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IKEA’s Sustainability Strategy: Save the World, One Product At a Time

09 Wednesday Jul 2014

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  • 154,000 workers.
  • 47 percent of all managers are women [compared to 17 percent of the American Fortune 500’s board seats or the female representation at the recently concluded World Economic Forum].
  • 338 stores worldwide.
  • 8 percent comparable store sales growth in FY2012.
  • A third of total energy consumption met through renewable energy.

Is IKEA‘s newly minted sustainability strategy working? Titled People & Planet Positive, the strategy was borne out of the retailer’s business mission: to create a better everyday life for the many people. The 2012 report marks the first update for the superstore whose goals start from the obvious – a fourfold increase in sales by 2020 – and go on to include the other two pillars of sustainability – engagement of customers, employees and suppliers, energy dependence, as well as community development.

In typical European fashion – understated with an emphasis on data – the release headline read: The IKEA Group is Growing and Financially Strong. Mind you, the release announces the retailer’s 2012 Sustainability report, not the latest quarterly report on financials. What better way to position sustainability?

I spoke to Chief Sustainability Officer Steve Howard briefly on the cusp of the report’s release. Excerpts:

Aman Singh: What are some of the key highlights of the 2012 Sustainability Report that you would want every CSRwire reader to know?

Steve Howard: We’ve divided the report into two parts. First is the forward-looking piece, which talks about our new sustainability strategy and lays out our 2020 goals. Implementing these goals has  meant a huge amount of work and unleashed an incredible amount of enthusiasm across the workforce. IKEA_2012_Sustainability_Report_Updates

The second piece deals with our impact. In terms of our operations, extending our work on energy has been significant. We completed installing 50,000 solar panels across our business locations by the end of FY 12. Last year, we committed to invest $2 billion in renewable energy by 2015. We’re already committed $500 million of that.

IKEA now owns wind farms in six countries. Thirty-four percent of our energy came from renewable sources last year. We’ve committed to reach 100 percent by 2020. Not bad for a furnishing company.

In our supply chain, we committed to reaching 100 percent compliance with our suppliers. We have 80 auditors working on this goal as well as independent team validating the work of our auditors. [Once we rolled this out] some suppliers agreed to collaborate while others decided not to. So we parted ways with as many as 60 suppliers. That has real business consequences – for us as well as the suppliers.

This goal has been a real test for us on how serious we are with our promises and commitments. Because our strategy is embedded and understood across divisions, our decision to part ways with 60 suppliers was not received with any criticism. We’ve also worked with our supply chain partners on funding projects and have reached more than 100,000 farmers on improving farm conditions, water conservation, etc.

Again, our goal is to reach every single one of our farmers by the end of 2015.

One of IKEA’s goals is to have at least 95 percent of coworkers, 95 percent of suppliers and 70 percent of consumers view IKEA as a company that takes social and environmental responsibility seriously. How’s that going?

Most of our suppliers, customers and coworkers are in the “I don’t know” category. They judge us and have opinions about IKEA but don’t know what we do on sustainability. What we also know is that people care. Once we communicate the urgency, they do care about things like climate change, the  future of their children, etc.

VIDJA_lamp_IKEAMoving forward, we will strengthen our customer communications. For example, last year we replaced the doors of one of our frame cupboards with honeycomb fiber, which is as strong as solid chipboard but uses 40 percent less material. Cupboards need strong doors, not heavy doors. And this reduces the cost to produce the cupboard, therefore, reducing the price for our customers, which makes it a better customer proposition.

Similarly, the VIDJA lamp was redesigned last year to take out unnecessary components [as many as 24 of the 33 original components were removed] and replaced with LED lights, resulting in half the weight and the same performance.  Additionally, we can now load 128 VIDJA lamps on a pallet vs. 80 previously, which means we can ship more at once, reducing our fuel usage and shipping costs.

Just like that, every IKEA product has a story. That’s the direction for our business. Soon everything will be traceable back to source but it’s a lot of hard work and we are starting to talk about these stories. But it will take us some time to get the communication across to our customers globally.

That’s emblematic of a true lifecycle approach. With thousands of products and a growing footprint internationally [IKEA is in China and will soon debut its first store in India] there must be some challenges in balancing sustainability goals and growing scale?

While having a mission and being a values-led business helps, it all comes down to a significant execution and implementation effort. Our people are motivated to lower prices and find sustainable solutions. I use three numbers to talk about sustainability within IKEA:

  • 1.5 planets: needed to provide resources for today’s population
  • 3 billion: extra consumers expected to overcome poverty across emerging markets by 2030
  • 6degrees centigrade warming: A catastrophe.

Integrating_sustainability_into_product_development_IKEAThese numbers are real. And hit hard. We’re over-consuming against the urgency of climate change.  This hits the heart of business: we are either sustainable or bust. We have to do whatever is needed. And we know that.

We can help our customers save energy by switching over to LED lights. We’re essentially banning non-LEDs by committing to sell and use only LED lights in our products. We can help people save water in a meaningful way by using energy-saving equipment. Simple things like LEDs, for example, can reduce our customers’ expenses by 30 percent. That’s equal to a 10 percent pay raise!

This is our opportunity…and it’s highly motivating.

How does reporting on these metrics help? Whose reading the report?

We just want to be transparent. We’re not expecting IKEA customers or coworkers to rush to read our sustainability report. It is meant for a specialist audience that believes in the phrase, you can only manage what you can measure.

Businesses – and management teams – like to have clear targets so that they can report against them [and benchmark, analyze and improve performance]. So why not use the same logic for sustainability?

Originally written for and published on CSRwire’s Commentary section Talkback on January  21, 2013.

Corporate Social Responsibility at Target: Behind the Red Bullseye

07 Monday Jul 2014

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Target released four new corporate responsibility goals in 2011:

  • Increase sustainable seafood selection
  • Improve owned-brand packaging sustainability
  • Increase diabetes HbA1c testing compliance
  • Increase reading proficiency

Now, Target’s 2011 CSR Report offers pages of graphs measuring the Minneapolis-based retailer’s progress against these goals. While the graphs look promising and underscore the challenges of operating in a competitive market with multiple layers of stakeholders, I wanted to understand the context behind these goals and what the execution would look like.

I sat down with Tim Baer, Executive Vice President, General Counsel and Corporate Secretary with Target, for a conversation about the goals and how his team plans to demystify complicated supply chains and motivate its employees and customers toward healthy and sustainable choices.

Aman Singh: While the PDF of goals and progress gave me a sense of exactly that, i.e., progress, it didn’t give me a sense of Target’s mission/values. Can you elaborate?

Tim Baer: At Target, we’re committed to positively impacting the lives of our guests and team members. Since 1946, our legacy of giving and service has been reflected in a commitment that today totals more than $3 million a week to our communities.

Tim_Baer_TargetAnd at the end of the day, by continuing to  serve our team members and communities, we ensure our future success. As a result of our giving model, we benefit from being a workplace and shopping destination of choice for our team members and guests. Not only do our guests value our commitment to communities and giving, but our team members do as well.

To bring our vision of strong, healthy and safe communities to life — which we can’t do alone — we work with community, business and civic partners who inform and share in our approach. We know we can make a meaningful impact, so we set goals to guide our work in three focus areas — helping to put more U.S. children on the path to graduation, reducing our impact on the environment and helping Target team members live healthy, balanced lives.

Why is education such a big goal for Target?

Education, specifically K-3 literacy, is important to Target for three primary reasons. First, we believe that every child deserves the opportunity to reach his or her full potential. And, we’re compelled to do our part to address the education challenge in America, putting more kids on the path to high school graduation.

Second, based on guest surveys, we know that our guests care about education more than any other social issue, and we’re committed to giving to communities in a way that positively impacts our guests and their families.

Third, we know that reading proficiently by the end of third grade is a significant milestone on the path to graduation. This is the time when a child transitions from learning to read, to reading to learn. A child who cannot read proficiently by the end of third grade is four times more likely to drop out of high school when compared with a child who can.

Ultimately, education is critically important to the success of our children and our economy. By supporting education, we are investing in developing an educated workforce that is prepared for today’s and tomorrow’s challenging work environment. At Target, our team is our competitive advantage, and preparing future team members with a quality education today makes good business sense.

CSR_Education_Target

Your data shows that you were not able to achieve your water reduction goals? Can you give us a sense of the challenges and where improvements need to be made?

To recap the report, Target used 3.45 billion gallons of water, representing a 0.3 percent reduction in water use per square foot from our 2009 baseline. Although our absolute water use exceeded our initial baseline, we also increased our total real estate square footage, which led to a decrease in water use per square foot.

The most significant challenges we faced in 2011 were drought-like conditions in some of our mature markets like Texas, Minnesota and Iowa, where we have a relatively high concentration of stores requiring increased irrigation. This negative impact was modestly softened by our rollout of several water-saving initiatives, which we estimate will contribute a reduction of 1.4 percent annually starting this year.

A few examples of our water-saving initiatives include:

  • Expanded installation of smart irrigation controllers that irrigate based on real-time local weather data in lieu of set times,
  • Use of ultra-low flow urinals and water closets, and
  • Elimination of continuously running dipper wells for ice cream and coffee stations at Target Café and Starbucks locations in our stores.

We’re also in the process of installing real-time water submeters in a number of stores to pinpoint the quantity of water a typical store uses for various operations. This will help improve our evaluation of water-saving opportunities moving forward.

Environment_CSR_Target

You have a goal of reducing owned-brand product packaging for at least 50 product designs by 2016. Is that aggressive enough?

While we’ve targeted 50 packaging designs, these changes will be implemented for a much larger number of items that use the same packaging.

We know environmental stewardship is important to Target guests, and our sustainable packaging designs will let them know that Target’s commitment to reducing our environmental impact begins before our products hit shelves.

Over the next five years, Target will be developing sustainable packaging designs that yield at least a 10 percent improvement in one of several attributes of our existing owned-brand packaging. We’ll do this in several ways, including reducing overall packaging, using more recycled or renewable content, and reducing product waste. We’ll also look to use more recyclable materials in our packaging, Sustainable Packaging at Targetcounting these improvements toward our goal only if the updated packaging is 100 percent recyclable.

The goals indicated regarding packaging are limited to your owned-brand products. Are there any plans to push your suppliers and CPG partners into more responsible, transparent and environmentally friendly actions?

We believe in leading by example and hope that by creating more sustainable packaging for our owned brands, we can inspire our suppliers, CPG partners and peers to implement more sustainable packages in their own products.

The report indicates strong progress toward empowering employees to be more health-conscious. Can you discuss some of the challenges behind the numbers?

For us, 2011 was a year of learning in regards to team member wellbeing.

We recognized goals specific to preventive service utilization rates were difficult to measure consistently and accurately, so we adopted HEDIS [National Committee for Quality Assurance’s Health Effectiveness Data and Information Set] measures. By doing so, we can support our wellbeing efforts by comparing our utilization rates to those of other employers or healthcare entities like medical groups or health plans.

The size and geographic distribution of the Target team member population reaches across 49 states, 1,700 stores, 37 distribution centers and nine domestic headquarters locations. We employ more than 365,000 team members and know they have varying degrees of health engagement, variable disease prevalence and differing perspectives on healthcare services. This is an opportunity for us to develop tailored programs that address these differences, more effectively reaching every team member, regardless of where and how they live and work.

Can you summarize the key highlights of the report?

All of Target’s corporate responsibility objectives ladder up to our larger goal of creating a brighter future for our team members, our communities and the world we live in. Target is here for good. Through all of these initiatives, we’re committed to positively impacting the lives of our guests and team members.

Additionally, Target’s 2011 Corporate Responsibility Report is the most transparent corporate responsibility report we’ve ever released. It represents the first time Target declared a GRI Application Level and obtained a GRI Application Level Check. [For more information, Target’s GRI Application Level/Check Statement from GRI were posted on www.Target.com/hereforgood on July 13, 2012.]

Why bother reporting on this set of internal goals? How do you measure the “success” of your CSR report?

Our commitment to our guest extends far beyond our stores, and we believe truly great service includes supporting the communities where we live and work. In business, Target collaborates and innovates to drive results. Key to that collaboration is transparency when it comes to measuring and reporting progress toward goals, allowing us to grow as a company.

Originally written for and published on CSRwire’s Commentary section Talkback on August  6, 2012.

Social Responsibility, Beer & Aliens: Journey to Becoming the Best Beer Company in a Better World

07 Monday Jul 2014

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I caught up with Carol Clark, Global VP for Beer and Better World, to drill deeper into Anheuser-Busch InBev’s latest CSR report. Key highlights:

The report is titled Connecting for a Better World. AB InBev makes beer. What’s the connection?

At AB InBev, our dream is to be the Best Beer Company in a Better World. We believe that taking consistent, active measures in our core areas of social responsibility means constantly connecting our business with our stakeholders, especially in the communities where we live and work.

It takes a team effort to address these issues. Through our work to promote responsible drinking, reduce our impact on the environment and support our communities, we work with others who share our collective goal of making a difference.

There’s a quote in the report from Carlos Brito saying “We’re not aliens.” Can you offer some context?

Carol_Clark_AB_InBevWhen Carlos Brito said, “We are not aliens …” he was responding to a question at the Business for Social Responsibility Conference last fall about why AB InBev actively promotes responsible drinking.

AB InBev today has over 116,000 employees operating globally. We live on this planet and share the same concerns as our friends and neighbors. Many of us are parents and understand how important it is to talk with our children to help prevent underage drinking.

Similarly, we don’t want to be on the road with drunk drivers, and we’re committed to supporting prevention efforts such as encouraging the use of designated drivers. We’re committed to addressing these issues not only from a business perspective, but also from a personal perspective.

What is the ROI in producing a comprehensive CSR report such as this one? Media mentions? Retention? Rankings? Anheuser-Busch_CSR_Report

Publishing our CSR report keeps us focused and accountable to our stakeholders and ourselves. The scrutiny that this annual process brings gives us an updated perspective to help us further drive our performance, engage our employees and very importantly, thank them for their great work over the past year.

From an external perspective, we’re satisfying the requests from varied stakeholders for transparency on our social responsibility efforts.

The report is over 80 pages. Who is your primary target audience? And, who would you want to target?

We have a lot of good things to talk about! We use the report to share our progress with diverse audiences – from community stakeholders to investors, to media, to government officials – around the world.

Alex Prud’homme author of The Ripple Effect recently said that “Water is the headlining story of our century.” Are you focusing on sustaining your business by reducing water use, R&D on water replenishment or identifying alternative products altogether?

Water is our primary environmental focus and we aim to reach a water usage rate of 3.5 hectoliters of water for each hectoliter of production by the end of 2012.

We tackle the issue of responsible water use by doing more to conserve both in our operations and in the communities where our breweries are located. Progress requires operational changes and continually applying the most updated technical innovations. It means going further with supply chain and community partners to help conserve water outside our walls. But it also requires reinforcing a mindset that doesn’t take water for granted.

[Anheuser-Busch InBev’s 2011 Global Citizenship Report]

It can be argued that 8.2% reduction in water usage since 2010 is not a lot. Primary challenges in reaching double-digit reduction?

Actually, if you look at the beverage industry, this is a significant achievement. And it’s important to keep in mind that we’ve focused on water and energy efficiency for some time now, so there is very strong year-on-year progress. And we’re also making these reductions while continuing to grow our business. That means that each year, our brewing operations teams find innovative ways to do more with less when it comes to water.

To date, we’ve achieved an average water use of 3.71 hectoliters per hectoliter of production across our global business, which represents a 13.7% reduction against our 2009 baseline.

Our target, which we’ve stated publicly, is to reach 3.5 hectoliters of water per hectoliter of production by end-2012, which will put us on the leading edge of water usage for the brewing industry.

Your report mentions the billions paid in wages and income taxes. Not a lot of reports make these metrics a part of their community development results. Why the emphasis on wages? 

As the leading global brewer, we have operations in 23 countries. We have a significant economic impact on the local communities where we do business through the jobs we create, the wages we pay and the taxes we pay governments at all levels. We feel that it’s important to report on and recognize the value and impact we are bringing to communities where we live and work.

Can you talk to the “ownership culture” of the company?

One of our 10 AB InBev Principles is about ownership: “We are a company of owners. Owners take results personally.”

[Sustainable Beer: Anheuser-Busch InBev’s 2012 Environmental Goals]

We strive to create a culture that encourages responsibility and accountability, and that applies to our work on social responsibility as well. Creating this culture of ownership helps us build those connections and team approach, both internally and externally, to helping make a difference in our communities as we strive to be the Best Beer Company in a Better World.

Originally written for and published on CSRwire’s Commentary sectionTalkback on April 26, 2012.

Dow Chemical: Extracting Business Value out of Sustainability

03 Thursday Jul 2014

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After more than a decade of negotiations, there’s news today that Dow Chemical has agreed to clean up 1,400 residential properties in Midland, Mich.

The root cause: A Dow Chemical plant located in Midland, also home to its headquarters, responsible for polluting the area with dioxin for a better part of the late 1990s.

Dow Chemical has had a long history of pioneering research and innovation in sustainability, from collaborating with nonprofits on driving solutions — it was named one of the most sustainable companies in Brazil in 2011 — to industry-wide partnerships on reducing their products’ environmental footprint.

But no number of accolades or ratings can hide the immense environmental and social footprint of the company’s operations, domestically or internationally. Or as many would opine, help erase a history of soil, air and water contamination.

So, how does the chemicals giant prioritize sustainability to drive its long term business plan? And how are these complex social and environmental challenges defining this strategy? Neil Hawkins, Dow Chemical’s VP for Sustainability & EH&S offers some insights:

Top Sustainability Challenges of 2011:

1. Accounting for the value of nature

We’re entering a new phase of integrating the value of nature into the corporate balance sheet through a breakthrough 5-year collaboration with The Nature Conservancy. This partnership will determine the value of ecosystems to Dow’s operations.

Scientists from both organizations are developing tools and testing models together that we will eventually share with other companies and the science community. In early 2012, we will issue a public progress report on the collaboration, as well as a broader update on Dow conservation projects around the globe.

2. Market adaptation to sustainable solutions and innovation

There is a significant divide between environmental and social issues, and the appetite of markets to adapt, and sometimes pay, for new solutions that address these issues. Bringing innovation to market is a costly proposition filled with economic and political volatility, lack of clear and consistent regulation, and lack of guarantees for ROI.

Despite these headwinds, we are addressing megatrends and challenges by staying focused on our mission and values, and through unwavering investment in our innovation pipeline.

Aspirations for 2012: Where does CSR / Sustainability fit?

In 2010, Dow passed the midpoint of its second set of 10-year sustainability goals – the 2015 Sustainability Goals.

In 2012, we will work on our next set of goals, building on the momentum of the past 20 years, and find ways to drive Dow’s science and people into unprecedented areas of leadership, collaboration, innovation and change.

These goals serve as a strategic guide for leveraging business to address global challenges from accelerating urbanization, rapid population growth and increasing demands on natural resources. Prioritizing the safety and wellbeing of Dow people will also always be at the core of how we measure success.

With sustainability at the root of our mission, vision, and values, sustainability and CSR don’t just “fit” in – they drive decision-making, investment choices, hiring practices, and employee engagement at Dow.

Sustainability, in particular the pursuit of more sustainable chemistry, also gives our innovation engine a clear target.

Predictions: Extracting Business Value from Sustainability

Companies will become more proficient at extracting business value from sustainability commitments and practices

The chemical industry, among others, will continue to move beyond sustainability as an obligation driven by outside forces, toward uncovering tangible economic value that drives both top and bottom line growth.

The economic value of sustainable development can and should influence all decision-making – including capital investments, recruiting, marketing, product design, R&D and service functions. Companies will need to become savvy life cycle practitioners, innovators and collaborators.

By looking externally at unique partnerships, and internally at deeply integrated sustainability through employee engagement and accountability, companies will unlock new areas for growth by harnessing the value of sustainability.

The critical role chemistry plays in solving world challenges will continue to move to center stage.

Our world is facing pressing challenges including water supplies, energy sources and affordable housing. Mitigating the impacts of these challenges and managing our natural resources worldwide requires the manufacturing industry, and in particular, the chemical industry, to play an enabling role by discovering and implementing new technologies.

Chemistry is fundamental to our lives. It enables more than 96 percent of all manufactured products.

As a company, we’re committed to driving innovative solutions through chemistry, such as the POWERHOUSE Solar Shingle, which transforms a typical house into a dynamic power generator.

Then there are efforts such as the United Nations’ 2011 International Year of Chemistry that put the power of chemistry on a global stage.

But more attention is needed to accelerate science-based solutions, increase collaboration, and attract new generations into rewarding STEM careers – where the problems of today and tomorrow will ultimately be solved.

Originally written for and published on CSRwire’s Commentary sectionTalkback on February 17, 2012.