Initiative, of which IKEA is a founding member (IKEA Group, 2015).

Each of these ideas helps IKEA's products to be more sustainable and reduce the impact on the environment.

A close working relationship with all suppliers is fundamental to IKEA's sustainability vision. During manufacturing IKEA specifies to its producers that waste should be avoided. Where waste does occur IKEA encourages suppliers to try to use it in the manufacture of other products. IKEA has a code of conduct called the IKEA Way of Purchasing Home Furnishing Products (IWAY). This contains minimum rules and guidelines that help manufacturers to reduce the impact of their activities on the environment. The IWAY code of practice expects suppliers to:

follow national and international laws

not use child labour

not use woods and glues from non-sustainable forests

reduce their waste and emissions

contribute to recycling

follow health and safety requirements

care for the environment

take care of their employees.

A product in use should not have a harmful effect upon consumers or their environment. For example, it should not cause allergies. If it uses energy, it should do so efficiently. When a product comes to the end of its useful life, it should be possible to reclaim or recycle the materials that make up the product. Such materials can then be re-used for making other products. To monitor suppliers, IKEA regularly carries out an IWAY audit. This involves talking to employees and inspecting documents and records. IKEA visits suppliers on-site on a number of occasions to ensure that they are following the code of conduct.

By the end of 2020, IKEA aims to be running on 100 per cent renewable energy. So far, the company has installed more than 700,000 solar panels at IKEA locations around the world and owns approximately 157 wind turbines in Europe and Canada. A further 104 wind turbines are being constructed in the US. Last year, the company committed to rolling out solar across all its Australian east coast stores and warehouses. To date, IKEA has invested 2.5 billion in renewable energy and assisting communities most impacted by climate change (Energy Monitor Worldwide, 2015).

As a global organisation IKEA has chosen to undertake a leadership role in creating a sustainable way of working. IKEA has formed partnerships with UNICEF and other global agencies to combat child labour by raising awareness and addressing the root causes. It has educated suppliers to understand how and why sustainable production is vital. This has helped IKEA differentiate itself from its competitors.

Responding to the Pandemic

In March 2020 the rapid spread of the Covid-19 pandemic forced all businesses to take swift action in response. This resulted in the total closure of nearly all offices, retail and physical outlets, as well as warehouse and distribution facilities (apart from food supply). IKEA was no exception. The non-essential nature of IKEA's business and its low online penetration mean the pandemic will have a significant impact on its 2020 sales. Despite the initial shock of having to implement such radical changes, IKEA has adapted to the new reality well. It has seen high demand for its office furniture as many people move to home working. Henrik Elm, IKEA's global purchase manager, stated that supply chain disturbances had increased dramatically as the coronavirus spread to Europe and America, with malfunctioning or closed borders creating key operational bottlenecks. IKEA had, however, been prepared and was able to mitigate such barriers relatively well, partly by spreading inventories to warehouses in several locations. IKEA has not experienced shortages of wood and other raw materials. However, one area of concern was finding room to store goods already in transit to markets where the company has temporarily closed many of its stores (IKEA Group, 2020)

In recognising that it was not in a position to conduct 'business as usual', IKEA has encouraged all parts of its global network to take action in their local communities. This has included making protective gear such as aprons and facemasks for hospitals battling the spread of coronavirus, donating food to local hospitals and food banks, and providing bedding for temporary hospitals and refugee charities. IKEA's reaction to the crisis has already boosted its brand image, and this will benefit it in the long term.