The Natural Step and IKEA Lesson 7

Module 6 – Managing for 1 Objectives

• Introduction to Natural Step

• Discuss IKEA case

Module 6 – Managing for Sustainability 2 The Purpose of The Natural Step http://www.naturalstep.org/

“To develop and share a common framework comprised of easily understood, scientifically-based principles that can serve as a compass to guide society toward a just and sustainable future.”

Module 6 – Managing for Sustainability 3 Birth of the Natural Step The Karl-Henrik Robert Story • Observed high rates of “rare” cancers in children • Noted literature contained endless arguments about controversial details and lack of focus on fundamental areas of agreement. • Considering non-negotiable conditions for survival of cells, wondered if there are similar conditions for sustainability of ’s as a whole. • Authored paper about principles that govern life on planet; distributed to 50 scientists for comments/revision; after 21 drafts, reached consensus  Principles of the Natural Step Module 6 – Managing for Sustainability 4 K.H. Robert Believed the Character of Environmental Problems Changed:

Local ------Global

Few Large Sources ------Diffuse Sources

Short Time Delay ------Long Time Delay

Low Complexity ------High Complexity

Module 6 – Managing for Sustainability 5  Links to Global Warming and Climate Change

Module 6 – Managing for Sustainability 6 Our Present Unsustainable Society

Module 6 – Managing for Sustainability 7 The Sustainable Society

Module 6 – Managing for Sustainability 8 Accepting Robert’s “Scientific Principles”…

1. 1st Law of : “Law of Conservation of Mass and ” ; and Energy cannot be created or destroyed ; E = mc2 2. 2nd Law of Thermodynamics: “Law of Increasing ” ; Entropy (disorder) of an isolated which is not in equilibrium will tend to increase over time, approaching a maximum value at equilibrium. 3. Biological and Economic value (quality) is found in concentration and structure (order) of matter (this is what we consume) 4. Green cells are essentially the only natural net producer of concentration and structure (Photosynthesis)

Module 6 – Managing for Sustainability 9 …Leads to a Systems Perspective which emphasizes:

• Focusing “upstream”

• Principles rather than details

• Shared framework and a common language

• Necessary (non-negotiable) system conditions - there are four

Module 6 – Managing for Sustainability 10 Four System Conditions

1) Substances from the Earth’s crust must not systematically increase in the . 2) Substances produced by society must not systematically increase in nature. 3) The physical basis for the productivity and diversity of nature must not be systematically deteriorated. 4) There needs to be fair and efficient use of resources with respect to meeting human needs.

Module 6 – Managing for Sustainability 11 System Condition No. 1

Substances from the earth’s crust must not systematically increase in the biosphere. i.e., Fossil fuels, metals, and other must not be extracted from the earth at a rate faster than their redeposit and reincorporation into the Earth’s crust.

Module 6 – Managing for Sustainability 12 System Condition No. 2

Substances produced by society must not systematically increase in nature i.e., Substances must not be produced faster than they can be broken down and be reintegrated into the cycles of nature or be deposited into the Earth’s crust.

Module 6 – Managing for Sustainability 13 System Condition No. 3

The physical basis for the productivity and diversity of nature must not be systematically deteriorated. i.e., The productive surfaces of nature must not be diminished in quality or quantity, and we must not harvest more from nature than can be recreated or renewed.

Module 6 – Managing for Sustainability 14 System Condition No. 4

There needs to be fair and efficient use of resources with respect to meeting human needs. i.e., Basic human needs must be met with the most resource efficient methods possible, including equitable resource distribution.

Module 6 – Managing for Sustainability 15 The Natural Step’s “Funnel of Sustainability”

Natural Capacity: Decline in Living Systems

Margin for Action System Collapse

Demand = f (Population x Affluence x Technology)

Module 6 – Managing for Sustainability 16 “Hitting the Wall”

• Ecology - species, atmosphere, oceans, land, water • Health of workers, society, self • Competition, prices, shortages, insurance • Social stigmas, recruiting problems Capacity • Government regulations, standards

Corporations should aim to make it Demand through the tunnel without facing constraints imposed by the walls.

Module 6 – Managing for Sustainability 17 Investing for the Future

Capacity • Societal Demands Defensive • Market Demands Enterprise • Nature’s Requirements

Long Term Restoration Profitability Strategic Enterprise A defensive enterprise is forced to implement changes at a later Demand stage at higher cost. Module 6 – Managing for 18 Sustainability Applying the System Conditions…

1. How can we reduce our dependence on and fossil fuels ? 2. How can we reduce our dependence on persistent, unnatural substances ? 3. How can we reduce our dependence on nature- consuming activities ? 4. How can we increase our resource efficiency (i.e., Do more with less) ?

Module 6 – Managing for Sustainability 19 … Creates a Framework for Decision Making

Does this Decision: Yes No

…reduce our dependence on mining and fossil fuels?

…reduce our dependence on persistent unnatural substances? …reduce our dependence on nature-consuming activities? …increase our resource efficiency?

Module 6 – Managing for Sustainability 20 Applying The Natural Step to Business • The economy and the environment are linked: – Sustainable economy is dependent upon natural environment. • Passing nature’s limits has consequences. • Understanding these limits allows for more effective strategic planning:  manage downside risks and costs  capture upside profits and gain competitive advantage  triple-bottom-line benefits  success over the long-term

Module 6 – Managing for Sustainability 21 The Evolution of TNS within a Company

1. Create Awareness - That the environment is now inseparable from competitiveness and success. 2. Build Knowledge - Number one measure of success is employee education. The more people educated, the greater the success of the program. 3. Put Principles into Practice - If it doesn’t reach this level, it is a failure; but TNS must not tell companies what to do, or it becomes just an organizational or management consultant. 4. Set Goals and Establish Metrics - If it isn’t measured it won’t count. [If only outflows are measured, environmental metrics will not lead to environmental success. (ISO 14000, EMAS, BS 7750)]

Module 6 – Managing for Sustainability 22 Best Practices in Applying the Natural Step

• Best to start with commitment of senior management. • Educate all employees. • Recognize that this is the Natural Step not the Natural Leap; look for small wins; start with “low hanging fruit”. • Incorporate principles into long-term planning. • Use the system conditions as a compass. • Set and measure long-term goals. • Leave implementation up to each group; let their expertise prevail.

Module 6 – Managing for Sustainability 23 Interface, Inc.

• World’s largest commercial floor covering company • First U.S. company to adopt TNS principles • Saved $25 million in first two years

Module 6 – Managing for Sustainability 24 IKEA

• Largest furniture company in the world. • Educating 25,000 employees worldwide. • Developed a four year plan. • Created a furniture line that meets all system conditions.

Module 6 – Managing for Sustainability 25 IKEA and the Natural Step

1. Ingvar Kamprad’s vision to “contribute to a better way of life for the majority of people” 2. Importance of empowered people 3. Incentives for suppliers 4. European advantage for IKEA’s environmental policies 5. Greenpeace partnership; issues in relationships to non-profits

Module 6 – Managing for Sustainability 26 IKEA and the Natural Step

6. Robert’s assessment of “systematic errors” in foundations of modern society 7. Adoption of The Natural Step (TNS) by other (furniture) manufacturers 8. Risks with toluene in catalog printing process / lessons from fiberboard 9. Focus of next environmental initiative…connection to TNS and IKEA history

Module 6 – Managing for Sustainability 27 IKEA and the Natural Step Additional Questions to Consider 1. What can other companies take-away as “best practices” from how IKEA originally managed their environmental issues? 2. What is the role of luck, time, location, stakeholders and/or industry in how this case unfolded? 3. Given the lessons learned as listed in the case, what three pieces of advice would you give a company considering implementation of TNS? 4. Given the benefits of using TNS as listed in the case, which are the most important (in your opinion) for this industry in today’s business environment? Module 6 – Managing for Sustainability 28