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INTRODUCTION
The following discussion is a literature review on five sources each for sustainability monitoring systems and effective indicators.
Sources for Characteristics of Good Monitoring Systems
“Monitoring Systems for Sustainability. What are they measuring?”
This is a doctoral thesis from an Australian university that examines the sustainability reporting and monitoring systems by governments, private corporations and global non-governmental organizations. Australian frameworks are compared to those of international models. Sustainability indicators in the Australian context are discussed extensively. Two case studies from the private sector are presented. (Davidson, 2008)
Using the case study of the Australian Gas Light Company, shortcomings in current sustainability reporting practices in Australia are discussed. Referring to the Global Reporting Initiative (GRI) as the most common framework for enterprises, shortcomings in actual practice are cited. A substantive definition and overview of the GRI precedes the presentation of the case study. The paper is concluded with suggested improvements on the monitoring framework. (Davidson and Wilson, 2006)
“What's the purpose of sustainability reporting?”
This is an article from the UK newspaper Guardian and it captures the views of experts all over the world on the current definitions of sustainability and on its role in corporate life. Various organizations and their frameworks are mentioned. The resources mentioned are a corporate sustainability architect, the director of CSR and sustainability consultant Up the Ethics, the co-founder of GRI, the international policy institute Chatham House, chairman of change consultant Volans, deputy director of Danish Business Authority, co-founder of sustainability consultancy Futerra, director of consulting company Incite, and director for sustainability consultancy Two Tomorrows. (Confino, 2013)
Sources for Features of Effective indicators
“CSR Classification and Corporate Sustainability Indicators”
This is a white paper from the website CSR Quest and is an introduction to the site’s sustainability framework. It provides classifications and indicators for CSR. The paper discusses sustainability indicators, organization methods, the list of the UN Commission on Sustainable Development, sustainability criteria, reporting standards and Social Responsibility Investment indices. It then presents its framework of sustainability indicators and its classification of CSR goals. Reference matrices for each of the major goals are then shown. This document contains the fundamentals for indicators for this paper. (Katsoulaos, Zapouna & Zevgolis, 2004)
“Indicators of Sustainable Business Practices”
This is a paper book that examines whether firms have applied sustainable business practices using the Triple Bottom Line (environmental, economic, and social areas). To illustrate, two surveys were taken to identify trends of indicators and to assess how firms have used performance reports. The paper shows a comprehensive list of indicators for all the Triple Bottom Line areas. (Bae and Smardon, 2011)
Sustainability Indicators - A Compass on the Road Towards Sustainability
This is a paper from the Wuppertal Institute for Climate, Environment, Energy which defines sustainability and identifies sustainability indicators. It describes four systems that can be used of what it calls established indicator systems: the Organisation for Economic Cooperation and Development Pressure-State-Response (PSR) approach, the World Bank indicators, the UN Development Program (UNDP) Human Development Index (HDI) and the United Nations Department of Policy Co-ordination and Sustainable Development (DPCSD) approach. It the discussion the institutes suggested ideas on further defining the indicators. (IKEA, n.d.)
THE ENTERPRISE
IKEA is a Swedish privately held global conglomerate which retails ready-to-assemble furniture, appliances, home accessories, home furnishings and kitchen products. Since 2008, it has been ranked as the world’s largest furniture retailer. Founded in Sweden in 1943, it now operates 392 stores in 48 countries and in 2016, it earned a revenue of 36.4 million euros. It is renowned for its management competence in cost control, operations and product development which lies behind its capability to offer affordable prices.
IKEA’s value proposition is from its modern practical and eco-friendly designs of appliances and furniture. Store presentation includes interior design work which augments products’ appeal. The products are exclusive to the company and reflects Swedish architectural design. Product design is based in Sweden while manufacturing is carried out in China and other Asian countries. It approximately carries 12,000 products and consumes about 1% of the world’s commercial wood making it one of the world’s largest consumers of wood for retail (Campbell-Dollaghan, 2013). This fact makes it an ideal showcase and potential proponent and advocate for environmental sustainability.
In 2011, 533 million were counted to have visited its stores worldwide. The stores’ popularity comes from its efficient and pleasant layout which showcases the products set in realistically designed home settings. Even without buying, shoppers carry with them great ideas for their homes. IKEA prides in understanding its customers and their purchasing motivations and acting on them through product designs and store layout. (Statista, n.d.)
Focus on customers’ store experience is also manifest in the serving of food. It is internally managed and promotes Swedish fare such as meatballs, cream sauce and lingonberry jam. As an international company, local tastes are also considered in their breakfast menus. The combination of window shopping and good food is a strong attraction to families which comprise the main demographic in IKEA’s market. (Loeb, 2012)
SUSTAINABILITY DIMENSIONS
Economic Sustainability
Forestry Requirements
IKEA’s main raw material is wood and with its enormous production and demand, it cannot assume that supply would forever be continuous. It has to be sure that wood generation and consumption are in balance for its production to be assured in the long run. In this regard, it has set policies for its wood procurement that will compel and influence its suppliers to adopt the same position towards wood supply preservation in the world. (ISEAL Alliance, 2011)
IKEA has its own forest reserves (Schutte, 2015) and it requires its forest managers to have certified conservation plans. On the other hand, it requires its suppliers to declare the origins of their lumber to ensure that they are not denuding endangered areas and for IKEA to be able to check on their forest management practices.
Product Circularity
This simply means that ways and means are done by the product provider for used and defective products to be serviceable again for customers. As an example, stores in Belgium makes available five options to buyers: sell, renew, repair, return or donate. ‘sell’ and ‘repair’ only applies for IKEA furniture. For ‘sell’, IKEA buys back the product from the customer, refurbishes it and resells. For payment, the customer receives an IKEA voucher to buy new products. ‘renew’ refers to customer workshops to learn how to restore furniture. ‘repair’ is the usual parts and repair service while ‘return’ and ‘donate’ is for disposal or charity. (Perella, 2016)
Social-Cultural Sustainability
IKEA’s practice of social sustainability primarily focuses on the well-being of people under its care which are its employees and the communities that it affects.
Employees
IKEA realizes it can only thrive if it gets good people and it is by developing a reputation of being a good employer. Firstly, it wants to know about all employee issues. It has an annual survey called VOICE which is vehicle for grievance relief and process improvements. It also has the IKEA Leadership Index to allow employees to give feedback on their managers. Mandatory safety training for retail and distribution protects workers. It is open to dialogue with labor unions. Diversity is shown in 200 top management positions from 22 countries. The IKEA Learning Centre supports employees in their career advancement. (IKEA, n.d.)
Communities
IKEA aims maintain good will and a positive image among communities which will ensure that it will be allowed to operate in many countries. This positive reputation also feeds into the customer market who will reward it with patronization and loyalty. Governments and regulatory bodies would also be supportive rather adversarial if it contributes to local communities’ welfare. The IKEA Charity Policy & Community Involvement Guidelines manages the charity function. The IKEA Foundation focuses on youth and children in developing countries (Spampinato, 2014).
Environmental Sustainability
IKEA fully supports the environmental protection that it is willing to change itself. It is aware that its good standing in every country depends on how well it complies with regulations and that includes environmental ones. Being a good corporate citizen in this way will also contribute to its business development in that country.
IKEA invests in solar panel systems and wind turbines for the energy requirements of its buildings. Carbon dioxide emissions are being monitored in all IKEA buildings worldwide. It uses alternative energy sources like ground source heat pumps, air heat pumps, biomass boilers and solar panels. Part of qualifications and requirements from suppliers are cooperation on environmental initiatives. Transportation distances are planned for the minimum to reduce fuel emissions in trucks. Rail transit is also used as much as possible. IKEA is also popular with providing bus transportation which reduces the use of cars. (IKEA, n.d.)
One grand strategy which makes it a big player is energy independence, in a program called People and Planet Positive. The plan is that by 2020, IKEA would be producing as much energy that it consumes through billion dollar investments in solar and wind projects. This would be a breakthrough model for many similar large companies. Currently, IKEA already produces 12% of its needs with its wind farms in six European countries. (Huffington Post, 2012)
SPECIFIC SUSTAINABILITY AREA
Environmental sustainability was chosen because it would be have the most impact on IKEA’s long term operations. It is highly dependent on natural products like wood, cotton, palm oil and leather. There is also a growing concern and importance on corporate social responsibility worldwide which may affect its reputation in the market. Environmental sustainability is concerned with the raw materials for production and directly affects the economic sustainability in the short and long term.
LIST AND ASSESSMENT OF INDICATORS FOR MONITORING
(IKEA, 2015)
IKEA would like to be associated only with sustainability responsible suppliers. For wood products, it has to work closely and even assist the Forest Stewardship Council to encourage wood suppliers from China, Russia, South East Asia and South East Europe to show evidence that they are responsible in managing their forests. IKEA can volunteer to send inspection teams to the forests of existing and prospective suppliers.
Like its consumption of wood, IKEA uses 0.7% of the world’s cotton supply and it took the mandate that it would also be a leader in sustainability for cotton ((Thorpe, 2015). This would mean imposing its sustainability standards on the suppliers from major producers China, India, Pakistan and Turkey. IKEA should continue its efforts in the ‘Better Cotton Initiative’ programme is started with World Wide Fund for Nature (WWF). It also is looking for other sustainable alternatives to cotton like cellulose, linen and flax.
IKEA uses palm oil for its candle products and it will join the campaign that will prevent indiscriminate deforestation and peat burning which are undesirable consequences of palm oil planting. It has joined the resource protection organisation called Roundtable on Sustainable Palm Oil for these aims (Lee, 2014). It should also provide assistance to the small firms in Malaysia and Indonesia to increase productivity while using sustainable processes.
The main sustainability issue of IKEA for leather sourcing are human and animal rights. Leather sourcing has a typically long supply chain from the farms to the tanneries and the traceability can be difficulty with non-cooperative suppliers. The industry is also susceptible to exploitative labour conditions. Sustainability is both social and environmental where animal populations need to be monitored as well. IKEA would seek to procure only from traceable sources where it can defend itself from inevitable accusations (Daily Mail Reporter, 2008).
CONCLUSION
IKEA understands that its size makes it inherently accountable to be responsible in all facets of business sustainability: economic, socio-cultural and environmental. The global market has already acknowledged its social contribution in improving the quality of life of people. Because its business is highly dependent on natural resources like wood and cotton, it also understands that it can only remain successful if it is seen as environmentally responsible as the world is becoming more attuned to the urgency of environmental preservation.
With the emergence of sustainability advocacy organisations and regulating bodies, IKEA can establish compatible monitoring systems to meet accepted standards. It is already doing so and proof of its commitment is its annual publication of its sustainability activities and achievements (IKEA. (2015).
References
Bae, H. and Smardon, R. (2011). Chapter 9, Indicators of Sustainable Business Practices. Retrieved January 23, 2017 from http://www.intechopen.com/books/environmental-management-in-practice/indicators-of-sustainable-business-practices
Campbell-Dollaghan, K. (2013, May 7). IKEA Uses a Massive One Percent of the World's Commercial Wood Supply. Retrieved January 23, 2016 from http://gizmodo.com/ikea-uses-a-staggering-one-percent-of-the-worlds-wood-677540490
Confino, Jo. (2013, May 23). What's the purpose of sustainability reporting?. The Guardian. Retrieved January 23, 2017 from https://www.theguardian.com/sustainable-business/blog/what-is-purpose-of-sustainability-reporting
Daily Mail Reporter. (2008, December 3). Ikea slammed by animals rights charity for selling reindeer salami to Christmas shoppers. Daily Mail. Retrieved January 23, 2016 from http://www.dailymail.co.uk/news/article-1091614/Ikea-slammed-animals-rights-charity-selling-reindeer-salami-Christmas-shoppers.html
Davidson, K. (2008). Monitoring Systems for Sustainability. What are they measuring? (Doctoral Dissertation). Retrieved January 23, 2017 from https://digital.library.adelaide.edu.au/dspace/bitstream/2440/63716/8/02whole.pdf
Davidson, K. and Wilson, L. (2006). Measuring social, economic and environmental sustainability at the enterprise level: A case study of an Australian Utility Corporation’s Sustainability Report. Proceedings from Social Change in the 21st Century Conference. University of Adelaide, Australia. Retrieved January 23, 2017 from http://eprints.qut.edu.au/6089/1/6089.pdf
Huffington Post. (2012, October 25). IKEA’s Environmental Sustainability Strategy Includes Plan For Energy Independence By 2020. Retrieved January 23, 2017 from http://www.huffingtonpost.com/2012/10/25/ikeas-environmental-susta_n_2018703.ht
IKEA. (n.d.). The IKEA Group approach to sustainability. Retrieved January 23, 2017 from http://www.ikea.com/ms/en_KW/pdf/sustainability_report/group_approach_sustainability_fy11.pdf
IKEA. (2015). IKEA Group FY15 Sustainability Report. Retrieved January 23, 2017 from http://www.ikea.com/ms/en_US/img/ad_content/2015_IKEA_sustainability_report.pdf
ISEAL Alliance. (2011, November 3). Spotlight on IKEA: Commitments and Challenges of Responsible Procurement. Retrieved January 23, 2016 from http://www.isealalliance.org/online-community/news/spotlight-on-ikea-commitments-and-challenges-of-responsible-procurement
Katsoulaos, P., Zapouna, T. and Zevgolis, D. (2004, December 20). CSR Classification and Corporate Sustainability Indicators. Retrieved January 23, 2017 from http://www.csrquest.net/uploadfiles/1B.pdf
Kreider, K. (2014, July 11). Certification Brings Positive Impacts and Better Traceability to Business. CSR Academy. Retrieved January 23, 2016 from http://csr-academy.org/en/agenda/Supply-Chain/Certification-Brings-Positive-Impacts-and-Better-Traceability-to-Business.php
Lee, J. (2014, November 25). Ikea Joins the Crowd and Heads for Greener Palm Oil Sources. Retrieved January 24, 2016 from http://www.triplepundit.com/2014/11/ikea-turns-green-sources-palm-oil/
Loeb, W. (2012, December 5). IKEA Is A World-Wide Wonder. Forbes. Retrieved January 23, 2017 from http://www.forbes.com/sites/walterloeb/2012/12/05/ikea-is-a-world-wide-wonder/#3ccf17e436f4
Perella, M. (2016, September 22). A Sustainable Life at Home: How IKEA Plans to Become Circular. Retrieved January 23, 2017 from http://www.sustainablebrands.com/news_and_views/brand_innovation/maxine_perella/sustainable_life_home_how_ikea_plans_become_circular_
Rainforest Rescue. (n.d.). When will IKEA see the light? No palm oil for candles and tea lights. Retrieved January 23, 2016 from https://www.rainforest-rescue.org/petitions/513/when-will-ikea-see-the-light-no-palm-oil-for-candles-and-tea-lights
Statista. (n.d.). Statistics and facts on IKEA. Retrieved January 23, 2016 from https://www.statista.com/topics/1961/ikea/
Schutte, S. (2015, July 31). IKEA becomes first company to have its very own forest. Real Business. Retrieved January 23, 2016 from http://realbusiness.co.uk/business-growth/2015/07/31/ikea-becomes-first-company-to-have-its-very-own-forest/
Spampinato, J. (2014, May 8). IKEA Foundation Maximizes Global Impact through “Up Scaling”, Sustainable Approach. Retrieved January 23, 2016 from https://www.uschamberfoundation.org/blog/post/ikea-foundation-maximizes-global-impact-through-scaling-sustainable-approach/31634
The Nature Conservancy. (n.d.). Forest Conservation: Responsible Trade. Retrieved January 23, 2016 from http://www.nature.org/ourinitiatives/habitats/forests/howwework/combating-illegal-logging-and-advancing-responsible-forest-trade.xml
Thorpe, L. (2015, April 30). Ikea makes 75% of its home furnishings from sustainable cotton. The Guardian. Retrieved January 23, 2016 from https://www.theguardian.com/sustainable-business/2015/apr/30/ikea-makes-75-of-its-home-furnishings-from-sustainable-cotton
