How IKEA is growing with its circular business model

IKEA

IKEA is often criticised for the fact that its cheap disposable furniture supports a culture of disposability. Simona Scarpaleggia, former managing director of IKEA Switzerland, says: “We are part of the problem, but we also want to be part of the solution to this problem”. In order to declare war on the “waste society” globally, the company has been putting its business model into the context of recycling management for several years. With new innovations, IKEA is thus primarily supporting SDG9 “Industry, infrastructure and innovation” and SDG12 “Sustainable consumption and production patterns”.

The IKEA circular approach

What social challenges does IKEA address?

Switzerland produces around 80 to 90 million tonnes of waste annually. This means that the average Swiss citizen is responsible for one of the highest municipal waste volumes in the world, at 716 kg of waste per person per year, according to FOEN. Only just under 53% of this is recycled. The high volumes of waste not only have a negative impact on the environment, but also have a major financial impact. The careless dropping or leaving of waste (littering) alone causes costs of around CHF 200 million per year in Switzerland.

What is the solution?

Millions of people consume IKEA products. This is precisely why it makes a big difference when the furniture giant decides to change not only the way they use resources, but also to optimize the consumer model itself.

Instead of the previously linear economic approach, IKEA wants to use material several times as much as possible. It should therefore be both recyclable and reusable. The company thus launched the “Second Life” program, where customers return their furniture and are compensated for this. In addition, IKEA is now testing the “Furniture as a Service” rental model in Switzerland, where B2B customers can rent furniture for at least 12 months or more. At the end of the rental period, customers can return the merchandise and IKEA either re-hills or recycles the merchandise. This enables the company to use less material for a wide range of products and to promote sustainable consumption by its customers.

What are the challenges?

The central challenge and ambition is the transformation of Ikea into a recycling business. This includes challenges in the conversion of the service offering, raw material procurement and product design. In doing so, the company tries to extend the life of the products and therefore to design them in such a way that they can be reused, repaired, reused, resold or recycled. Adapting to changes in the customer’s lifestyle and integrating them into the cycle concept is also a challenge. For this purpose, the company developed specific customer interaction programs.

What are the results (impact)?

The example of IKEA shows that growth and sustainability are not contradictory, and that a circular economy can promote both. With regard to the “Second Life” project and the rental concept, IKEA Australia estimated in its “People and Planet Positive 2018” report that they could recycle, reuse or repair approximately 13.5 million pieces of furniture. The impact is enormous when you consider that IKEA was already using about 1% of the world’s commercial timber supply in 2013.

What is IKEA’s vision?

IKEA is aware that they are responsible for part of the problem. Nevertheless, and precisely because of this, they want to be part of the solution. The mission and vision is to work 100% sustainable. The company started with LED light bulbs, then came sustainable cotton and by next year the company wants to have switched to 100% renewable energy. Further initiatives are underway and enabling and promoting a global recycling economy is only part of it.

“People and planet positive” by 2030, resulting in a net negative amount of greenhouse gases, requires a multi-faceted approach. In addition to the $3.75 billion invested in renewable energy, IKEA will phase out disposable plastics by 2020.

Can IKEA’s solution be multiplied and scaled?

The circular solution approach of “Second Life” and “Furniture as a Service” can be scaled well in that IKEA can expand the solution in all countries and to various product groups. The solution can also be implemented and extended beyond the company itself to the entire furniture industry. This requires a rethinking of the companies as well as the consumers from the one-way to the closed loop economy. Ultimately, the solution not only reduces negative, ecological effects, but also achieves positive, economic effects.

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