Re-designing the future for sustainable business development

Achieving sustainable business development for companies with a global footprint is challenging but also full of opportunities. IKEA, a home furnishing retailer operating a full value chain in over 60 markets has approached this challenge by working toward becoming circular and climate-positive by 2030. Circularity is one of the best opportunities for economies and businesses to address growing climate concerns while generating growth. At its core, it offers the possibility to eliminate waste, creates new ways to engage with consumers, and bases product and service development on the use of renewable or recycled materials.  But it requires a complex systemic shift, where all parts of the value chain have to adapt to harness its full potential.  

In recent years IKEA has been exploring and developing circular capabilities and has identified several elements as truly key. While the entire transformation is underpinned by the need to respect the complexity of the change required and the patience to continue taking incremental steps toward a long-term goal, several elements must be put in place to succeed in enabling this transformation.

IKEA has summarized these into four strategic goals: enabling customers to acquire, care for and pass on products in circular ways, using only renewable or recycled materials, designing all products with circular capabilities, and advocating and joining forces with others toward the circular transformation.

Finding the common language in what circularity means is essential to creating an alignment between the actors within the value chain. Creating a common understanding opens up the doors to a more fruitful discussion. This starts with a common set of definitions, defining terms that are often misunderstood and making easier for businesses, policymakers, and cities to align on what the circular economy is and how they can adopt truly circular models. Such work has already been started and is still underway, including with the regulatory movements in the EU and the discussion in International Standardization Committees. In support of these efforts, in 2020, IKEA and Ellen MacArthur Foundation joined efforts and developed a set of common definitions for the circular economy, aimed at guiding and clarifying the key terms used in the discussion and development of circular business models.

Yet, simply identifying the language is not enough to stimulate the systemic adoption of circular business models. Circular flows are based on the possibility for products and materials to be reused, refurbished, remanufactured, and recycled in the end. The life of products and materials is no longer confined to a linear model, which starts with the sourcing of raw materials and ends with, hopefully, recycling. In a circular economy, the goal is to keep products and materials in circulation for as long as possible. One starting point is designing products to enable reuse, maintenance, and repair, and ensuring they can be used at the end of their life as a resource for future products. This development approach requires looking holistically at a foundational design approach starting with the understanding of user behavior, expected lifespan, and emotional connections to the product. IKEA has tested this approach over time and developed a set of circular product design recipes to guide the development of all home furnishing products. These circular product design principles  are securing the possibility for products to enable reuse, repair and adaptation, refurbishment, and recycling, and build in the long-term capability for remanufacturing as the processes and global capabilities make this increasingly possible. We are now hoping to see at least some of these principles translated into industry standards, where both standardization committees and legislators, particularly at EU level, are creating a common industry baseline. We are excited to be a part of this development. 

Even if the circular economy is much more than recycling, we should not underestimate the importance of continuing development in this area. At IKEA, we are aware that the largest part of our climate footprint derives from material use.

The transition to the use of recycled and renewable materials needs to accelerate to tackle this challenge. But it is not something a single company or producer can do alone. Infrastructure and common processes are needed to clear the way and enable large-scale sourcing and utilization of secondary raw materials, overcoming the obstacles to setting up the circular supply chain systems needed for the future. To exemplify: we need easily accessible collection sites and recycling centers, a modern definition of “waste” and clearer, harmonized rules to move products and materials between markets. We all have a role to play in a circular system, making the change for the better with new ways of working, reshaping the traditional responsibilities we have had for so long in the linear supply chain. This change may seem daunting, but also offers exciting possibilities. 

In this context, we applaud the European Union for having embarked on a journey that places the circular economy at the core of the European Green Deal. The development of the EU Circular Economy Action Plan is paving the way to create firstly an increasing awareness about circularity within the industry and in some cases more broadly within the public. It has offered a good platform to discuss and discover the current readiness for this development. It has also given a push for companies such as IKEA to explore future
business models even more boldly. This, however, must remain rooted in a fact-based understanding of how companies work, and more importantly how to meet the demand from the public. For example: establishing useful and accessible sources of knowledge about what it takes to adopt circular behaviors will not be accomplished through simple labeling of products. It will require long-term investment and incentives into making them more attractive to consumers. At the same time, longer product life will not be achieved by simply offering access to a very large number of spare parts. With our experience, we can predict what parts may need replacement and should be prioritized, in order to avoid counterproductive overproduction. Creating accessible and affordable service offers is a key element of engaging customers within IKEA. Convenience and value for money and effort are central to shifting mindsets toward a more sustainable consumption for the many people.

The good news is we are not starting from scratch.

Within IKEA we have understood that many capabilities are already naturally built into our business model. Turning waste into resources has been an integral part of building IKEA. We created our BILLY bookcase from industry waste at a time when scraps and dust from sawmills were seen as waste.

Today, the same material is a valuable resource in many different types of board materials, and the BILLY bookcase has remained with IKEA for more than 40 years, still in many, many people´s homes.  Our suppliers who produce our products have been essential partners in understanding what it takes to for example refurbish a product in an efficient and cost-effective way. Our relentless pursuit to standardize parts has been a strong starting point for developing possibilities to replace broken parts rather than full products. The development of a wedge dowel replacing screws has enabled disassembly and reassembly so products can be moved, repaired, updated, and passed on . These experiences and knowledge are not always unique to IKEA. It is therefore immensely useful for regulators to continue engaging with businesses and the industry to build on existing best practices. 

It is clear that circularity is a crucial piece of the puzzle needed to achieve meaningful change for our planet. The opportunities for innovation are boundless. But they can only be realized through careful balancing of long-term goals with what is possible today, incentivizing efforts while learning along the way. As we say at IKEA, “Most things remain to be done”, but we have a bright future to look to. It is about designing this future for long-term sustainable business development.