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The Influence Of Triple Bottom Line On Ikea Sustainability Strategy

Question

Task: An individual management report critically evaluating the most significant component of a chosen organisation’s operations and /or behavior that has the most contentious issues arising. Make responsible recommendations that could be implemented to address the arising issues.
The work’s main focus must be on “TRIPLE BOTTOM LINE” (Responsability, Sustainability and Ethics), and how they influenced the organisation.
Further aspects that can be added into the work are:
- Building a responsible strategy and competitive advantage
- Responsible supply chains management
- Responsible human resources Management
- Responsible marketing and communication
- International business responsibly

Answer

Introduction:
The study sheds light on the concept of IKEA sustainability strategy. The ‘Triple Bottom Line’ or TBL framework encourages business organisations to concentrate dedicatedly on the socio-environmental issues besides continue to make a profit. This framework suggests that companies should take into consideration people and planet with the same intensity as they would consider making profits. TBL aims to estimate the level of dedication and commitment an organisation puts into its corporate social responsibilities as well as the effects it might have on the socio-environmental aspects over an extended period. With the help of the Triple Bottom Line, the companies are expected to maintain their responsibility, sustainability as well as ethics.

In a nutshell, the idea behind the implementation of the Triple Bottom Line is to do business in such a way that not only becomes financially profitable but also improves the lives of the people and the environment at the same time. The chosen organisation for this assignment is IKEA, the leading retailer for furniture and home accessories. In this IKEA sustainability strategy assignment, IKEA’s most contentious business operations and organisational behaviour will be taken into consideration and will be evaluated in the backdrop of the TBL framework.

IKEA: A Brief Overview of the Company
IKEA is a multinational conglomerate from Sweden that designs and retails furniture (mostly ready-to-assemble), home accessories, kitchen appliances and other necessary home accessories. Since 2008, IKEA has been the leading furniture retailing organisation in the world. As of the financial year of 2019, the total revenue amount collected by IKEA is €41.3 billion. The company operates in around 433 locations in approximately 52 countries as per the reports published in 2019. Presently, IKEA has over 2, 11,000 employees in total. IKEA also operates in an online platform as well and the website of IKEA has over 12,000 products. IKEA makes one of the largest utilisations of woods in the retail and commercial sector (Alänge, Clancyand Marmgren, 2016).

Responsibility and Sustainability Issues in IKEA:
IKEA has a clear and detailed “People and Planet Positive Strategy” to address a rapidly transforming world around. In IKEA sustainability strategy, the company mention issues like climate change, abrupt consumption environmental resources, human rights and overall sustainability issues. However, the behaviours associated with the negative social and environmental impacts of IKEA’s business have been taken into consideration here. The critics of IKEA’s business are cynical of the sustainability commitment propagated by IKEA on the grounds of low quality and low-cost products. The business model of IKEA has also been heavily criticised as it encourages impulsive purchasing and disposability (Apériaand Persson, 2018). The environmental IKEA sustainability strategy motives of IKEA are also criticised as the amount of renewable energy used in their gigantic stores leaves a substantial carbon footprint on the earth. IKEA Greenwich store in London is claimed to be the most sustainable store of IKEA around the world (Apteand Sheth, 2017). The sustainable commercial architecture of IKEA Greenwich is developed on the grounds of eco-friendly design. However, a huge controversy lies as to how sustainable IKEA Greenwich is as to the store was built only after demolishing the most sustainable supermarket in the UK, Sainsbury’s Greenwich. Instead of retaining the building and convert it to be used in some other purpose, IKEA decided that the building was not worthy enough to be fit for them. Therefore, the sustainable environmental programs of IKEA became quite questionable when a revolutionary environmentally sustainable building was destroyed (Wilson, 2015).

In their "People and Planet Positive Strategy" IKEA sustainability strategy also proclaims that their motto is to empower people with not only adequate financial opportunities but also with the range of new products and services that will encourage them to live a sustainable life. However, with their rather inexpensive products, IKEA is also generating the perception of disposing of their products fast (Zutshi et al., 2016). On the other hand, it remains questionable as to how one can claim to be sustainable if they are using 1 per cent of the annual wood and cotton produced in the world. Therefore, on the grounds of volatile landscape, admonitions of deforestation and global warming and rampant uses of fossil fuels, companies like IKEA are expected to be even more responsible and focused in the "Triple Bottom Line" (Choudri et al. 2017).

Triple Bottom Line and Its Impact on IKEA:
Modern businesses should adopt a business approach that complements the demands and concerns of the contemporary world. Modern companies cannot be concerned about their profits and revenues only to operate a successful business. With technological innovations and modifications, businesses should also focus on transforming their 'way of thinking as well. The horizons of human knowledge about the effective consumption of natural and environmental resources along with the appropriate balance of human lives have increasingly become important (Grinsteinand Blekher, 2015).Organisations, these days, are embarking on their efforts to develop IKEA sustainability strategy to initiate environmental changes along with protecting the people who are in close contact with their business. The “Triple Bottom Line” plays a major role, in this context, by motivating the business leaders to look beyond the concepts of profitability. The “Triple Bottom Line”, therefore, is important in offering businesses long-term sustenance (Goodman, Korsunovaand Halme, 2017).

The "Triple Bottom Line" helps to encourage a company to contemplate over its socio-environmental responsibilities. Usually, companies emphasise their image mostly on the standpoints of financial value, economic profits along with revenues. However, TBL essentially encourages business to think about People, Planet and Profit (3Ps) (Hahnand Kim, 2016).

People:
People are the biggest assets of a company. People consist of both the employees, human capital as well as the community within which the organisation is working. As far as IKEA is concerned, the “People and Planet Positive Strategy” is quite reflective of their inherent IKEA sustainability strategy. Though the “People and Planet Positive Strategy” of IKEA is often criticised by researchers, it is an undeniable fact that this strategy has been a driver of creativity and transformation for IKEA. IKEA concentrates into taking a leading position to create a better life for the communities and people who are directly impacted by their business (Hajmohammad and Vachon, 2016). The company has the best interest in supporting human rights and protect children. To develop and promote sustainability for the millions of customers that IKEA serves, the company encourages the customers to generate or reserve energy, reduce waste and incorporate effective waste management and recycle water etc (Heathand McKechnie, 2019).

Commitment to the people is next responsibility for IKEA sustainability strategy. Therefore, the responsibility of IKEA is to involve and engage their customers, co-workers and suppliers in their "People and Planet Positive Strategy". The company should be as impactful enough in being relevant along with having a distinctive channel of communication. An in-depth focus on their responsibility to the people would strengthen and integrate sustainability in all the communication channels of IKEA. The moment a company like IKEA becomes inherently responsible about their people and social well-being, they can offer innovative ideas, knowledge, smart solutions and inspiration to the community that they are serving. People of an organisation act as a strong instrument to motivate the company the lives of the people in their community better (Hussain, Rigoniand Orij, 2018).

Planet:
The production and manufacturing in an organisation depend quite a lot on the consumption of environmental resources and raw materials from nature. Therefore environmental sustainability is something that needs their constant attention to save the planet and nature. As per the “People and Planet Positive Strategy” of IKEA, they are working extensively towards source materials from environmentally sustainable sources or recycled sources. IKEA is criticised for claiming to be environmentally sustainable when they solely use 1% of the global production of woods and cotton. However, IKEA claims to use more sustainable products such as 'better cotton' as a measure to improve the environment (Jiang, Jiaand Gong, 2018).

In their “People and Planet Positive Strategy”, IKEA claims to use environmental resources like energy more organically and responsibly. The company also claims to encourage their peer group to use resources in such a way that the planet can bear it. Waste management and converting waste into resource are also taken into proper consideration by the company. Resource and energy independence is something that plays a major role in encouraging a company like IKEA to be a leading organisation in renewable energy. As far as the impacts of the TBL framework on the functioning of IKEA is concerned, it can be said that they are trying to be more energy efficient all through their supply chain and operations (Larsson, 2016).

Profit:
Profit is undoubtedly the primary focus of an organisation. However, how far the organisational activities would maintain the balance of the financial system depends only on the responsibility and sustainability factors of that organisation. As far as the Triple Bottom Line is concerned, profit is said to be heavily dependent on the other two factors, i.e. People and Planet. Reports suggest that the revenue of IKEA has been elevated up to 37.6 billion dollars in 2016. However, the company did not consume all of its profits. Instead, it reinvested those profits into waste materials recycling. The waste materials were recycled into products like tree remnants to incorporate into their mission of generating zero landfill waste. Hence, the most important aspect of profit is to incorporate financial value besides promoting and supporting the future. If a company performs business operations responsibly and sustainably, the profits have extensive value and impact (Laurinand Fantazy, 2017).

IKEA’s Business: Different Aspects of Responsibility, Sustainability and Ethics
The reason as to why TBL should be considered as a productive and beneficial business strategy is easily understandable from its impacts on responsibility, sustainability and ethics. Since the “People and Planet Positive Strategy” of the company is a part of IKEA sustainability strategy of 2020, it can be said that if performed accurately, it would raise the transparency in mitigating the concerns of the shareholders. It would also increase the amount of accountability in the portfolio of the actions taken by an organisation (Mokhtar et al., 2017). A combination of responsibility, sustainability and ethics are expected to deliver both financial and social growth to an organisation. As far as IKEA is concerned, many of its "People and Planet Positive Strategy" acts have been overtly criticised over time. However, it should not be overlooked that through these strategies IKEA intends to leave positive impacts on both the people and the planet. The company aims through the measurements of sustainability, responsibility and ethics to leave a positive impact on the world around us along with their visions (Perrott, 2015).

What are the recommended solutions to overcome the rising issues IKEA sustainability strategy?

  • The world is rapidly transforming which necessitates a sustainable business. Irrespective of the challenging issues faced by IKEA, the company should not deviate from strategies that would heavily influence their sustainable supply chain leadership. Therefore, the first recommendation for the betterment of IKEA sustainability strategy is to ensure the supply chain is sustainable. A sustainable supply chain ensures that the future has a positive impact (Zutshi et al., 2016). The two key materials used in the production of IKEA are wood and cotton. So, IKEA should make sure that the supply chain for producing wood and cotton is sustainable. They should make sure that the standards of sustainable production comply with the use of fertiliser, pesticide and limited water. They should also make sure that they are not using any hazardous chemicals. Working on the durability of the products would also improve the ethical integrity of the brand identity of the company (Sebastiani et al., 2015).
  • As far as wood is concerned, rampant sourcing of wood might lead to much bigger issues and business risks like deforestation. Therefore, they need to make sure that they are also taking part in reforestation programs as well. In this way, IKEA would be able to maintain the health of the planet as well. In other words, IKEA should aim to completely forest positive by 2020. In their entire value chain, IKEA should promote the utilisation of water stewardship. Many of IKEA's candles use palm oil which is recommended to be replaced by some sustainable material (Alhaddi, 2015).
  • The packaging is another significant aspect of IKEA's business and it is also associated with the IKEA sustainability strategy of the environment. It is recommended that IKEA should ensure that they have eliminated single-use plastic components from the packaging of their products. Instead of using plastic products, they should be using biodegradable alternatives. To strengthen their waste reduction and recycling measurements, they should also think about using mycelium packaging. Reducing the consumption of plastic or polystyrene wastes would invariably minimise the risks associated with landfill. This would also be an intelligent and responsible way to save wildlife (Tronvoll et al., 2019).
  • To be a more responsible, sustainable and ethically sound business, IKEA should encourage their customers to adopt climate positive measurements in their residences as well. Customers are the most important, integral and fundamental parts of an organisation. Therefore, starting from them would be highly influential for IKEA. Every customer of IKEA should be made aware of the sustainable methods of generating, consuming and managing energy. Other than that, customers are also needed to be made aware as to how they can reuse and recycle of certain chosen IKEA products, such as sofas (Yang, 2016).
  • To be more responsible about the people that they are serving, IKEA should focus on offering them with a healthy and sustainable diet in the IKEA restaurants. Since IKEA restaurants are an integral part of every IKEA store, IKEA should make sure that the food they are offering is free from artificial preservatives and has fewer amounts of salt, fat and sugar. The food products are also needed to be sourced from sustainable sources.The meats, fishes, seafood items and eggs that are served in the IKEA restaurants should have high welfare standards (Apéria and Persson, 2018).

Conclusion:
To conclude the discussion on IKEA sustainability strategy, it can be said that being sustainable is one of the most important benchmarks for the future of an organisation. Not only does the TBL framework allow a company to be sustainable, responsible and ethical, it also substantially improves the competitive advantage of the company. The analysis and evaluation of IKEA sustainability strategy, therefore, is suggestive of how an organisation can effectively strengthen the aims and objectives of their business. If IKEA can follow the recommendations properly, it would invariably help them to be a part of the betterment of the world in a broader context. Being such a huge international conglomerate, organisations like IKEA is always under the scrutiny of the public. Following a socially and environmentally responsible, sustainable and ethical image would certainly reduce the risk of being publicly scrutinised. IKEA, in a nutshell, would be able to propel its customers, employees and shareholders to a world that is a much better place to reside.

References:
Alänge, S., Clancy, G. and Marmgren, M., 2016.Naturalizing sustainability in product development: A comparative analysis of IKEA and SCA. IKEA sustainability strategy Journal of Cleaner Production, 135, pp.1009-1022.

Alhaddi, H., 2015. Triple bottom line and sustainability: A literature review. Business and Management Studies, 1(2), pp.6-10.

Apéria, T. and Persson, C., 2018, July.THE SUSTAINABLE BRAND EQUITY MODEL.A RETAIL STUDY MEASURING SUSTAINABLE BRAND EQUITY.In 2018 Global Marketing Conference at Tokyo IKEA sustainability strategy (pp. 1239-1243).

Apte, S. and Sheth, J., 2017.Developing the Sustainable Edge. Leader to Leader, 2017(85), pp.48-53.

Choudri, B.S., Baawain, M., Al-Zeidi, K., Al-Nofli, H., Al-Busaidi, R. and Al-Fazari, K., 2017.Citizen perception on environmental responsibility of the corporate sector in rural areas. Environment, development and sustainability, 19(6), pp.2565-2576.

Goodman, J., Korsunova, A. and Halme, M., 2017. Our collaborative future: Activities and roles of stakeholders in sustainability?oriented innovation. Business Strategy and the environment, 26(6), pp.731-753.

Grinstein, A. and Blekher, M., 2015.Corporate Social Responsibility. IKEA sustainability strategy Wiley Encyclopedia of Management, pp.1-3.

Hahn, Y. and Kim, D., 2016. Corporate Social Responsibility: A Comparison Analysis. IKEA sustainability strategy The East Asian Journal of Business Management (EAJBM), 6(4), pp.13-17.

Hajmohammad, S. and Vachon, S., 2016.Mitigation, avoidance, or acceptance?Managing supplier sustainability risk. Journal of Supply Chain Management, 52(2), pp.48-65.

Heath, T. and McKechnie, S., 2019.Sustainability in Marketing.In Incorporating Sustainability in Management Education (pp. 105-131). Palgrave Macmillan, Cham.

Jiang, Y., Jia, F. and Gong, Y., 2018. IKEA: global sourcing and the sustainable leather initiative. International Food and Agribusiness Management Review, 21(5), pp.627-640.

Larsson, R.G., 2016. Ikea's Almost Fabless Global Supply Chain—A Rightsourcing Strategy for Profit, Planet, and People. In Lean Management Of Global Supply Chain (pp. 65-82).

Laurin, F. and Fantazy, K., 2017. Sustainable supply chain management: a case study at IKEA. IKEA sustainability strategy Transnational Corporations Review, 9(4), pp.309-318.

Mokhtar, M.F., Omar, B., Nor, N.H.M., Pauzi, N.F.M., Hasan, S. and Mohamed, W.W., 2017, April. Environmental concerns of supply chain sustainability (SCS). In AIP Conference Proceedings (Vol. 1831, No. 1, p. 020045).AIP Publishing.

Perrott, B.E., 2015. Building the sustainable organization: an integrated approach. Journal of Business Strategy, 36(1), pp.41-51.

Sebastiani, R., Corsaro, D., Montagnini, F. and Tzannis, A., 2015. Sustainability in the Supply Chain: The Retailers’ Perspective. In Marketing in Transition: Scarcity, Globalism, & Sustainability (pp. 8-12). Springer, Cham.

Tronvoll, B., Edvardsson, B., Möllerskov-Jonzon, M. and i Innlandet, H., 2019. From Customer Feedback to Innovation: The IKEA Innovation Journey from Screws to Click. Service Innovation For Sustainable Business: Stimulating, Realizing And Capturing The Value From Service Innovation, p.75.

Yang, X., 2016. Get consumers walk into the sustainability talk: an analysis of consumers' sustainability perception via business’s sustainable practice, focusing on a case study from IKEA. IKEA sustainability strategy Master Thesis Series in Environmental Studies and Sustainability Science.

http://lup.lub.lu.se/luur/download?func=downloadFile&recordOId=8880444&fileOId=8880482

Waage, S. and Anderson, R., 2017. IKEA sustainability strategy Integrating sustainability into business strategy and operations: applying The Natural Step approach and Framework and backcasting from principles of sustainability. In Ants, Galileo, and Gandhi (pp. 61-80).Routledge.

Wilson, J.P., 2015. The triple bottom line: Undertaking an economic, social, and environmental retail sustainability strategy. International Journal of Retail & Distribution Management, 43(4/5), pp.432-447.

Zutshi, A., Creed, A., Holmes, M. and Brain, J., 2016.Reflections of environmental management implementation in furniture. International Journal of Retail & Distribution Management, IKEA IKEA sustainability strategy 44(8), pp.840-859.

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