A key target for IKEA to contribute to the climate transition is 100% renewable energy in the entire value chain. IKEA has to not only change their own energy use but also that of their suppliers. This is a challenge, but through their support program for suppliers, they have started to help them transition to renewable energy faster successfully.
On April 20, 2023, IKEA participated in the first-ever Stockholm Climate Week. Peder Weibull Hartman, Program Leader, Renewable Electricity for Supply Partners of Inter IKEA Group joined the live broadcast from SPACE Arena in Stockholm, participating in a panel along with representatives from Apple and Ørsted to present their Renewable Electricity for Supply Partners program.
Peder Weibull Hartman highlighted the importance of supporting the IKEA supply chain in the switch to renewable energy during Stockholm Climate Week.
One of the key actions to reduce value chain emissions is to consume 100% renewable energy in the whole value chain — both in own operations and within supply partners’ operations. Many of the IKEA suppliers find this challenging to reach on their own, so IKEA started thinking about how we can help them accelerate the transition to renewable energy. That is where the program was born.
“At IKEA, we came together and said ‘How can we support our suppliers in the best way to accelerate the movement and reach the goals together?’ We made the decision to launch a program to support them in doing exactly this,” explained Peder, and added that the program is based on a number of assumptions.
IKEA based the program on the assumption that “our suppliers have more bargaining power if we go to the market together”. They can also utilize economies of scale and share learnings across the supply chain to increase overall competence. With this, IKEA launched the program in 2021 in the top three emitting countries: Poland, China, and India, and they looked at how they can support them directly in increasing the percentage of renewable energy they use.
In the program, IKEA supports the suppliers in three ways. The top priority action is on-site investments, where IKEA lends money to suppliers to install e.g. solar panels, wind power, or other renewable energy solutions near or on-site so that they can produce their own renewable energy.
The second solution is off-site solutions, which means direct ownership of off-site energy production or Power Purchase Agreements (PPAs), which are long-term agreements between a seller and a buyer to off-take a certain amount of energy at a pre-defined price over e.g. 10-15 years.
The third solution is guiding suppliers to ensure that the energy they consume from the grid is replaced with renewable energy, through buying certificates from the provider. This solution is the last option because while the energy is credibly renewable, it is not always additional, something that the first two options provide, Peder explains: “The top two steps secure the additionality aspect. When you work with these steps, you are directly driving new investments in renewable energy, which is what we need.”
This program has shown great success in the first three markets where it was launched, so IKEA is now expanding it to include 10 more markets, which you will be able to read about in our next article.
https://youtu.be/vOskr-dtwz4?t=17574
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Awesome steps! I like your program and the goals to walk with suppliers.
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92 w
this is extremely influential
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A very interesting presentation and insights from Ikea!