Why does IKEA care about sustainability? Kind of a hard question…
Steve Howard: I’m going to give you a slightly long answer, if that’s okay. Long but structured. We have many businesses that have been around for any length of time, and we’ve got strong sustainable values in our culture. We’ve also got a vision that was set up more than 30 years ago by our founder. And the vision is to help create a better every day life for many people. So you’ve got people thinking how can you get a better more functional sofa at a lower price so the family in – whether it’s Cincinnati or Shanghai – that’s moving into an apartment can have a great sofa to sit on. We’re motivated by that. And that vision naturally structures to sustainability. And then you also want to continue to lower prices and then you actually look to efficiency in a big way. So efficiency is a great proxy for the long part of the sustainability – if you can be breathtakingly efficient. I’ll give you a couple of examples of where it connects really well.
We have a lamp called the Vidja lamp and there was a design challenge there. As we redesign products we put them through a score card. With that, we eliminated 24 out of 33 elements. Clever design, we did. We lowered the weight of the product by about a half. We also reduced packaging by nearly a third in that product. We also slashed the amount of cotton – mixing it with viscose. The product was better, it was lighter and we lowered the price by more than a third to the customer. So it actually fundamentally changed the footprint of our product. The other thing – we could actually ship 128 of the lamps on a pallet rather than 80. If you can imagine from a fuel efficiency point of view – in one year you could effectively get a 60% increase in fuel efficiency just by the way you design things and pack them. But we take that across the entire range. So it’s good business sense. And then there’s a sort of values driven element.
Obviously no one’s perfect – we’re a good company, with good people doing good things for good reasons overall. So people are well-motivated, and we know that there are four numbers in sustainability. One and half planets – you’ve heard it at the conference here – one and a half planets of consumption today. We can’t carry on for too much longer so we use lots of resources. We have to be really mindful of where they come from and to make sure we secure sustainable forests or farmlands. We have to take a lead on that otherwise, you know, with one and a half planets of consumption, it’s not going to be there for future generations or for the next generation of IKEA. The next number is three billion – three billion extra consumers by 2030. We have two billion consumers today – two billion people in the global middle class. That swells by three billion to five billion by 2030. Six is the next number – six degrees warmer.
If you just take those three numbers and think, “Okay we’re expecting six degrees warming, three billion extra consumers on one and a half planet’s resources – this shapes the business landscape. So [sustainability has] gone from “it would be nice to do” to an absolutely business-critical thing to do. And as soon as I explain that, or my colleagues explain that anywhere in the business – we have a conversation and everybody will say, “What can we then do? How can we help our customers live a more sustainable life at home with super low priced LEDs or induction stoves. How can we help design efficiency and renewable materials and recyclability into products? How can we make our operations completely sustainable? That’s why we are going for 100% renewable energy – we actually own and operate wind farms in six countries now.
And just in our Beijing store actually with PV, we’re rolling out solar panels across there. We’ve done most of our U.S. stores and distribution centers. We’ve got the biggest solar installations in 10 U.S. states.
In the U.S., 85 percent of our facilities have PV. Then we top it up around the world with wind power off-site where we own and operate wind power. That future brings us business – wouldn’t you rather have energy from the sun and the wind, with no impact, where you’ve got price predictably for the future and there’s no danger of the wind running out or the sun running out than to get it from the the old fossil fuels?And it’s good business sense for us to do it. It also feels good to do the right thing. Our customers want to do it, our co-workers want to do it. It’s investing in the future. I can’t think of one single reason why we wouldn’t do it.
And, speaking of which, do you see that your customers want recyclable products or products made from recycled materials?
Steve Howard: Yes. We actually see that IKEA customers care more than non-IKEA customers about sustainability. I don’t actually fully know the reason for that and you’ll see that’s a universal truth whether you’re in the US, Sweden or China. I think it’s a big issue and concern outside of daily life for people. But most people – generally – don’t want to pay more for it. People might say they’ll pay a premium, but we don’t want to charge people a premium. We’d like to get the most sustainable products to be the cheapest products. We’ll invest aggressively to do that.
So, would you say that your sustainable products are as cheap as your other products?
Steve Howard: Well, if you just take the Vidja lamp that I mentioned, where we lowered the price about 34%, that’s a great example. We did the same thing with the more sustainable products from previous generations – take the Ektorp sofa. You flat pack the Ektorp sofa, so it takes the customer 15 minutes to re-assemble it. We can lower the price five, ten dollars because you can suddenly ship three or four times as many sofas. So, you’ve actually just completely destroyed the cost of transport. You’ve taken it apart. So the customer’s part is 15 minutes to put the sofa back up. The sofa’s going to last just as long, it’s just as good, just as comfortable and you can lower the price as well as saving a huge amount of emissions. So in our world sustainability is almost always the right thing to do, but also from a straightforward cost point.
Well, we’re certainly very impressed with that, but if you’re going to have three billion more customers, then what about the consumption issue? And some people feel that IKEA products can, you know, sometimes break a little easier? How are you trying to solve that issue of longevity?
Steve Howard: I think that’s a totally fine question. We actually have a sustainability structure which is called People & Planet Positives. We put a line in there and we mean every word of it. Really, every word in that document to be published externally. We’ve talked about the durability fitting the purpose. So like, your toilet brush doesn’t need to last 100 years.
Right. Nor would you want it to. Haha.
Steve Howard: Right, nor would you want it to. You know, we’ve got a 25-year guarantee on mattresses, 25-year guarantee on kitchens. So for us, it’s about making sure we are in the right place with people, so we’ve got also to try and fit. The difficult thing is if you are talking about – right at them bottom of the price model – and this for a family struggling with very low income, or students, or somebody who’s in an expensive city by themselves, when we get to allow people to have a super cheap wardrobe, really, where they can have storage rather than hanging their clothes on a rack or something. Then how durable do you make that product? So we are asking those questions ourselves. But for the majority of range, we’ve got this – 25 years is long enough for a mattress. It might be too long. I think about this when I go to a hotel room. How many people have slept in that bed? More than I’d like. Make sure we’ve got that durability absolutely right and it’s explicitly understood. We’re really – to be honest – we openly talk about that. A coffee table – with care – it should last forever. You’re not designing in redundancy and we’ve redesigned LACK. If it doesn’t deliver durability then we will find another solution to make it green. We obsess about it. And then we need to look at how can we go for the reuse or the recyclability and this is sort of the next wave for us. So we’re looking at not just how do we design for recyclability. Putting that through our entire range now, how do we guarantee that it actually does get recycled? In different markets we’re doing same thing with the LED lights or with plastic garden furniture. Early stage piloting issues are getting resolved now – you’ll see a lot more of that over the next five years.
We’ve been following IKEA for quite some time now. What are IKEA’s next steps? What is in the future for the brand?
Steve Howard: What I’d like us to be where every IKEA customer is able to point to a product that they really like and are proud of, but that they know is helping them save energy and not waste water. Some of the work we’ve done with customers – this is not expensive stuff, these are simple things that involve improvements. That you can actually save as much as 30 percent on your energy bills and that’s – for most people – that’s like a five to ten percent pay rise. Induction tops – stove tops – are so much more efficient. It cooks faster. So actually it’s a pleasure to watch your pan of water boil because it boils so much faster. So efficiency saves you time. So not only do you get a ten percent pay rise, you also get at the same time about 48 hours of reduced cooking time per year. So sustainability can give you a pay rise and give you two days of your life back.
We want everybody – all of our customers around the world – to be part of what we talked a lot before about how we really do look for extending product life and the new business puzzles around that. We’re making sure we’ve got really innovative ways of reuse of remanufacturing and recycling.