Ikea Group Sustainability Fy15 Report Contents

IKEA GROUP SUSTAINABILITY FY15 REPORT CONTENTS

11 | A MORE SUSTAINABLE LIFE AT HOME 12 | PRODUCTS AND SOLUTIONS 20 | INSPIRING MORE SUSTAINABLE LIVING

92 | PERFORMANCE AGAINST TARGETS

CONTENTS | 02 INTRODUCTION

IKEA was founded seven decades ago in the farmlands of Småland, where people had to be thrifty and innovative to make a living. We have come a long way since then, but even as a major global retailer, these values still guide us today. And just as the people of Småland would always find ways to turn challenges into possibilities, so do we. The world is now facing some of the greatest social and environmental challenges of our time, and in this report you will read about how we are working across every part of our business to create a positive impact on people and the planet.

INTRODUCTION | 03 billion IKEA GROUP million EUR5 3. 54 48% Net profit Visits to the catalogue app Female managers AT A GLANCE An increase of 5.5 % An increase of 17 % We want a workplace where 50 % of compared to FY14. compared to FY14. leadership positions are held by women Operations in 43 countries F Y15 and 50 % by men. In addition to our 328 stores in Today, more than half of our co-workers 28 countries, at the end of FY15 are women, as are 48 % of our managers we had 27 Trading Service Offices and 33 % of Group Management. in 23 countries, 33 Distribution Centres and 15 Customer Distribu- tion Centres in 17 countries, and 43 IKEA Industry production units in 11 countries.

Bed & 1.9 billion 771 million Visits to IKEA.com Store visits Bath EUR 31.9 billion With our focus on "Bed & Bath" An increase of 21 % An increase of 7.7 % we provided the many people compared to FY14. Total sales FY15 compared to FY14. with solutions for a better start, Total sales translated into Euro and end, to their day. increased by 11.2 % to EUR 31.9 billion. 9,500 EUR 1 billion Products across 450 million EUR1.6 billion Online sales FY05 FY14 FY15 the IKEA range 14.9 28.7 31.9 Shopping centre visits IKEA Food turnover across 13 countries Every year we renew our range, launching Billions of Euros approximately 2,500 new products, to our 65 retail destinations. Sales at our restaurants, designed by our in-house and contracted bistros, Swedish Food Markets, designers. and co-worker restaurants.

328 155,000 All-in for more 978 sustainable sources IKEA Group stores Co-workers Suppliers Now all of the cotton we use for our EUR 1 billion We opened 13 new stores products comes from more sustainable By the end of FY15 we had 978 in 9 countries. RETAIL 1 home furnishing suppliers in 50 For climate action sources. FY05 FY14 FY15 116,500 countries. We form long-term partnerships with suppliers: Made up of an IKEA Group 196 315 328 INDUSTRY In FY15, 50 % of our wood came from 20,500 2 on average 11 years. commitment of EUR 600 million more sustainable sources, and we are 1 for investment in renewable Number of IKEA Group stores RANGE & aiming for 100 % by 2020. SUPPLY energy, building on the EUR 1.5 We opened three new pick-up and 18,000 billion invested since 2009, and order points – in Spain, Norway a EUR 400 million commitment 1 Cotton from more sustainable sources includes cotton and Finland – and entered a new grown to the Better Cotton Standard; by farmers working from the IKEA Foundation, to market: South Korea. towards Better Cotton; and more sustainable cotton from support communities most the USA (such as the ‘e3 Cotton Program’). 2 More sustainable sources for wood are currently defined as 1There are also more than 40 IKEA stores impacted by climate change. FSC™-certified or recycledwood. operated by franchisees outside the IKEA Group.

ABOUT THE IKEA GROUP | 04 PETER’S MESSAGE

IKEA is a company with a vision to certainty for business to invest in create a better everyday life for the products and services needed for many people. As we grow, even a sustainable future. This in turn more people can create a better life will create more jobs and greater at home. And we can continue to prosperity. invest in our commitment to making Overall, we are making good a positive difference to people and progress at putting our sustainability the planet. strategy People & Planet Positive to We know that improving people’s work. In FY15 we achieved our target lives goes beyond home furnishings. to source all of our cotton from more We have a great responsibility sustainable sources. This means that and opportunity to make a positive the farmers supplying cotton use difference and speak up for the less water, chemical fertilisers and many people on the topics that matter pesticides, while increasing their most. That’s why we want to become profits. And we have converted our completely sustainable by transform- entire lighting range to energy saving ing our business and why we’re raising LED - a product that uses up to 85% our voice on critical issues such as less energy, offers better functionality, climate change. and saves customers money. We are making long-term invest- There are many challenges ahead ments, like our new commitment as we continue to go all-in across this year to invest EUR 600 million our business. We can’t do it alone. in renewable energy, building on In forestry we are working with the the EUR 1.5 billion we’ve invested in Forest Stewardship Council, WWF wind and solar since 2009. Moving and others to reach and exceed our to a low-carbon economy is critical own targets and help to transform for the planet and communities, and the industry. Partnerships like these, it can bring exciting opportunities across many areas of our business, for innovation and growth for us and will help us make an even bigger our partners. impact. We have been speaking a lot about Despite our achievements this this, including at the COP21 climate year, we know we can do better summit in Paris in December 2015. next year and the year after that. It is essential that governments It’s the spirit that drives IKEA: striving demonstrate ambition too. Strong to create a better everyday life for the policies will provide the clarity and many people.

PETER AGNEFJÄLL President and CEO, IKEA Group

PETER´S MESSAGE | 05 STEVE’S MESSAGE

This year we’re going all-in: all of the perform, our customers want to buy cotton we use for our products now from us with confidence that we have comes from more sustainable sources, done the right thing on their behalf. our entire lighting range is now LED We have to make sure that the many and we are on track to produce as people behind our products are treated much energy from renewable sources fairly and can enjoy a good life too. This as all of the energy we consume in our applies to our co-workers, the people buildings, by 2020. All-in to transform who work for our business partners in our business and have a positive impact our supply chain, and the many people on people and the planet. All-in to and communities we impact across our combat climate change, conserve value chain. natural resources and tackle inequality. One of the big issues we have You need support from everyone faced is ensuring that the people at across the business to make and our suppliers are not working too achieve these kinds of big, bold com- many hours in the week. In China, mitments. And the results are exciting where long hours are very common – we are making a positive difference in some industries, we’ve required and sustainability is becoming a natural a maximum 60 hour work week, part of our everyday work. including overtime, but this year we We have a huge opportunity to en- have gone further. Together with our able people to live more sustainably at suppliers, we reached working hour home – by offering affordable products limits of 49 hours (including overtime), and solutions and by demonstrating while maintaining wage levels. This is that they are good for people’s wallets a major achievement, accomplished in and the environment. just a few years by working closely with People were used to spending our suppliers. By building long-term good money on lightbulbs that did partnerships we’ve taken this and not last very long and used a lot of many other important steps towards electricity. We worked hard to improve supporting decent jobs for people in our LED bulbs – which use up to 85% our supply chain. less energy than traditional incandes- We are determined to play our part cent bulbs – so they are affordable in making a fairer world for the many and great quality. We want to make people. And we still have much to do to choosing the sustainable option afford- extend our impact throughout our value able, attractive and easy for people. chain. That’s why we are determined to But no matter how well our products keep going all-in.

STEVE HOWARD Chief Sustainability Officer, IKEA Group STEVE´S MESSAGE | 06 THE YEAR IN BRIEF ALL-IN FOR COTTON FROM MORE SUSTAINABLE SOURCES Now all of the cotton we use for our products comes from more sustainable sources.1 This means that the farmers supplying WE’RE GOING ALL-IN cotton use less water, chemical fertilisers and pesticides, while TO TACKLE CLIMATE CHANGE increasing their profits. Read more on page 28 IKEA Group and the IKEA Foundation committed a total of EUR 1 billion for climate action, made up of a EUR 600 million commitment by IKEA Group for investment in renewable energy and a EUR 400 million commitment by the IKEA Foundation to support communities most impacted by climate change. Read more on page 9 VEGGIE- CERTIFIED SEAFOOD BALLS FOR 650 MILLION – A HEALTHY, CUSTOMERS LOW-CARBON We achieved our goal for the fish and EUR 20.9 MILLION RAISED ALTERNATIVE seafood3 for our restaurants, Bistros, DURING THE BRIGHTER LIVES Swedish Food Markets and co-worker We launched the veggieball, a restaurants to be either Aquaculture FOR REFUGEES AND SOFT TOYS Stewardship Council (ASC) or Marine 4 healthy alternative to our famous FOR EDUCATION CAMPAIGNS meatball, with 25% fewer calories Stewardship Council (MSC) certified Donated by the IKEA Foundation, these funds will and the carbon footprint is 30 by FY15. improve opportunities for children in some of the times less. Read more on page 30 world’s poorest communities. Read more on page 78 Read more on page 14

ENTIRE LIGHTING RANGE NOW LED OR COMPATIBLE WITH LED BULBS 50% OF WOOD FROM LED bulbs are better for our customers’ wallets and the en- MORE SUSTAINABLE vironment. They use up to 85% less energy than traditional 2 incandescent bulbs, and last up to 20 years. SOURCES Read more on page

We reached our goal two years 17 1 Cotton from more sustainable sources includes cotton ahead of schedule. By August grown to the Better Cotton Standard; by farmers working towards Better Cotton; and more sustainable cotton 2020, we aim to source 100% of from the USA (such as the ‘e3 Cotton Program’). 2 More our wood, paper and cardboard sustainable sources for wood are currently defined as from more sustainable sources. FSC™-certified or recycled wood. 3 Crayfish is an exception as there are currently no certified fisheries. 4 Figures for Read more on page the Soft Toys for Education campaign are from November 25 and December 2014, figures for the Brighter lives for refugees campaign are from February and March 2015.

THE YEAR IN BRIEF | 07 PEOPLE & PLANET 2. Strive for resource and energy GROWING IKEA TOGETHER independence. Securing long- POSITIVE STRATEGY term access to sustainable raw ma- Our long-term strategic direction, Our success depends on the people terials, having a positive impact on Growing IKEA Together, outlines our we work with both within our busi- the communities where we source aim to create a better IKEA, and to be ness – our co-workers – and beyond it materials and using resources the leader in life at home with long- – suppliers, customers, governments within the limits of the planet. Pro- term growth and profitability. Sustain- and other organisations. Find out duce as much renewable energy as ability is one of the four cornerstones more about our partnerships and how the energy we consume and drive of our Group strategy. But we cannot we work with others throughout this energy efficiency throughout our succeed alone. report and on page 84 . value chain.

3. Take a lead in creating a better life for the people and commu- To be the leader in life at home nities impacted by our business. Extend our supplier Code Growth and long-term profitability of Conduct throughout our value

chain; be a good neighbour, sup- OBJECTIVES A better IKEA port human rights and act in the best interest of children. 1 2 PEOPLE ...through developing all co-workers, The People & Planet Positive Strategy strengthening our culture and making defines the areas that are most impor- GROWING IKEA a great place to work tant to us and where we can have the largest positive impact. IKEA 3 SUSTAINABILITY ...through offering better products ...through becoming “people and planet posi- This report is an account of our tive” and always acting in a responsible way progress against the targets of our at lower prices, developing a more vital IKEA and becoming more strategy. It is how we share our CORNERSTONES accesible to the many people 4 LOWER COSTS achievements and challenges. ...through lowering our overall cost structure and simplifying the way we work For an overview of our progress against our targets, see page 92 . GOALS

Our vision is to create a better life for Our strategy focuses on three areas: the many people. Our People & Planet Positive strategy is one of the ways 1. Inspire and enable millions of we work towards this. It sets out how customers to live a more sus- we are going all-in on the things that tainable life at home. Take the really matter, from going 100% for lead in developing and promoting Read the full strategy: renewable energy to sourcing all of products and solutions that en- our cotton and wood from sustainable able customers to save or generate People & Planet Positive sources. We have made good pro- energy, reduce or sort waste, use IKEA Group Sustainability Read more about the scope of this report on page 87 . gress, but we are determined to less or recycle water: at the lowest Strategy for 2020 Read more about the IKEA Group on page 83 . do even more. possible price.

THE IKEA PEOPLE & PLANET POSITIVE STRATEGY | 08 GOING ALL-IN TO TACKLE CLIMATE CHANGE

Climate change is a big, global a driver for innovation and renewal. uses up to 85% less energy than “We’re working toward a world climate change, but policy leader- challenge that needs a big, bold It is an opportunity to make our incandescent bulbs. And we have where children living in poverty ship is crucial to provide the stable, response. business better and meet the needs set targets to source 100% of our have more opportunities to create long-term framework needed for In 2015, a critical year for tackling and expectations of our customers. cotton and wood from more sustain- a better future for themselves and business to transform their opera- climate change, IKEA Group and That is why we are going all-in to able sources. We reached this target their families,” says Per Heggenes, tions and invest in the products and the IKEA Foundation committed a transform our business and ensure for cotton in FY15 and we are on CEO of the IKEA Foundation. “Tack- services for the future. In December total of EUR 1 billion for climate that it is fit for the future. track to achieve it for wood, paper ling climate change is critical to 2015, Peter Agnefjäll, our President action by 2020. This includes a We are going for 100% renew- and cardboard by 2020. achieving this goal and we aim to and CEO, and Steve Howard, our EUR 600 million commitment from able energy – producing as much Together with our suppliers, we help poor communities build resil- Chief Sustainability Officer, were at IKEA Group to invest in renewable as the total energy we consume in have achieved an 18% improvement ience and improve lives by adopting the COP21 climate change summit energy and a EUR 400 million our operations by 2020. In FY15 we in energy efficiency since FY121 and renewable energy technologies in to share the actions we are taking commitment from the IKEA committed to own and operate wind we are encouraging them to switch homes, schools and businesses.” and to emphasise the importance of Foundation to support communities farms that, together with our exist- to renewable energy too. Going all-in means transforming bold policy measures for IKEA and most impacted by climate change. ing wind farms, solar panels and Going beyond our value chain, the our business, joining with others other businesses. As a global business, we have a biomass generators, we expect to IKEA Foundation’s EUR 400 million to take a stand and call for positive clear responsibility – and a great produce the equivalent of over 70% commitment will support commu- change (see page 86 ), and inspir- opportunity – to have a positive of our consumption. We have gone nities most impacted by climate ing others, including our customers, impact on people and the planet. all-in with LED, switching our whole change (read more about the IKEA to take action. All parts of soci-

The need to tackle climate change is lighting range to the technology that Foundation on page 78 ). ety have a role to play in tackling 1 At tier 1 home furnishing suppliers.

CLIMATE CHANGE | 09 WE MEAN BUSINESS

In 2014, we helped to bring together seven key organisations focused on business and climate change to create We Mean Business, a coalition to push for action on climate change. During Climate Week NYC in 2014, Tim Cook, CEO of Apple Inc, joined our President and CEO, Peter Agnefjäll, in leading the call for business action on climate change. Since then, the coalition has become a powerful platform – now made up of over 30 organisations – and helped to build momentum for the Paris climate negotiations in December 2015. We Mean Business has helped hundreds of leading companies and investors to step up and make commitments to climate action. In September 2015, the coalition joined with the International Chamber of Commerce and placed a full-page advert in the global edition of the Financial Times, calling for a bold climate agreement at COP21.

Find out more at wemeanbusinesscoalition.org

RE100

RE100 is a collaborative initiative of leading influential businesses committed to 100% renewable power, led by The Climate Group in partnership with CDP, and supported by We Mean Business. Together with the reinsurance company, #GO100PERCENT CAMPAIGN Swiss Re, we were one of the founding partners. Since then, 48 other major businesses from around the world have We are joining millions of people and a social media by signing a petition at joined the campaign, sending a strong diverse mix of companies and organisations www.momentforaction.org to show signal that leading businesses support to support a campaign to build a brighter their support for action on climate change renewables and are helping to drive the future through a transition to 100% clean and a 100% clean energy future. The peti- transition to a low-carbon future. energy. In the lead up to COP21, we en- tion was delivered to world leaders during couraged our co-workers and customers the COP21 summit. Find out more at there100.org to get involved on IKEA.com and

CLIMATE CHANGE | 10 A MORE SUSTAINABLE LIFE AT HOME

We have a great opportunity and a big responsibility to inspire the 771 million visitors to our stores and 1.9 billion visitors to IKEA.com to live more sustainable lives. Everyone should be able to do so without spending more, radically changing the way they live, or compromising on style or quality. Many of our products enable customers to use fewer resources, such as energy and water, reduce waste and save money on bills. By collaborating with our customers, we are learning much more about how we can enable more sustainable living. We keep working to expand our range for a more sustainable life at home, and aim to achieve a fourfold increase in sales of these products by August 2020.

A MORE SUSTAINABLE LIFE AT HOME | 11 PRODUCTS AND SOLUTIONS PEOPLE & PLANET STATUS PERFORMANCE IN FY15 POSITIVE TARGETS

Take the lead in developing and Sales of products for a more sustainable life at home increased to promoting products and solutions EUR 1,311 million (EUR 641 million in FY13). that inspire and enable people to live a more sustainable life at home, and achieve more than a fourfold increase in sales by August 2020, compared to FY13.1

Our energy-consuming products Achieved in FY14. Our measurements give an indication of the pro- » 75% of consumers will be, on average, at least 50% gress we have made, but there are uncertainties in the methodology more efficient than our range was that mean our calculation is not as accurate as we would like. We are are interested in in 2008 by August 2015. now reassessing this target and will identify new goals for the future. saving energy By September 2017, offer the most We have made good progress in introducing new energy-efficient 1 at home « energy-efficient home appliances at appliances to our range, including cookers, dishwashers, fridges, the lowest price. oven hoods and washing machines. However, these are not currently available in all markets. Although we are working hard to extend the availability of the range, it will be challenging to meet this target 1 IKEA Brand Capital, Spring wave 2014 globally in FY17.

By September 2016, all our electric 66% of our electric hobs were energy-efficient induction hobs, up We are committed to enabling more EUR 1,311 million, bringing us half hobs will be energy-efficient from 55% in FY14. Not all homes have the electricity infrastructure customers to live more sustainably. way to achieving our target. This induction hobs.2 required for induction hobs, and we want to stay relevant in all our Our Democratic Design approach is partly as a result of additional markets. That is why we will re-assess this target and continue to combines form, function, quality and products being classified which has offer a range of energy-efficient electric hobs, including both radiant sustainability at an affordable price. increased the number of products in and induction, and look into other potential solutions. Every product is developed following scope. To learn more about how we this principle. Many enable our cus- classify our products and make them By September 2015, our entire All of our lighting range is now LED or compatible with LED bulbs. tomers to save or generate energy, even more sustainable, see page 32 . lighting range will switch to LED conserve and re-use water, reduce offered at the lowest price. waste and live healthier lives. Small changes, such as replacing a tradi- Offer leading water and energy Our range of dishwashers offers great water and energy savings and SALES VALUE OF PRODUCTS saving solutions in our range of value for money. And we are developing a new range of showers and tional incandescent with an LED light CLASSIFIED AS “MORE taps, showers, sink accessories and taps with water and energy saving features, though these will be SUSTAINABLE LIFE AT HOME bulb, can have big benefits – saving dishwashers by September 2016 – launched outside of the target date. We will therefore not achieve this PRODUCTS” (MILLION EUR) money and energy. all at the lowest possible price. target on schedule. One way we measure our impact is by tracking the sales of products 2,564 Take action in more healthy and We have developed a tool called the Balanced Meal, which we have that we categorise as enabling a more sustainable food by enabling and used to assess the nutritional value of our core food range (the sustainable life at home. The range encouraging a more balanced diet. range available in our restaurants globally). We are now rolling it continues to grow, keeping us on out to assess food offerings produced in our local markets. We track to achieve our goal of a fourfold 1,311 AUG 2020 launched our GRÖNSAKSBULLAR veggieballs as an alternative to GOAL increase in the sales of products for 1,015 our traditional meat balls. FY15 a more sustainable life at home by 641 1 A fourfold increase corresponds to sales the end of FY20, compared with FY14 of approximately EUR 2.6 billion per year, as of FY20 with baseline year FY13. 2 Where local FY13. In FY15, these sales more FY13 conditions allow. Achieved Ongoing Not achieved than doubled compared to FY13, to

A MORE SUSTAINABLE LIFE AT HOME | 12 SHARING OUR TOP TIPS FOR A MORE SUSTAINABLE LIFE AT HOME

wanted to make it fun! “We rented a flat in central Prague, fitted it out with our latest products and gadgets, and invited 44 journalists and bloggers round for lunch. As our guests toured the flat, they found tips on how to live more sustainably in every room. In the lounge they saw how much energy they could save by switching to LED lighting. In the kitchen VLADIMIR VISEK they learned how to keep food Sustainability manager, IKEA Czech fresher for longer and how much Republic, Hungary and Slovakia water they could save by using a dishwasher instead of washing up We’re on a mission: to create a by hand. Our professional chef movement for sustainable living. created a delicious meal out of As well as showing customers food that would have gone to how easy it can be to live a waste, and we even ran a waste more sustainable life at home, sorting workshop.” co-workers at IKEA Czech Republic challenged themselves to share And did it work? Previewed at the Democratic Design Day this message to a much bigger “Yes! Our guests enjoyed our event audience. and have been sharing what they learned through articles, interviews SNEAK PEEK: ANVÄNDBAR COLLECTION “We surveyed 500 households to and stories in newspapers, radio, find out how people live at home TV and online. We want to keep the and their attitudes to more sus- momentum going and keep coming ANVÄNDBAR means “useful” in with built-in flower boxes that journalists and bloggers sneak tainable living. And we learned a up with new ways to engage more Swedish, and is the name of our maximise space and encourage previews of unreleased products lot. Including that around a third people in living more sustainably.” upcoming sustainable life at home micro-gardening, ANVÄNDBAR that are designed to make every- of households still have at least collection featured at the May 2015 products celebrate everyday chores day life better. Members of the one incandescent bulb and another Democratic Design Day. and make it easy to do at least one IKEA design teams were there to third wash their dishes under ANVÄNDBAR products aim to small thing every day that is good talk about the thinking behind running water. make everyday tasks beauti- for the planet. The collection will each collection, and IKEA product “The next priority was to share fully simple, while contributing to be available in stores globally from designers joined up-and-coming what we found out and to show a more sustainable life at home. April 2016. designers in a workshop to that there are many simple ways to From cookware that retains heat IKEA of Sweden hosts Democratic design new products to prevent save resources and money. But we and conserves energy to benches Design Days every year to offer food waste.

A MORE SUSTAINABLE LIFE AT HOME | 13 HEALTHY LIVING

We want our products to enable a We are offering healthier and healthier life for our customers. Since more sustainable products that our we added this to our strategy in FY14, customers can take home from our we have strengthened our efforts to Swedish Food Markets or eat in our create products that enable healthier restaurants and bistros, and that our living and are improving the food on co-workers can eat at work. These will offer in our restaurants. change throughout the year to reflect For example, our adjustable work seasonal ingredients. desks, such as BEKANT and SKARSTA, Our new vegetarian, gluten free support healthy lifestyles by getting GRÖNSAKSBULLAR veggieballs are people moving and providing the based on a vegan recipe and contain option to stand while working. And our 25% fewer calories than traditional range of indoor gardening products meatballs. They are low in fat and con- like the FRÖER growing set and tain vitamins, calcium, iron and 30% SOCKER greenhouse make it easy of the recommended daily fibre needs. to grow your own fruits, herbs and And the carbon footprint is 30 times vegetables, even in small spaces. We less than that of a traditional meatball. are developing this range to include We also introduced Nordic Fruit Water SOCKER Greenhouse exciting new solutions to inspire even in FY15, which contains just half the more people to grow their own at sugar of the sodas they replaced in home. our range. FRÖER Growing set

To assess and improve the calories and nutritional values of each meal or product and guide the development of our food range, we have introduced a Balanced Meal standard. We started by assessing our core restaurant meal range in FY15, and will use the findings to improve the range. We want customers to be able to make informed choices. We have started to make calorie counts and other nutritional information available on menu boards and websites in some of our markets and our goal is to ensure we give our customers in every country the information they need. To read more on how we aim to source our food ingredients responsibly and make a positive BEKANT Work desks SKARSTA Work desk impact for people, animals and the GRÖNSAKSBULLAR Veggieballs planet – see page 30 .

A MORE SUSTAINABLE LIFE AT HOME | 14 OUR IDEAS FOR THE KITCHEN OF TOMORROW

By 2025 our relationship with food explore the answers. Together, may be completely different. What over 18 months, we identified the will we eat? How will we grow, buy key trends for how we will live with and transport food? How will we food in the future, and developed prepare it? How and where will the Concept Kitchen. We then built we eat? And what does that mean and displayed the prototypes at for the design of kitchens in the IKEA Temporary during the World future? EXPO Milan 2015. We will use these We partnered with students insights to help understand our from the School of Industrial customers’ needs, and inspire and Our vision for the fridge of the future helps to avoid waste and save money. Design at the Ingvar Kamprad inform our product designs, though Unlike traditional fridges, it uses Design Centre, Lund University, these prototypes may never make induction cooling that is built into and the Industrial Design depart- it to our shelves. open shelves, so you can always see ment at Eindhoven University of what food you have. And by reading Technology, along with IDEO – a Here are some of the innovative the RFID (radio-frequency identification) tags on the food packaging, it always global design consultancy – to ideas: stores food at exactly the right PLANNING FOR temperature, saving energy too. THE FUTURE, TODAY

Our designers spend a lot of time Technology (MIT) Media Lab to thinking about and planning for the draw on cutting-edge technology future. How can we create prod- and methodologies for running ucts and solutions that make urban our Living Lab. This will help us to living better and more sustainable? learn even more and use the data What will the average family look and insights to develop products like, and need, in 2050? and solutions that better meet To answer these questions, we our customers’ needs. set up our Living Lab – a 78 m2 Developed after years of apartment in Malmö, Sweden research, including at our Living that is the home of new ideas to Lab in Malmö, the Flexible Wall improve urban living. We use the – a movable partition with Living Lab to test our most innova- integrated furniture – enables tive products by inviting real fami- people to adjust the size of a room This smart table is designed to inspire This sink system collects used water, so that grey water can be recycled to water house lies to live, work and play there and create a new space instantly. people to be more creative with food plants and for washing up, and badly contaminated (black) water is sent to the sewerage for two-week periods, so we can By making living spaces much and waste less. Not only does it suggest pipes for treatment. recipes for the ingredients you have - assess how they respond to our more adaptable, it reduces the it also cooks the food using induction designs, especially their emotional need for structural renovations, heating, charges your phone through reactions. which can be stressful, expensive induction charging and can even be We are partnering with the and create a lot of waste. used as an interactive toy! See the Massachusetts Institute of film to find out more. Find out more about the concept kitchen here .

A MORE SUSTAINABLE LIFE AT HOME | 15 ENERGY

the most value as we roll it out more widely. By FY17, we aim to have a solar offer in nine countries. While we have made progress with making our products more energy and water efficient, there are three targets in this area that we will not meet and have decided to reassess:

• By September 2016 we aimed for all our electric hobs to be energy- efficient induction hobs. In FY15, 66% of our electric hobs met these criteria. Not all houses in every market have the necessary electri- We are making many of our electrical generate their own power at home cal infrastructure to power induction saving solutions in our range of working on ensuring that we products more efficient and provid- from renewable sources. In 2015, an hobs, and we want to stay relevant taps, showers, sink accessories can make sustainable products ing customers with options to better average UK family could halve their in all our markets. We will therefore and dishwashers – all at the lowest available more consistently across understand and manage their energy electricity bills with a solar installation, reassess this target and continue possible price. We will not achieve all our markets. use. This contributes to reducing which would pay for itself within seven to offer a range of energy-efficient this by the target date. While our carbon emissions and monthly bills – years. In FY15, we expanded afforda- electric hobs to suit our customers’ dishwashers offer great efficiency a win–win for our customers and the ble home solar to the Netherlands and needs, including both radiant and and value for money, and we offer a Understanding energy usage planet. Switzerland, following the successful induction, and look into other number of other smart solutions to These products include our ex- roll out in the UK. We are using what potential solutions. encourage water and energy savings We know through our own and oth- panding range of electric induction we have learnt from these markets • By September 2016 we aimed to at home, we have much more to do. ers’ research, that when people see hobs, steam ovens that cook faster to make sure we offer customers offer leading water and energy We are now developing a new range how much energy they are using, with less energy, and ‘cold start’ mixer of showers and taps with water and they make steps to use less. Energy taps that cut energy consumption by energy saving features, and we meters make this possible. But why around 30% by eliminating uninten- will keep working to develop more should they be so hard to read? tional use of hot water. They all com- ENERGY-EFFICIENT PRODUCTS solutions and products for a more That is why we developed the bine function and efficiency. sustainable life at home. SPARSNÄS easy-to-understand % OF ALL LIGHTING PRODUCTS % OF ELECTRIC HOBS In FY15 we completed an impor- WHICH WERE LED OR WERE AVAILABLE IN RANGE THAT • By September 2017 we aimed to of- energy display which receives tant step in our energy efficiency COMPATIBLE WITH LED BULBS1 ARE INDUCTION HOBS fer the most energy-efficient home real-time data through a wireless journey by achieving our target to appliances at the lowest price. We transmitter. It can be installed switch our entire lighting range to LED. 90 have introduced a number of new anywhere in the home, helping We put a lot of effort into producing 75 energy-efficient appliances to our make energy efficiency a part of simple, informative and fun commu- 66 range, including A and A+ classified everyday life. We are currently nications to explain the benefits and 51 55 ovens and hoods, A+++ fridges, A+ trialling this meter in Sweden. 43 inspire customers to feel confident FY15 and A++ dishwashers, and A++ and FY15 about buying LED products. To find out A+++ washing machines. However, FY14 more about why we are excited about FY14 these are not currently available in FY13 LED, see page 17 . FY13 all markets, which means we will not We want to make it affordable meet the target globally in FY17. for as many people as possible to 1 By August 2015, our entire lighting range was LED or compatible with LED bulbs. We have set up a taskforce that is

A MORE SUSTAINABLE LIFE AT HOME | 16 to create a no-compromise solu- energy solutions – making them tion. Now, our LED bulbs come in a safer for families and better for range of shapes, sizes, and tones the environment. – all at an affordable price. In fact, Switching to more efficient we aim to offer the lowest price LED lighting is good for IKEA too. In bulbs and built-in LED lamps on the FY15, we converted the lights in market. over a third of our stores to LED In FY15, 90% of all lighting prod- or other more efficient lighting. We ucts sold were LED or compatible aim to invest EUR 100 million in with LED bulbs (e.g. lamps which LED and other efficient lighting customers can use with an LED systems by FY17, saving each bulb). And we have now switched store thousands of euros every the entire range to LED so in FY16, year. Read more on page 39 . this will be all lighting products. Watch our video to find out The customers buying LED bulbs more about the benefits of LED. in our stores are also bringing light to the lives of refugees in Asia, Africa and the Middle East through the Brighter Lives for Refugees campaign . For every bulb sold during February and March 2015, the IKEA Foundation donated EUR 1 to the UN refugee agency (UNHCR). This generated EUR 10.8 million to light refugee camps with solar lanterns and other renewable HÅRTE LED work lamp LEDARE LED bulb

GOING ALL-IN WITH LED

We are at the beginning of a light- to hit lighting since the electric light home by using much less energy. ing revolution! In September 2015, was invented! The bulbs can last up We know LED bulbs are better we achieved our goal to convert our to 20 years and use up to 85% less for people and the planet. Early entire lighting range to LED – it is energy than incandescent lighting, versions of the technology did not one of the ways we are going all-in saving customers money on their provide the right quality, variety to tackle climate change. bills. And, of course, enabling them and price for our customers. So we LED lights are the biggest thing to live more sustainable lives at have worked hard with our suppliers

A MORE SUSTAINABLE LIFE AT HOME | 17 WATER WASTE

We aim to motivate customers to turn like our FÖRTROLIG containers, waste into resources by offering low and develop more products and price, functional and easy to use solu- inspiring communications that will tions for sorting and minimising waste enable customers to prevent food at home. waste by keeping things fresher A quarter of all food produced for longer. in the world ends up as waste. In When it comes to things our FY15 and FY16 we are focusing on customers no longer need, we want tackling this problem. We undertook to encourage them to see them as research in Munich, Germany, and a resource for new materials and Shanghai, China, to understand how products, not waste. But we know people store their food at home and that sorting and storing them can their views on food waste. Although be frustrating. Products like our the findings varied in the different stackable and compact SORTERA FÖRTROLIG Containers locations, there were some things in bins make it simple and convenient, common. For example: enabling customers to sort paper, cans and plastic for recycling. • People do not know how or for how Designing products that grow long to store food, and there is no with children is one of the ways we Our LADDA rechargeable batter- consistent advice. are enabling customers to enjoy and ies provide a sustainable alternative • Modern homes do not always have use their IKEA purchases for as long to disposable batteries. However, BOHOLMEN Washing-up bowls space for storing food in the right as possible. For example, our STUVA rechargeable batteries are often less way and people need better sys- changing tables can be transformed popular than conventional batteries Water is a precious, and in many baskets mean customers do not need tems for identifying what needs to into desks, and our BUSUNGE and and are perceived as more expensive parts of the world, scarce resource. to keep the tap running – a simple be eaten before it expires. MINNEN beds are extendable. and inconvenient to use. We asked We want to find new, simple ways to way to save water and energy. And Learn more about how we design our customers what they thought enable our customers to conserve it. our water-efficient dishwashers save We are using our findings to build on sustainable and durable products about rechargeable batteries and are Many of our products are designed even more water, and time. our existing food storage solutions, on page 32 . developing solutions to meet their to save water. All of our kitchen taps needs and eliminate their frustrations. feature a pressure compensating Our new low-cost, easy-to-use charg- aerator that restricts the flow of ers are one way we are encouraging water, to reduce water use by up to more customers to make the switch. 40%. Since September 2015, all of We will introduce these along with our our new bathroom taps are equipped expanded range of LADDA batteries with cold start functions that enable in April 2016. customers to save energy. Many In some markets, when a of our products, including the product is no longer wanted or GRANSKÄR wash basin taps, combine needed, we give it a second life both pressure compensating aerators through our furniture take-back and cold start functions, providing programme. To learn more about both water and energy savings. how we are putting circular thinking Washing dishes inefficiently can into practice, see page 47 . waste a lot of water. Our BOHOLMEN washing-up bowls and rinsing GRANSKÄR Wash basin tap SORTERA Bins BUSUNGE Bed

A MORE SUSTAINABLE LIFE AT HOME | 18 STAKEHOLDER CHALLENGE In a world of limited resources, how can IKEA create a positive impact on the planet while continuing to sell low-cost products that customers can easily discard and replace? Isn’t IKEA actually fuelling the problem?

converted our whole range to LED now in 20 countries and we’re work- sustainable living. These customers and we’re making sure our custom- ing on some innovative projects to will value IKEA products highly – ers understand that this is a win–win close the loop on certain materials. where there is scarcity, there is for their wallets and the planet. There is still a long way to go to be a no waste. At design and development, every fully circular business, but we are up In developed markets, IKEA product is scored on quality as part for the challenge. should change its furniture’s ‘tempo- of our Product Sustainability Score- rary’ image, whilst maintaining core card. Then we work closely with attributes of good quality, low-cost suppliers to secure consistent quality products, by: in bulk so that we can make great quality, durable products available • Making returns as easy and con- to the many people. Many of our venient as buying new products. products come with guarantees of • Applying its smart engineering and up to 25 years. design skills to create solutions for At the same time, we aim to use reverse logistics and upcycling or STEVE HOWARD PETER BAKKER fewer resources and ensure the recycling used products. President, World Business Council for Chief Sustainability Officer, IKEA Group materials we use are produced in a • Using its brand power to raise Sustainable Development way that is good for people and the consumer awareness, changing We want our customers everywhere planet. We are transforming our attitudes to value and waste, and to have access to beautiful, well- supply chain to source all of our In the future, all companies will need making sustainable lifestyles more made and sustainable home furnish- wood and cotton from more sustain- to work towards a more equita- desirable. ings. And we believe that you can able sources, and we want to make ble world that is also increasingly have all of that at a low price. sustainable sources the norm across carbon-, water-, and raw material- Making sustainable living easy re- With billions of visitors to our the industry. constrained. Leading companies are quires not just smarter furniture, but stores and website every year, Used products are a valuable integrating this into their business also supporting water, energy and we have a huge opportunity to resource, not waste. We’re working models today: IKEA has already waste infrastructure. IKEA should encourage and inspire customers to towards a circular IKEA, where our made bold steps in its supply chain take a visible leadership position live a more sustainable life at home. products last as long as possible, are and is working to become a global beyond home furnishings, inspiring Take LED. We worked to make designed for easy upcycling and re- leader in taking climate action. other companies to support its vision these super energy saving, long- cycling, and secondary materials are IKEA’s expansion into emerging of people and planet existing togeth- lasting light bulbs more affordable used instead of virgin raw materials. markets means new customers can er positively. and higher quality. Now we’ve Our mattress takeback scheme is access responsibly made, high quality products that encourage more

A MORE SUSTAINABLE LIFE AT HOME | 19 INSPIRING MORE PEOPLE & PLANET STATUS PERFORMANCE IN FY15 SUSTAINABLE LIVING POSITIVE TARGETS Take a lead, together with our customers Continued to conduct research into the future home and others in society, in re-thinking the and sustainable living, through our Living Lab and nature of future homes and communities to other projects. provide examples of attractive, affordable and sustainable living.

Enable our co-workers to live a more sustain- Number of co-workers participating more than doubled able life at home by using our solutions or since FY14, to 4,033 across 24 countries (FY14: 1,773 knowledge for reducing energy, water and participants from 10 countries). Now extending the waste at home, through a dedicated global project to customers, starting with selected families in project beginning in 2014. France and Switzerland.

Achieved Ongoing Not achieved

ENGAGING OUR CUSTOMERS AND CO-WORKERS

that enable them to save water and energy or reduce waste. They also receive a handbook with tips on how to live more sustainably and guidance on how to capture and share their results from the project. In FY15, 4,033 participants representing 24 countries took part, more than double that in FY14. Each par- ticipant will become a More sustainable life at home ambassador, and by sharing their experiences with more co-workers, they will help to extend the reach of the project. In FY15, we invited customers People can learn about the sustain- Inspiring co-workers and to join the project in France and ability of our products on our website, customers to take action Switzerland, and other countries will through social media, in our catalogue, follow in FY16. In France and Swit- on many of our price tags and through Our More sustainable life at home zerland, we challenged a total of 256 We want to use our insights and everyday lives. Effective communi- in-store events and communications. co-worker engagement project, customers, bloggers and co-workers scale to inspire all 771 million visitors cation is a key part of how we can Our co-workers are ambassadors for launched in FY14, aims to enable our to adopt a more sustainable life at to our stores and 1.9 billion visitors to enable people to benefit from our our products and services. The more co-workers to change the way they home for six months. In France, par- IKEA.com, and our 155,000 co-workers products and solutions for a more they know, the more they can inspire live at work and at home. Partici- ticipants were given expert coaching to lead better and more sustainable sustainable life at home. our customers. pants choose and use IKEA products and EUR 500 towards IKEA solutions

A MORE SUSTAINABLE LIFE AT HOME | 20 sustainability knowledge. Attendees can learn about a variety of topics, including choosing LED lighting, working with textiles, growing and producing food at home, reducing water and energy consumption and managing waste. During FY15, events like these were hosted in Austria, China, France, Japan, Norway, Russia, Sweden and Switzerland. IKEA Belgium ran 18 workshops across six stores, for members to share techniques and tips for repairing damaged products, to encourage participants to value old furniture rather than seeing it as disposable and replaceable. IKEA FAMILY members are also encouraged to take part in our community projects.

that would help them along the way. Engaging our IKEA FAMILY They learned how to reduce their water and energy use and manage their IKEA FAMILY is our membership club waste. They could save as much as for loyal customers around the world, EUR 150 per household annually. who receive exclusive benefits like The project will tell us a lot about discounts and invitations to events. At the way people live, how they use the end of FY15 there were 78 million our products and what they need to members, making it one of the biggest enable them to live more sustainably. loyalty schemes in the world. Members We will use what we learn to improve are a key focus for our work promoting the way we engage customers and to more sustainable living. For example, develop better products and services we invite IKEA FAMILY members to that meet their needs. in-store ‘Mega events’ – sustainability themed days with special activities and offers on certain products – and home furnishing workshops to share our

A MORE SUSTAINABLE LIFE AT HOME | 21 RESOURCE AND ENERGY INDEPENDENCE

We want the way we use resources and energy to have a positive impact on people and the planet. That means finding sustainable sources of natural resources and energy, and using them efficiently. This means we can continue to shrink our environmental footprint while making affordable, high quality products. Working with suppliers, governments, businesses and other partners enables us to find new ways to innovate and have a positive influence beyond our operations and products.

RESOURCE & ENERGY INDEPENDENCE | 22 RESPONSIBLE SOURCING PEOPLE & PLANET STATUS PERFORMANCE IN FY15 POSITIVE TARGETS

By August 2017, at least 50% of our wood In FY15, 50% of our wood was from more sustainable will come from more sustainable sources. sources, meaning that we met our 2017 target two years By August 2020, we aim to source 100% of ahead of schedule. our wood, paper and cardboard from more sustainable sources.1

By August 2015, all cotton used in IKEA We reached our goal at the end of FY15, and all cotton we products will be sourced from more use for our products now comes from more sustainable sustainable sources,2 and we will sources. During FY15, 94.5% of cotton was from more continuously investigate complementary sustainable sources. fibres with improved sustainability performance compared to cotton.

By December 2015, all palm oil, currently By August 2015, 87% of our palm oil was from certified, used in home furnishing products such as segregated sources.3 One of our challenges is to map candles or as a food ingredient, will either local food supply chains to understand which market- come from certified segregated sustainable specific food products contain palm oil. sources or be substituted with more sustainable alternatives.

By August 2017, all of the leather we use will The leather supply chain has changed and is complicated, have full chain of custody and be produced so it will only be possible to trace leather to the according to standards that help protect slaughterhouse by August 2017. Our long-term ambition forests and respect human rights and animal remains to secure full chain of custody and improve social welfare.4 and environmental standards for the leather we use.

All seafood sourced for the IKEA Restaurants We reached our goal and now only source and sell ASC or and Swedish Food Markets are certified by MSC fish and seafood.5 August 2015.

1 Defined as FSC™ certified or recycled wood. 2 Includes Better Cotton, cotton from farmers working towards Better Cotton Initiative standards, and cotton Achieved Ongoing Not achieved grown to other regional standards such as e3 Cotton Program in the USA. 3 Applies to known sources of palm oil only. See page 29 for more detail. 4 Leather production can be linked to deforestation in some areas – see page 30 for more detail. 5 Crayfish is an exception as there are currently no We use a huge variety of raw mate- together to transform markets and certified fisheries. rials to make our products and we protect resources for future genera- want to make sure these materials tions. To achieve this we must work are produced in ways that are good closely with suppliers and partners to for the environment and society. We understand where raw materials come strive to always increase our positive from, and support improvements at impact, including going beyond the key stages of the value chain. needs of our business and working

RESOURCE & ENERGY INDEPENDENCE | 23 BECOMING FOREST AND STAKEHOLDER CHALLENGE Huge volumes of natural resources are needed to make IKEA products. As a growing WATER POSITIVE business, with more stores opening and more products being sold, the demand for these resources can only increase. How can IKEA truly have a positive impact on people and We want our business to benefit fund a conservation study centre the planet while it has such a large, and growing, environmental footprint? the world. That is why we have in the Maliau Basin, Borneo that committed to becoming forest and shares forestry research with reduction for each product opportunity – and responsibility water positive by the end of FY20. scientists and students worldwide. sourced, by 2050. – to contribute to positive change Our aim is for responsible forestry And investing in our own forest • Reduce waste throughout value for people and the planet, in and water management to become operations means we can roll chains by 75%. particular when it comes to the norm, beyond our own supply out our forest positive approach • Support pre-competitive ap- resources. chain. But we cannot do this alone further, and be more confident of proaches and share information. Our first step is to use mate- – we need collaboration to make securing a sustainable supply of • Start a conversation with con- rials as efficiently as possible. this happen. wood (see page 25 ). sumers about the impacts of By using innovative design and To become forest positive, we Being water positive is about consumption. lightweight materials we can use will contribute to ending deforesta- considering water stewardship fewer resources in our products. tion by promoting the adoption across our whole water footprint, IKEA can achieve more by working Secondly, we focus on sourcing of sustainable forestry methods from suppliers to customers. We with others, and communicating our key materials, like wood and across the whole industry. Through are exploring ways to improve JASON CLAY what it does, than by itself. Now cotton, from more sustainable our people and planet positive water efficiency in our operations Senior Vice President, it’s time to influence others. sources. In many cases, our work strategy we commit to use only and supply chain, supporting Food & Markets, WWF US to secure sustainable resources wood from more sustainable customers to reduce their water goes beyond the volumes or sources (currently defined as impact, and collaborating with The world is more prosperous areas of resources that we need FSC™ certified or recycled wood) other stakeholders to develop than ever. This is a good thing. for our own business. We aim to by 2020, and not to source wood long-term improved water Yet our efforts to improve human contribute to increasing the sup- from high conservation value management. well-being have taken a toll on the ply of more sustainable materials forests, unless they are certified Together with WWF we have health of our shared home, planet across the industry. as responsibly managed. been working for many years to Earth. Today we have surpassed the Thirdly, we are changing the We have been working in part- support farmers to reduce their planet’s carrying capacity – we are way we think about materials. nership with WWF for more than water use in cotton production, using the equivalent of 1.5 Earths Waste is an outdated concept – a decade to increase levels of FSC which is a particularly water every year. we are starting to look at existing certification globally and fight the intensive crop. Our new projects This is everyone’s problem, products as ‘banks of materials’ illegal timber trade. So far we have in India and Pakistan support but IKEA can be a key part of the for the future, and we design new increased FSC certified forest by cotton farmers to address their solution. products so they can be easily around 35 million hectares, an water impact and many other It should set targets that encour- reused, repaired, and recycled. area roughly the size of Germany interconnected challenges. We age innovation and it should meas- LENA PRIPP-KOVAC Creating a circular IKEA requires and more than double the total aim to enable farmers to improve ure progress on how it restores Sustainability Manager, us to change how we work area needed to supply IKEA. water management practices the planet. Range & Supply, IKEA of Sweden with our supply chain, design We continue to work on eight in order to maintain or restore products, and interact with our FSC-related projects in 10 water resources, increase • Set footprint targets for IKEA’s The size of our business means customers. Closing the loop is a countries. We also seek the local collaboration, and ultimately operations and reduce total global we use a lot of resources to make big challenge, but one with huge support of local NGOs, participate secure long-term livelihoods for footprint regardless of growth. products that improve our custom- potential for a positive impact. in policy discussions, and fund people and communities. • Set targets per unit of production ers’ everyday lives. Our size and forestry education initiatives. We that would equal 75% footprint influence bring a fantastic

RESOURCE & ENERGY INDEPENDENCE | 24 WOOD AND PAPER TOTAL WOOD IN IKEA PRODUCTS (million m3 rwe)1 sustainable sources. Increasing FSC certification has many benefits, such as:

• combating illegal timber trade and promoting responsible trade in forest products FY15 16.12 • ensuring long-term economic FY14 15.50 and social benefits from the FY13 13.97 forest, particularly for indigenous communities FY12 13.56 • halting and reversing forest FY11 13.78 degradation and deforestation • protecting the natural environment 1 Roundwood equivalent (rwe) is the volume of roundwood (logs) required to produce our products. and its biodiversity Data covers all solid wood and wood-based board used in IKEA products, but excludes wood used in • raising awareness of and imple- packaging and printing and paper used in products such as napkins. menting responsible forestry management plans.

Our supplier Code of Conduct, IWAY, COUNTRIES WE SOURCED TYPES OF WOOD SOURCED (%) includes a Forestry Standard based WOOD FROM IN FY15 on these principles, designed to (% wood sourced) ensure the bamboo, board material and solid wood in our products does not come from sources that harm people or the planet. See page Wood and paper are essential for our and paper we source will be from 61 for more on how we support business. Wood is the main material more sustainable sources, currently suppliers to comply with IWAY. in many IKEA home furnishing prod- defined as FSC certified or recycled As part of our journey towards ucts, and we use paper in notebooks, material. In priority areas where resource independence, we are napkins and other paper products, there is a higher risk of illegal or investing in our own forest opera- for the IKEA catalogue, and in irresponsible forestry practices, tions. In FY15 IKEA acquired 33,600 much of our packaging. These are such as China, Russia, South East hectares of forest in Romania. In line Poland 25.5 Bamboo 1 potentially sustainable resources – Asia and South East Europe, we with our commitment to responsible Lithuania 7.3 Solid wood 43 renewable, reusable, recyclable and aim to achieve our goal by FY17. forest management, all the forests Russia 6.9 Wood-based board 56 biodegradable – as long as they are By focusing on certification and that we invest in will be certified Germany 6.4 managed responsibly. That means industry collaboration, we promote to the FSC forest management Sweden 6.3 ensuring forests and wood supply responsible forest management, standard as soon as possible. chains are managed in a way that which provides incentives to con- Romania 6.1 benefits people and the planet. serve forests and end deforestation. China 4.6 Our goal is to become forest We believe using FSC certification France 3.1 positive by the end of FY20 (see page is currently the best way to ensure Other countries <3.0% 33.8 24 ). By then, 100% of the wood that the wood we use is from more

RESOURCE & ENERGY INDEPENDENCE | 25 Performance with the United Nations Food and Paper Agriculture Organization (FAO) that In FY15, we used 16.1 million m3 of will explore ways to remove these We are changing the way we source roundwood for the solid wood and barriers to certification, improve paper and cardboard. During FY15, wood-based board materials in IKEA everyday life for people in rural areas we studied our paper supply chain products, which is 4% more than in and promote sustainable forest to understand exactly where our FY14 due to business growth. We management. We will begin by paper products currently come from. sourced 50% of our wood from more mapping wood from forest-growing Currently more than 90% of the sustainable sources, reaching our communities in northern Vietnam. supply chain has been mapped. target for FY17 two years early. We are exploring more ways to By 2020, we aim to only use paper In priority areas,1 wood from source wood sustainably. By FY20 and cardboard from more sustainable more sustainable sources rose to IKEA Industry Malacky, in Slovakia, sources. And since FY14, we have 40%, compared to 20% in FY14. We will source 30% of its wood from been publishing the IKEA catalogue trained 80 co-workers globally on its newly purchased short-rotation using only FSC™ Mix Credit certified IKEA forestry standards, relevant plantation (SRP). Tree species used paper. For more information on the laws and FSC certification. More in SRPs mature much faster than tra- sustainability of the IKEA catalogue, training, better communication and ditional species, producing wood that see page 50 . an updated data entry system mean is strong and lightweight, enabling us that responsible forest management to make products using less mate- is becoming a part of everyday work rial (see page 33 ). We will obtain in these priority areas. FSC certification for the plantations as soon as possible. The 60 hectares planted in 2015 are due to be FSC certified in FY16. By spring 2016, the WOOD FROM MORE plantation will cover 800 hectares SUSTAINABLE SOURCES1 (% wood sourced) and eventually reach 4,000 hectares, with the first harvest due in FY20. 50 Forest management is highly dependent on local regulations and 41 government policy. In April 2015 we To scale up sustainable forestry, certification in delivering these contributed to the public review of we need to demonstrate how certifi- benefits. Through our long-standing the EU Timber Regulation (EUTR), 32 cation contributes to better manage- partnership with WWF, we have which prohibits the sale of illegal ment of the world’s forests. This will already increased global levels of wood and requires traders to com- enable businesses and consumers FSC certified forest by 35 million plete due diligence checks on the 23 to understand the value of certified hectares. We aim to reach another wood they sell. We passed an EUTR timber and create greater demand. 10 million hectares by FY20 – see audit on our German operations in 16 We are collaborating with the Dutch page 24 . August 2015 with full compliance. FY15 Sustainable Trade Initiative (IDH) and Achieving certification can be We would like to see the EUTR fully FY14 other partners on Value and Impact challenging for smallholders and and consistently implemented across FY13 Analysis (VIA), a project coordinated forest-reliant communities. For the EU, and we are lobbying together FY12 by the ISEAL Alliance to promote the some producers, the cost of achiev- with other businesses – Kingfisher, FY11 benefits of using legal, responsibly ing certification is high compared to Carrefour and Marks & Spencer – to sourced, sustainable timber. VIA their income levels, and meeting our achieve this. 1 From forests certified to the FSC Forest aims to develop a methodology requirements can be very difficult. In Management standard and recycled wood. 1 Priority areas are countries where IKEA, along with Includes solid wood and wood-based board. to understand the role of FSC June 2015, we announced a project our partners, have identified high risk of challenges such as illegal or irresponsible forestry practices.

RESOURCE & ENERGY INDEPENDENCE | 26 Our timber supply chain is audited in three ways.

• Independent organisations known as ‘FSC accredited certification bodies’ perform annual audits of suppliers who have FSC CoC certification. • IKEA, or occasionally independent auditors acting on our behalf, conducts annual audits of wood suppliers who handle wood not covered by FSC CoC certification.1 • IKEA annual audits of higher-risk areas can cover the entire supply chain, including wood processing and transport, back to the forest.

In FY15, 72% of wood suppliers were Auditing and compliance standard verifies that non-certified certified to FSC CoC standards. or potentially illegally logged material We encourage suppliers to work is kept out of FSC certified forestry towards FSC Chain of Custody (CoC) operations at all stages of the value 1 A small number of suppliers considered very low-risk because of their location or type of timber are audited IWAY FORESTRY STANDARD certification where possible. This chain. every two years.

Our supplier Code of Conduct, • not come from officially recog- IWAY, contains specific criteria for nised and geographically iden- AUDITS OF OUR WOOD SUPPLY CHAIN FY11 FY12 FY13 FY14 FY15 wood, bamboo and board suppli- tified commercial genetically ers. The IWAY Forestry Standard modified tree plantations. states that these materials should: IKEA suppliers that are FSC Chain of Custody 34.9 42.2 52.5 66.1 72.0 certified (%) All suppliers must have proce- • only come from forests that dures in place to implement these have been legally harvested standards throughout their opera- Total wood volume from FSC Chain of Custody 62.0 63.5 84.5 94.8 98.0 • not come from forestry operations and supply chains, and must certified suppliers (%) tions engaged in forest-related be able to track the origin of their social conflicts wood. For more information on Number of IKEA audits — under IWAY Forestry 139 116 149 143 108 • not be harvested in geographi- how we monitor compliance with Standard and IKEA wood supply chain audits (5) (5) (11) (4) (6) cally identified intact natural for- IWAY, see page 61 . (number performed by third-party auditors) ests (INF) or high conservation value forests, unless they are Total wood volume from suppliers that underwent 12.3 17.3 12.4 19.7 13.0 certified as responsibly managed an IKEA audit during FY15 (%) • not be harvested from natural forests in the tropical and sub-tropical regions being Wood volume that underwent an IKEA audit that com- 94.0 95.2 99.1 99.0 98.0 plies with IKEA minimum forestry requirements (%) converted to plantations or for non-forest use

RESOURCE & ENERGY INDEPENDENCE | 27 COTTON biggest impact, IKEA and our partners are focusing our efforts on major cotton-producing countries, including China, India, Pakistan and Turkey. We encourage designers to seek ways of using less material, and to consider alternative materials like cellulose, linen and flax. Read more about how sustainability informs PRAMOD SINGH LISEN WIREN product design on page 32 . IKEA Cotton Leader, IKEA of Sweden Sustainability Manager, IKEA Netherlands Performance This year is the beginning of a new era for cotton at As one of the biggest global At the end of FY15, we achieved our IKEA. Reaching our goal of users of cotton, we have a huge target to only source cotton from sourcing 100% of cotton from opportunity to support cotton more sustainable and recycled more sustainable sources is a farmers and improve the way sources, with 100% of our cotton great achievement, but it also we work with cotton across our shipments now meeting these marks the start of our next entire value chain. And it’s criteria. From FY16 onwards all the challenge – to maintain the 100%, amazing that we can source all cotton we use in our products will and to find even more ways to our cotton from more sustainable be from more sustainable sources. support cotton producers around sources while still reducing prices During FY15 we used 140,000 the world to be sustainable. for our customers. tonnes of cotton, and 94.5% of this Cotton is used in IKEA products like Our hope is that one day, Whatever cotton products was from more sustainable sources. COUNTRIES WE SOURCED soft furnishings, bedding, towels and sustainable cotton will replace they buy, customers can see our It is important to note that some COTTON FROM IN FY15 rugs. As a natural, renewable fibre, all conventional cotton farming. Democratic Design concept in (% cotton sourced) cotton is a popular material and its That’s why, as one of the found- action: a functional product with production is an important source ing members of the Better Cotton the same low price and good COTTON FROM MORE of jobs and income for communities Initiative, we are working with quality that we have always SUSTAINABLE SOURCES around the world. partners in cotton-producing offered, and now with the added (% cotton sourced) We use almost 1% of the world’s countries to increase the global bonus that 100% of the cotton 94.5 annual cotton supply and are com- supply of sustainable cotton and has been produced by farmers mitted to sourcing all of our cotton improve standards across the who are working sustainably and from more sustainable sources. We whole industry – not just in our profitably. I’m very proud to tell 76 achieved this milestone at the end of own supply chain. this story. 72 FY15. Our reach means we can make a big difference in tackling the chal- India 36 lenges that can exist in cotton produc- levels of the supply chain. We are one Better Cotton Standard, by farm- tion, such as child labour, health and of the founding members of the Better ers working towards BCI, and more Pakistan 21 financial difficulties for farmers, and Cotton Initiative (BCI), a multi-stake- sustainable cotton from the USA (such FY15 China 13 damage to local water supplies through holder organisation that aims to make as the ‘e3 Cotton Program’). This cot- 34 FY14 Turkey 7 the use of agricultural chemicals and cotton production better for the people ton is grown using sustainable farming 24 FY13 USA 5 high-volume irrigation. that grow it, better for the environ- practices that reduce fertiliser, pesti- FY12 We want sustainable cotton to ment where it grows, and better for cide and water use, improve working 13 Brazil 4 FY11 be the norm for the entire industry, the future of the entire cotton sector. conditions and earnings for farmers, Others 14 not just IKEA. This can only happen Cotton from more sustainable and benefit ecosystem health and FY10 through collaboration across different sources includes cotton grown to the biodiversity conservation. To have the

RESOURCE & ENERGY INDEPENDENCE | 28 products already in store were PALM OIL produced prior to meeting our 100% milestone. This constitutes very small volumes of only a handful of products, Our palm oil sourcing strategy includes December 2015. Our next step is to available only until the products are two additional criteria that go beyond analyse these roadmaps, and support sold out. The detailed product specifi- RSPO requirements. suppliers and their sub-suppliers to cations we introduced in FY14 explain strengthen their commitments where the requirements for cotton from • No deforestation. Forests of high necessary. more sustainable sources, and have value, for conservation or carbon In 2014 we purchased 44,000 enabled us to move from thinking storage, will be protected. All new GreenPalm certificates from producers about more sustainable cotton as a palm oil developments should be of RSPO-certified palm oil, each project to simply business as usual. on land where biodiversity and representing one tonne of palm oil. Now we have hit the 100% target, natural vegetation are already These certificates generate a premium a new journey begins. Our next chal- highly degraded. for producers that work to RSPO lenge is to put the routines, pro- • No new development on peat, standards, even when the palm oil cesses and systems in place to always regardless of depth. Peat wetlands is not from segregated sources. maintain the 100%. Cotton farms are are important carbon stores with We are partnering with the United assessed before being classified as high biodiversity value. Nations Development Programme sources of more sustainable cotton, (UNDP), the Government of Indonesia but we want to encourage continuous By December 2015, we have asked and other global corporations to set improvement in our supply chain and IKEA global suppliers to produce a up the Sustainable Palm Oil Initiative work towards even more sustainable roadmap of how they will meet these (SPO). The project’s long-term aim cotton. In FY15, we conducted 17 additional requirements by December is to create a sustainable and respon- traceability assessments in our supply 2017. sible Indonesian palm oil industry by chain, from product sales to the cot- reducing deforestation and increasing ton fibre stage. We will extend these Performance smallholder income and productivity. assessments to the farm level in FY16. As part of achieving the 100% We used 47,562 tonnes of palm milestone, we are using the opportu- oil in FY15, and 87% of this was nity to engage customers on the issue from certified, segregated sources. of sustainable cotton. More effective Overall we have made good progress communication with customers will towards reaching our 100% target increase their understanding of the by December 2015. benefits of choosing cotton from more We are still working to map exactly sustainable sources. We continue which locally sourced food products to support our partners in projects contain palm oil, and we are not yet to improve cotton production. For able to guarantee that the palm oil example, the Better Cotton Initiative We use relatively small quantities of to be a sustainable raw material. comes from certified, segregated aims to have five million Better Cotton palm oil, mostly in candles and some We support the Roundtable on sources. farmers producing 8.2 million metric food products. Producing palm oil is Sustainable Palm Oil (RSPO), which During FY15, all palm oil produc- tonnes of Better Cotton by 2020 – often associated with environmental develops standards and encourages ers in our candle supply chain (cover- around 30% of global cotton production. damage such as deforestation and global stakeholder engagement to ing around 90% of the palm oil we The IKEA Foundation is working biodiversity loss, and social concerns make sustainable palm oil the norm. use) produced a roadmap of how they to create positive social change in including poor labour rights and dan- Our target is to source 100% of our will meet our new palm oil require- cotton communities – read more gerous working conditions. But we palm oil from segregated RSPO- ments by December 2017. We expect on page 78 . believe that palm oil has the potential certified sources by December 2015. our food suppliers to do the same by

RESOURCE & ENERGY INDEPENDENCE | 29 LEATHER FOOD Performance

Leather is used in IKEA products like Performance While we continue to serve tasty food sofas and rugs. We work closely with at affordable prices, we are increas- stakeholders to minimise the environ- In FY15, we used 5.1 million m2 of ing the focus on healthy, sustain- mental and social problems that can leather, and 88% of this was chromi- able options. In FY15, we introduced occur in leather supply chains. These um-free. By August 2015 100% of the GRÖNSAKSBULLAR, our vegetarian include deforestation, violation of leather we sourced was chromium- meatballs, in all markets, and custom- indigenous land rights, forced labour free, and from September 2015 on- ers and co-workers love them already. and chemical pollution. wards all our leather will be produced Veggie balls are nutritious and their The IKEA leather centre in China is using ‘wet-white’ or other alternatives carbon footprint is 30 times less than responsible for sourcing and pro- to chromium, which is highly polluting. meatballs. ducing leather and artificial leather. We have been working with suppliers We work with internationally By working closely with purchasing and a number of chemical companies recognised third-party certification teams across the Americas, Asia, Eu- to find ways to reduce chemical use, organisations to source more sustain- rope and Russia, the centre ensures carbon and water impacts of the able raw materials (see examples on that our standards for leather sourc- tanning process. following page). ing are aligned across IKEA. Now that we have met our chro- Our long-term ambition is for the mium-free leather target, we are leather we use to have a chain of focusing on continuing to improve custody, and be produced according leather traceability. Pilot projects with to standards that help protect forests a number of our tanneries in Asia and and respect human rights and animal Europe will enable us to track chain of welfare. We had aimed to achieve this custody all the way to the slaughter- by the end of FY17, but our initial work house. We eventually aim to be to investigate leather traceability has able to trace leather from all of the shown that the supply chain is very tanneries we use back to the farms. complicated. During 2015, we are updating our Our revised strategy is to secure leather traceability requirements to traceability of leather back to all strengthen standards in Brazil. They slaughterhouses by August 2017. will include instructions on the sys- We will also develop and start to tems slaughterhouses can use to CHRIS NINNES implement animal welfare and work- ensure their suppliers are not linked More than 640 million customers a healthy and high-quality ingredients, CEO, Aquaculture Stewardship ing standards at slaughterhouses, with deforestation. We are also up- year and the majority of our 155,000 responsible sourcing, sustainable Council (ASC) and use risk assessments to priori- dating the requirements to ensure co-workers enjoy IKEA Food products operations and working with tise farms with the greatest social, full chain of custody to all slaughter- in our restaurants, bistros, Swedish communities. Read more about how “IKEA’s global commitment to environmental and animal welfare houses globally, and to farm level in Food Markets and co-worker restau- we contribute to customers’ health the ASC programme is a game issues. This approach will enable us to high-risk countries. Once we establish rants. It is important to serve healthy, and wellbeing on page 14 . changer, introducing the ASC to make a real difference by supporting traceability, we will provide animal safe and sustainably-produced food We source our food from more customers in many new markets. long-term sustainability in the leather welfare standards for slaughterhouses. that they enjoy eating. than 600 global and local suppliers. Customers can now be assured supply chain. We continue to work We are updating our IKEA Food Around half of the volume of our food that all salmon sold at IKEA towards our original goal to secure Health & Sustainability Direction for is provided by local suppliers working comes from farms that respect More on animal welfare on page 31 . full chain of custody and to improve FY17. We used input from more than in individual markets. We are currently More on IWAY on page 61 . the environment, the rights of standards by addressing issues like More on how we are supporting 150 internal and external stakehold- reviewing these parts of our food workers and the interests of the deforestation and animal welfare. communities in the leather supply ers, including academics, members of supply chain to help us secure IWAY local community.” chain on page 78 . the food industry, and opinion leaders, compliance (see more on page 67 ). to help us define our key focus areas:

RESOURCE & ENERGY INDEPENDENCE | 30 • Fish and seafood: We now source by KRAV, a Swedish standard The IKEA Group Animal Welfare 23 species of fish and seafood from for organic food production that policy, adopted in FY14, applies to all either Aquaculture Stewardship considers people, animals and animals in our supply chain including Council (ASC) or Marine Steward- the environment. In FY14 the lingon- hens, pigs, and cows, and a number of ship Council (MSC) sources for berries, blueberries and cloudberries our animal welfare goals are relevant our restaurants and Swedish Food in our jams became KRAV certified, for food. Markets. By selling these certified which means that our jams are now We set ourselves the target for all species, we are bringing responsibly 100% organic. whole eggs served in IKEA restaurants sourced fish and seafood to eight • Coffee and cocoa: Both of these to come from free range hens with countries that had never previously raw materials are covered by UTZ outdoor access by August 2015, used ASC labels. Some fisheries Certification, a standard that focuses and 33% of markets now meet this have not yet been certified to ASC or on providing better opportunities for criterion. We knew this would be MSC levels, and we are supporting farmers and their families. In FY15, a challenging target because free many of them through the process. 100% of our globally sourced coffee range eggs are not always available. For example, at the moment there and 100% of cocoa in IKEA-branded For example, in many countries the are no MSC certified crayfish chocolate bars was UTZ Certified, supply of free range eggs is very low, fisheries in the world, but instead and by FY17 all of our globally and in some places it is illegal to keep ANIMAL WELFARE IN of removing crayfish from our sourced coffee will also be certified chickens outside. In these situations menus, we are partnering with organic. our goal is to source from cage-free PRODUCING NATURAL FIBRES MSC to support the fisheries to • Tea: We committed to ensuring that systems. Despite this, we decided become certified. all our tea is certified as responsibly to challenge our markets to source • Berry jam: In FY15, all of the sugar sourced, and 35% of all markets from as many free range systems as Part of our current home furnishing welfare standards into the in our jams was certified as organic sold certified tea in FY15. We possible, and we will continue to work range contains animal-based raw existing IWAY audit process are working to overcome supply with producers in different countries materials, such as wool, sheep (see more on page 61 ), as challenges in some of our markets to raise awareness and increase the skins, leather, cow skins, down well as cooperating with industry to achieve this goal. supply of eggs from free range hens. and feathers. We support animal partners where possible. We have started to develop higher husbandry that ensures animal External certification already Working closely with suppliers is criti- welfare standards for all animals in wellbeing at all times, from rearing exists for many animal products. cal for us to continue to source food our supply chain. In FY16 we will start to slaughter. Although the chal- We will align IKEA requirements responsibly. In FY15 we appointed a to implement these standards, in lenges and risks are different for with these programmes wherever full time IWAY leader for IKEA Food, partnership with the Food Animal each type of animal and country of possible, and work with stake- who has developed a specific working Initiative (FAI), a research and origin, we aim to develop a holistic holders to strengthen current method for how we conduct audits at advisory group that develops agri- animal welfare strategy for the standards. food suppliers’ sites. cultural systems to enhance the life whole of IKEA. Working collaboratively is impor- In FY15 we launched a Supplier of people and animals, and protect the The first step is traceability. tant. We participate in a number Assurance Project that supports IKEA environment. We will continue to work Understanding the supply chain of networks and working groups, Food suppliers to secure Global Food with our NGO partner Compassion in for each material is important if including the Leather Working Safety Initiative (GFSI) and IWAY World Farming (CIWF). The feature we are to set minimum standards Group and the Animal Welfare compliance, and set roadmaps for right explains our approach to animal for animal welfare. Some chains Group formed by Svensk Handel improvement. For FY15, 98% of welfare for non-food raw materials. are more complex than others – (Swedish Trade Federation). our global suppliers were certified for example, tracing wool is more Svensk Handel is a knowledge- according to a GFSI approved scheme, difficult than sheepskins because sharing group of Swedish retailers and 93% of in-scope global suppliers of the extra steps in making yarn. with a long-term goal to improve had an IWAY Musts verification Auditing farms and manufacturers animal welfare in global leather completed (see page 61 for more will be a huge task, and one of our and wool supply chains. on IWAY). ambitions is to integrate animal

RESOURCE & ENERGY INDEPENDENCE | 31 MORE PEOPLE & PLANET STATUS PERFORMANCE IN FY15 SUSTAINABLE PRODUCTS POSITIVE TARGETS By August 2020, 90% of the total sales value will 54% of total sales value was from more sus- come from home furnishing products classified as tainable products, as classified by the Product more sustainable.1 Sustainability Scorecard.

By August 2015, all our home furnishing materials, 98% of home furnishing materials and pack- including packaging, will be either made from renewable, aging were either renewable, recyclable or recyclable2 or recycled materials. recycled. The remainder is a challenge due to regional legislation and specific requirements for some materials, but we continue to look for ways to improve.

By August 2020, all plastic material used in our home We sourced 23% of plastics in our plastics furnishing products will be 100% renewable and/or category products from renewable or recycled recycled.3 sources in FY15.

1 Through the Product Sustainability Scorecard. 2 On an industrial scale in at least one market where we have retail Achieved Ongoing Not achieved operations. 3 The scope is plastics category products which we sell, textile products, packaging and components for furniture.

PRODUCT SUSTAINABILITY SCORECARD

Sustainability is one of the five equally the maximum score is 400, but we Performance important principles of Democratic cannot always score all products on Design. The IKEA Product Sustain- each of the 11 criteria. In FY15, 54% of our sales value came ability Scorecard is an internal tool To move from development to from products classified as more that allows us to measure, and build production, new products must get a sustainable, compared with 52% in the business case for, developing more higher score than existing, equivalent FY14. The average score of products sustainable products. The Scorecard’s products. This means each new prod- evaluated was 109 in FY15, compared 11 criteria (see page 33 ) take uct should increase the average score to 107 in FY14, based on assessments sustainability into account at each of the IKEA home furnishing range. of around 90% of our products. It stage of the product’s life cycle. If products score poorly, a team is very difficult to assess 100% of A product is classified as ‘more will suggest ways to improve, for products because our product range sustainable’ if it scores above 120. example by choosing different is constantly changing and being There is always more we can do to of the product’s life cycle – testing, We use this threshold to measure materials or working with different updated. But we continue to work make great products that satisfy production, customer use and disposal progress towards our FY20 target suppliers, and designers must then towards gaining a full understanding of our customers. For us, good design – and finding just the right balance to make 90% of our total sales from set out an action plan to increase the sustainability of our product range. means creating the right combination is a unique challenge that keeps us more sustainable home furnishing scores within a year. The Scorecard is not perfect, of form, function, quality, sustain- innovative. We call this approach products. See page 33 for some of and we are continuously looking for ability and a low price. We take these Democratic Design. our best-scoring products. In theory, ways to improve it. Although it is an principles into account at every stage

RESOURCE & ENERGY INDEPENDENCE | 32 internal tool, some of the criteria re- PUTTING THE SCORECARD INTO PRACTICE late to suppliers – such as production methods and transport – so during Making more from less environmentally damaging to extract Resource Chain project, which started Read more about our journey towards FY15 we sought suppliers’ input to the and use. For example, in FY15 we be- in 2012, is exploring these oppor- a circular economy on page 47 . Scorecard. Their expertise has helped Efficient resource use and production gan using a new mattress foam made tunities. From FY16, we will assess us strengthen criteria on energy and methods bring business and environ- of 15% soy-oil, reducing the amount of products returned by customers for 1 A material (or combination of materials) is consid- raw material use in production. mental benefits. For example, design- petroleum-based, non-renewable foam recycling, and internal waste from our ered recyclable if an industry-scale recycling opera- ing products to use fewer resources in mattresses. Our suppliers comply stores and facilities, with the aim of tion is implemented and available in at least one IKEA means we conserve natural resources, with IWAY, our Code of Conduct, and using these materials to manufacture retail country, which can reprocess the material into a new raw material resource, for the original or other cut material and production costs, and source soy oil from segregated, new IKEA products at lower prices. useful purpose. reduce end-of-life waste. Of course, traceable sources. We do not source producing more from less does not soy beans grown in South America. OUR PRODUCT mean we compromise on quality, form In FY15, 98% of the main materials PRODUCT EXAMPLES and function of IKEA products. The in our products were renewable, re- SUSTAINABILITY Product Sustainability Scorecard cycled or recyclable. This is the same SCORECARD outlines three ways to make more as in FY14. Due to regional legislation Every year, our designers create from less. and specific requirements for some wonderful new products that are sustainable, stylish, functional and af- materials, we may never reach our We assess our products against fordable, and rate many of them using • Smart design – making the best 100% target, but we continue to look 11 criteria. the Product Sustainability Scorecard. use of raw materials, for example for ways to improve. We sourced 23% Here are some of the leaders in FY15. 1. More from less (using our NORDEN tables are made of of plastics in our plastics category lightweight materials and irregular-looking pieces of wood products from renewable or recycled applying smart designs that otherwise may be rejected. sources in FY15. JANSJÖ working lamp that enable us to use fewer – 220 points – Uses LED Using recycled materials, and resources) • Production techniques – using lamps to support a more materials more efficiently during ensuring our products are recycla- 2. Renewable materials sustainable life at home. production, for example altering ble at end of life, helps us reduce 3. Reused and recycled fabric templates so that more the amount of waste that ends up in materials cuttings can be made from the landfill or incineration. Wood used by 4. Material from more same piece of material. IKEA Industry Division Boards con- sustainable sources • Lighter materials – choosing materi- tained 10.7% recycled material. The VARIERA storage box - 208 5. Recyclability at product als that perform well but weigh less, level of recycled content depends on points – Made of renewable end-of-life materials, mostly bamboo. for example by using lighter wood the quality of locally available recycled 6. Quality species from short-rotation planta- materials, availability of machinery to 7. Transport efficient (number tions (SRP) to make board material clean wood, and recycling facilities. of products per container) (see page 26 for more on SRPs). Some of our facilities such as in Lure, 8. Energy use in production France, produce board that contains 9. Renewable energy in Renewable, recycled and up to 55% recycled wood, and we are production recyclable materials1 exploring ways to increase this in our 10. Raw-material utilisation other facilities. in production The Scorecard encourages us to look We are exploring new sources of 11. Sustainable life at home EMMIE SPETS bedlinen for alternatives to using the planet’s recycled materials for our products. – 206 points – Made of cot- (products that enable our ton, a renewable resource. customers to reduce energy finite resources, such as oil. Using Since many of our products are materials from renewable sources recyclable, and we encourage Cotton is from 100% more and water use, reduce waste sustainable sources. Suppliers in their homes, and lead a reduces our dependence on non- customers to recycle them, we perform well on energy manage- healthier lifestyle) renewable virgin material that may thought – why not use this as a ment and raw material use. be increasingly scarce, expensive and source of recycled materials? The

RESOURCE & ENERGY INDEPENDENCE | 33 Materials from more sustainable content. We are developing ways to Quality sources feed material performance into the HOW WE IMPROVE Product Sustainability Scorecard. We want our customers to love our PRODUCT SUSTAINABILITY PERFORMANCE Our aim is for all the virgin renewable We also look for innovations – products. Democratic Design is all materials we use to come from re- and tomorrow’s innovators – outside about listening to our customers’ sponsibly managed sources. For more IKEA. In FY15 we joined forces with needs and expectations. Our new We give our designers the necessary guidance and tools to make our information on wood, cotton, palm NASA, Nike, and the US Agency for Quality for Life strategy, launched in products more sustainable. These include: oil and other materials from more International Development for the FY15, outlines how we create durable sustainable sources, see page 23 . LAUNCH Nordic Challenge, which products with long-lasting value for The Product Sustainability Scorecard – enables developers and Materials Guides provide product encourages participants to share customers, and we always make sure technicians to measure products against 11 criteria corresponding to developers with an understanding of ideas for solutions to reduce to consider quality right from the start each stage of the life cycle, and set goals to improve sustainability. the sustainability performance of the chemical and water consumption in of the design process. For example, Materials Guides – explain the sustainability performance of specific materials they choose, for example material production, use and recycling. we discovered that assembly time materials, to help product teams select the best option. whether materials are renewable, has a big impact on quality perception recyclable or contain recycled – so we strive to make products that The Resource Chain framework – a working method to increase use can be assembled and dis-assembled of secondary and recycled materials. easily. Ensuring our products are durable The Material Risk Council – assesses all potential new materials for safety, and fit for purpose are key compo- quality and sustainability. nents of quality. Durable products last longer, saving raw materials and energy in production, and we continually innovate and look for new materials, surface treatments or manufacturing processes that maximise durability. Our rigorous product testing techniques ensure that products live up to our customers’ high expectations, and some of our products come with guarantees of up to 25 years. We work closely with our suppliers to secure consistent quality even in very large quantities. Making millions of products with the same high quality leads to happier customers, fewer returns and less waste throughout the value chain. OTHER CRITERIA ON THE SCORECARD

More on transport efficiency on page 40 . More on energy use in production on page 49 (suppliers) and page 38 (our operations). More on how our products enable a more sustainable life at home on page 12 .

RESOURCE & ENERGY INDEPENDENCE | 34 PRODUCT SAFETY CHEMICALS encouraging companies to phase these out in advance of regulation. It is essential that all our products are Performance safe to use. Choosing the right mate- Performance rials and making high quality, durable During FY15, we recalled four prod- products helps avoid breakages and ucts globally – these are listed on our In countries like the UK and USA, problems during use. It is vital that website. it is mandatory to use flame customers trust our products, and When it comes to creating safer retardant technology on some that they are safe to use. homes, we believe that we and our furniture to reduce the risk of We have zero tolerance for any customers are partners – we call this ignition. Traditional chemical flame safety or health risks. Our product the ‘Safer homes together’ concept. retardants can be harmful to people safety standards are based on legisla- In February 2015 we launched the and the environment, so during tion, compliance requirements and ‘Secure it!’ campaign in the USA and FY15 we launched SKUMMESLÖV, a customer needs and expectations other markets to address the issue flame-retardant layer of fabric that across our markets. Before starting of furniture tipping over, which is replaces the need to use chemicals. production, we thoroughly test the estimated to cause the death of two Now being used in products for safety of all materials and items made children per week in the USA. Through North America, we are exploring the by suppliers. Spot checks and risk as- the campaign we are providing clear possibility of rolling this out in Europe sessments help identify issues during instructions for customers to stop and China, and looking into other product development, production, and using chests of drawers unless they chemical-free fire safety solutions. after products go on sale. We train are secured, and we are raising aware- In FY15, we implemented a new and support co-workers to monitor ness of the importance of following production technique for artificial the products in our range and report the assembly instructions and safety We take a stand for using safer developers to carry out risk assess- leather, enabling us to cut levels of safety concerns through the Product guidelines we provide, to decrease the chemicals in materials, surface ments for all chemicals. the solvent dimethylformamide (DMF) Safety and Compliance School. number of incidents. treatments and production processes. Increasing awareness of our by 80% compared to FY14. We are If we are not satisfied with a By the end of FY15, IKEA stores If new evidence emerges to suggest work on chemicals is also a priority, on track to completely phase out product’s safety, or if a product fails around the world saw a twenty-fold a chemical is considered harmful for and our communication plan includes DMF by September 2016. We are to comply with legal requirements, we increase in the number of tip-over re- people or the environment, we work working with customers, governments, also working to phase out potentially issue a product recall, which we com- straints requested by customers. We to eradicate it from products, often in NGOs and other stakeholders to build harmful fluorinated chemicals used municate to our customers through a are exploring the possibility of making advance of legislation. In most cases, trust and find better ways to share to repel water and stains. number of channels, including country Secure it! mandatory for all markets. we apply the strictest laws and regula- information about harmful chemicals. Many customers who are parents IKEA websites. For many children, home is their tions from across all our markets. And From 2017, we will publish more are especially interested in how first playground, and it needs to be we continue to develop stronger ways information about our work with we use chemicals in our children’s a safe environment. All co-workers to ensure we do not introduce new chemicals throughout our communica- products. Since 2006, when we and relevant suppliers who design chemicals without being sure they tion channels. phased out bisphenol-A from our and produce children’s products are safe. We work to improve industry plastic children’s toys, we have participate in Children’s School, a set Our ongoing goal, outlined in standards for chemicals and continued to place high demands of workshops that addresses hazards the IKEA Chemical Strategy, is to support peer companies to phase on products used by children. For especially relating to children. We are substitute hazardous chemicals with out harmful materials. We are example, we have analysed all the partnering with world-leading safety safer alternatives across our value members of the business working ingredients in our MÅLA crayons to expert, Herdís L. Storgaard, on a chain, and be as transparent as group of ChemSec, a Swedish NGO show they are non-toxic, because study to support customers to reduce possible about how we work with that advocates for stricter controls we know that children might put incidents and accidents in their home, chemicals. We also aim to work with on hazardous chemicals. ChemSec’s the crayons in their mouths. See with a special focus on children’s suppliers that share our values on SIN (Substitute It Now!) list shows page 72 for more on our work to safety. Read more about our commit- chemical safety. When necessary, which harmful chemicals are likely protect and support children. ments to children on page 72 . we support suppliers and product to become restricted within the EU,

RESOURCE & ENERGY INDEPENDENCE | 35 MORE PEOPLE & PLANET STATUS PERFORMANCE IN FY15 SUSTAINABLE OPERATIONS POSITIVE TARGETS By August 2015, produce renewable energy In FY15, actual production reached 53% of the equivalent to at least 70% of our energy consumption in our own operations. Adding all the wind consumption and by August 2020, on Group farms that we have committed to own and operate, we level, produce as much renewable energy as will generate renewable energy equivalent to over 70% we consume.1 of our FY15 consumption.

Become 20% more energy efficient in our Compared with FY10, energy efficiency increased by own operations by August 2015 and 30% by 14.6% in stores, 26.8% in distribution centres, 12.6% in August 2020.2 IKEA Industry Group Divisions Flatline and Solid Wood, and 4.7% in IKEA Industry Group Division Board.

By August 2016, reduce carbon emissions Carbon emissions from transport were 27.2% lower from the transport of goods by 20% than in FY11. compared to FY11, and by 30% compared to FY12 by August 2020.3

By August 2015, reduce carbon emissions We did not achieve this target, with carbon emissions in from our own operations by 50%.4 FY15 29.9% lower than FY10. This is partly because we have opened new facilities in IKEA Industry since FY10, with more energy demanding units in markets with limited access to renewable energy. FY16 will be the first full year when our new wind farm in the US is operational. It produces more energy than we consume in the country

and will bring significant reductions in our reported CO2 emissions. We are in the process of setting a new ambitious climate target.

By August 2020, 90% of the waste from our In FY15, 88.9% of our waste was recycled or energy own operations will be recycled or energy recovered. Material recycling was 76.9% at stores, 86.8% recovered. Of this, 80% of the waste from at distribution centres, and 75.9% at IKEA Industry. stores and distribution centres and 90% from We want to make our operations to manage water efficiently and strive IKEA Industry will be material recycled. completely sustainable. By 2020 for zero waste to landfill wherever we are aiming for 100% renewable possible. By August 2020, reduce waste from our store Waste from our stores was 18% higher than the FY13 base- energy – producing as much as we Some of our greatest impacts lie operations by 10%.5 line. The increase is mainly due to better data collection. consume – and we are investing in outside our own operations, so we See page 45 for how we are reducing waste from stores. becoming more energy efficient. This work together with our suppliers is good for people and the planet and (see page 48 ) and customers 1 Own operations relate to distribution centres, stores, offices and IKEA Industry Group factories. 2 Compared to FY10 in makes good business sense, because (see page 11 ) to support them to relative terms, measured by KWh/m3 sold goods for retail Achieved Ongoing Not achieved operations and kWh/m3 purchased goods for trading opera- it cuts costs and makes us resilient reduce their impacts. We continue tions. 3 Compared in relative terms and measured by m3 to fluctuating energy prices. We are to improve the way we work in our transported goods. 4 Compared to FY10 in relative terms, 3 3 measured by CO2/m products sold, or CO2/m goods reducing emissions by making our own operations because this is where purchased. 5 Baseline year: 12.5 kg/m3 in FY13. This is transport as efficient as possible and we have the greatest control and can measured as kg/m3 sold goods. by using greener options. And we aim make a big difference quickly.

RESOURCE & ENERGY INDEPENDENCE | 36 INVESTING IN RENEWABLE ENERGY Performance not yet operational), we will generate Because our sites do not operate renewable energy equivalent to over 24 hours a day, they often produce During FY15 we produced 2,412 GWh 70% of our FY15 consumption. We are renewable energy at times it cannot be of renewable energy from wind, solar on track to achieve our goal to reach used. We are exploring ways to store and biomass (heat). This is 33% more 100% by 2020. energy so that we can use as much as than FY14, and equivalent to 53.4% of IKEA Industry, our furniture pro- possible of the energy we produce. total energy consumption in our own duction business, uses large amounts We have a global energy independ- operations. We produced 1,094 GWh of heat energy during manufacture, ence goal to produce as much energy of renewable electricity, equivalent to but buys very little gas or oil. This is as we consume, and in some individual 45.2% of our electricity consumption. because 77.9% of its heat energy is markets we already do. IKEA Canada We have committed to own and generated by biomass, and in FY15, now owns and operates a wind farm operate 314 wind turbines, and have 69% of its total energy consumption that produces more than double its installed almost 700,000 solar panels came from renewable energy. The new energy consumption. In FY15, all on our buildings. This year we signed factory in Nantong, China, was the first our Nordic operations – in Denmark, and took over legal ownership of four IKEA Industry facility to install rooftop Finland, Norway and Sweden – became new wind farms, with an expected PV panels, which will generate around energy independent. Poland is set to annual production of 873 GWh, and 3.5 MW. The factory also uses a sys- become energy independent by the end 12.8 GWh worth of solar photovoltaic tem that automatically controls the of 2015, and our Hoopeston wind farm (PV) panels. Including our committed internal temperature and humidity to produces more energy than IKEA USA projects (i.e. under construction but use energy as efficiently as possible. consumes.

RENEWABLE ENERGY PRODUCED BY TYPE (GWh) FY12 FY13 FY14 FY15

Wind 290 298 410 985

To become energy independent, we energy we purchase is not included Solar PV 29 68 90 109 need to be a leader in renewable en- in our energy independence goal Biomass 899 1,059 1,310 1,319 ergy. One of our goals is to produce as (which focuses on production of our much renewable energy as the energy own renewable energy), it contributes Total 1,218 1,425 1,810 2,412 we consume by August 2020. Since to reductions in our reported carbon Percentage of total energy consumption (%) 34 37 42 53.4 FY09 we have invested EUR 1.5 billion emissions. We are working to update into renewable energy, and in June the way we measure and report the 2015 we committed to invest another renewable energy we purchase, in line RENEWABLE ENERGY (purchased electricity and FY10 FY11 FY12 FY13 FY14 FY15 EUR 600 million in our own wind and with the World Resources Institute’s on-site generation as % of total consumption)1 solar power generation equipment. guidance on Scope 2 emissions Stores 32.1 38.5 47.9 51.0 53.7 51.4 Every new site or building is assessed (emissions resulting from consumption for its suitability for solar panels. The of purchased electricity or heat). Distribution centres 37.7 37.4 47.2 46.4 55.1 55.2 biomass and solar energy we produce We want to be part of accelerating IKEA Industry - Furniture 58.8 61.2 59.8 59.2 55.6 68.6 is mostly used in our buildings. Most the transition to a world powered by wind energy we produce is sold to the renewable energy, which is why we are IKEA Industry - Boards 64.4 63.8 68.1 68.8 69.2 70.3 grid, but increasingly we are finding a founding member of RE100, an IKEA Components 0.0 0.0 0.0 48.8 41.8 38.3 ways to use the wind power ourselves. initiative that encourages companies In some markets we purchase to commit to using 100% renewable Total 46.0 49.6 55.2 57.1 59.8 61.9 renewable electricity to supply stores energy. Read more about RE100 and other buildings, as well as pro- and our other climate commitments 1 Data from all years has been restated due to updated methodology. ducing our own. While the renewable on page 10 .

RESOURCE & ENERGY INDEPENDENCE | 37 ENERGY EFFICIENT BUILDINGS

Cycle. Countries collect monthly data from each site and feed it through to IKEA Group level. We gather this to create annual performance reports that measure progress at Group and country levels, and help set targets for the following year. This enables greater learning and collaboration across the Group. We aim for every new IKEA building to be more sustainable than the last. When designing and updating stores, we use the IKEA Energy Model – a simulation tool that enables building designers to find efficiencies in building heating, cooling, lighting and energy systems. In FY15, we used the tool to help us construct 25 stores in a more sustainable way. Although construction costs can be higher, these BOOSTING OUR WIND POWER are soon recovered through lower running costs. We are hugely excited about the EUR 1.5 billion we have put into renew- Examples of our most sustainable able energy since FY09, and about our new EUR 600 million commitment. sites include: So what is the news from FY15? • IKEA Hubhult is our new meeting place for about a thousand co- • October 2014: Our 46 MW Oldman 2 wind farm in Canada workers in Malmö, Sweden. It is became fully operational also one of the first buildings in • November 2014: Committed to purchase the 165 MW Cameron the Nordic Region to be rated wind farm, which will generate enough electricity to power 59,000 ‘Outstanding’ by BREEAM – an homes - the biggest investment we have made so far in the USA independent environmental assessment method for buildings • December 2014: Our 30-turbine Glötesvålen wind farm in that perform well in areas like Sweden became fully operational energy, responsible construction • December 2014: In Poland, invested in the 38 MW Wróblew Improving energy efficiency reduces for turning these guidelines into practices, water use and waste. wind farm and committed to invest in Lubartów wind farm – running costs and carbon emissions, country-level targets. The targets • The IKEA Clermont-Ferrand store bigger than any of our current projects in Poland and we take this into account in every are translated into action plans by in France opened in August 2014 store, office, distribution centre and site managers, who work closely with with 700m2 of rooftop solar PV March 2015: Our Hoopeston wind farm became fully operational • factory. Our Energy, Emissions and other functions like facilities managers, panels, a solar wall that provides – it is expected to generate the equivalent of 165% of the Water Management guidelines set out logistics and other relevant teams. naturally heated air when necessary, electricity consumed by the whole of IKEA USA each year our Group-level approach for retail The guidelines also explain our a rainwater recovery system, and and food operations. Sustainability data gathering process, called the surroundings filled with wildflowers teams in each market are responsible Energy and Water Performance Year and plants. It has the lowest energy

RESOURCE & ENERGY INDEPENDENCE | 38 consumption per m2 of any IKEA By the end of FY16 we aim to install store in France. 40 power quality regulators. • Opened in May 2015, IKEA Marsden Efficient lighting can reduce stores’ Park is the most sustainable IKEA energy use by up to 15%. We aim to store in Australia with 10,000 LED invest EUR 100 million in LED and oth- light bulbs, rooftop solar PV panels er efficient lighting systems for stores and monitoring systems for hot by FY17. In FY15, 51 stores were fitted water and recycled water. with new lighting and 13 new stores • The IKEA Zwolle store in the were fitted with LED or other energy Netherlands uses geothermal efficient lighting, bringing the total to energy for heating and cooling, 126 stores. We expect annual savings reducing annual carbon emissions of EUR 15 million. Distribution centres by around 80%. The store was the are also retrofitting lighting systems – first IKEA store in the country to for example, all Distribution Services install solar PV panels, and it units in France are switching to to LED. also features urban windmills, In Tacoma, USA, we use technology movement sensors to control to detect daylight levels and motion in lighting, and high speed sliding the room, so that the light comes on doors to prevent draughts. only when needed. This uses 83% less energy than the old system and Performance will save USD 16,000 (EUR 14,700) a year. IKEA Industry Division Board In FY15, energy efficiency improved by has invested EUR 2.7 million in LED 14.6% in stores, 26.8% in distribution installations in five factories, aiming centres, 12.6% in IKEA Industry Group to replace all lighting systems with Divisions Flatline and Solid Wood, and LED by FY18. From September 2015, 4.7% in IKEA Industry Group Division our entire range of lighting products Boards. These measures have saved was converted to use LED – read us more than EUR 133 million since more on page 16 . FY10. Energy-efficient kitchen ventila- During FY15, we identified 70 sites tion systems can reduce stores’ annual ENERGY EFFICIENCY FY11 FY12 FY13 FY14 FY15 FY15 (% improvement against FY10 GOAL where we plan to install power qual- energy use by more than 175 MWh, baseline) ity regulators. These units convert 25% of which comes from reducing power from the grid into a quantity electricity, and 75% from a decrease Stores 1 4.2 7.1 9.5 15.1 14.6 20 and quality suitable for the equipment in heating. Annual savings are almost that uses it. Regulating the power in EUR 9,000, with payback times of Distribution centres 2 7.1 17.9 12.5 25 26.8 20 this way reduces energy consumption around two years. The systems are and protects the electrical equipment now installed in 99 stores across IKEA Industry Divisions Flatline 7.5 14.0 10.9 17.9 12.6 20 from power surges, reducing energy 11 countries. and Solid Wood 3 bills and replacement costs. In places In the EU, large companies are where energy comes from burning legally required to audit their energy IKEA Industry Division Board 9.6 13.8 3.4 -1.6 4.7 20 fossil fuels, regulating power also consumption and identify ways to IKEA Components - - - 25.9 48.0 20 reduces carbon emissions. A pilot reduce it. IKEA provided input into this Baseline year: 2012 in our store in Vantaa, Finland, has methodology, and by December 2015 already saved almost EUR 20,000 and we aim to roll out the approach across 1 Figures for FY11 and FY13 restated from FY14 due to changes in the calculation methodology. 2 Figures for FY11-14 restated from FY14 due to changes in reduces energy consumption by 5.5%. all our markets. the calculation methodology. 3 Figures for FY13-14 restated from FY14 due to changes in the calculation methodology.

RESOURCE & ENERGY INDEPENDENCE | 39 TRANSPORT

We always strive to reduce emissions Working closely with transport sup- Performance from transport so we can shrink pliers and industry partners enables us our carbon footprint. Transporting to explore ideas and test innovations In FY15, total carbon emissions from products represents 2.6% of our in transport. As part of meeting IWAY product transport were 975,632 tonnes. carbon emissions, and customer and requirements, our transport suppliers Carbon emissions per cubic metre co-worker travel accounts for 7.0%. must use vehicles that comply with of product transported were 27.2% strict engine specifications to minimise lower than FY11, which means we have PRODUCT TRANSPORT carbon dioxide and particulate emis- already reached our FY16 target to sions. We regularly assess options reduce transport emissions by 20%. We sell millions of products around for more efficient vehicles and more We achieved this by making more the world every day, and each one sustainable fuels across our markets. efficient journeys and adopting new, shipment, fewer journeys, and lower Although biogas is not yet available in must make its way from supplier to We also aim to positively influence low-emission transport technology. We prices for customers. During FY15 we all markets, we use similar alternative customer. Efficient transport and working conditions in the transport will continue to work towards achieving also explored ways to combine heavy fuels to help pave the way for biogas. distribution systems reduce costs sector. Even though the drivers who our 30% reduction target by FY20. and light products in the same ship- Certain fuels such as compressed or and are better for the environment. transport our products are not em- We increased the volume of trans- ment, enabling us to increase the liquefied natural gas (CNG and LNG) Reducing the number of steps in ployed by IKEA, it is important for us ported goods per shipment by 1.3% to volume of transported goods without have lower carbon intensity, nitrogen this journey is important – for exam- that they have good and fair working 56.1 m3. Products that contributed to exceeding weight restrictions. oxide and particulate emissions than ple, by sending products straight from conditions. IWAY, our supplier Code of this result include SULTAN mattresses, We always look for new ways to diesel, and use similar vehicles and suppliers to stores instead of going via Conduct, covers transport suppliers which are now available in a rolled-up reduce and replace fossil fuels in our refuelling infrastructure to biogas. distribution centres. We can increase and includes clear and strict demands package instead of flat in North Amer- product transport. Using fossil fuel al- Therefore using CNG and LNG means the number of products per shipment for their drivers’ wages, benefits and ica; and the FRIHETEN sofa, which can ternatives like biogas and electric vehi- we can easily switch to biogas once and reduce the number of journeys working conditions. Read more about now be transported more efficiently as cles can reduce each journey’s carbon it becomes more readily available. In by packaging and loading products IWAY on page 61 ). three components instead of one large emissions by up to 90%, and in FY15 Italy, more than 50,000 customers in more efficiently. article. This means more products per we rolled out these new technologies eight cities had their products deliv- to more countries. ered in CNG-powered vehicles in FY15. Stores in Belgium, China, the Nether- • In China, 14.5% of customer deliver- lands, Portugal and Spain also deliver TRANSPORT OF PRODUCTS FY12 FY13 FY14 FY15 FY16 ies from our Chengdu store were using CNG and LNG. GOAL made using electric vehicles in FY15. We use shunting trucks to move • In Sweden, we have success- trailers and containers around our Increase in cubic metres of product per shipment 2.5 1.7 1.5 1.3 - fully concluded extensive trials with distribution centres, and in FY15 they compared with the previous year (%) synthetic diesel made from waste represented around 15% of total IKEA products like scrap wood and animal Distribution Services (DS) carbon Reduction in CO2 per cubic metre of products transported 7.3 10.8 12.8 27.2 20 compared with FY11 (%) fat residue. Major truck manufactur- emissions. As the rest of DS becomes ers have now certified the fuel for more efficient, we have set ourselves Products delivered directly from supplier to stores (%) 56 60 58 58 - use in conventional engines, and it the challenge of ensuring that these is already being used by two of our trucks keep up with the pace of suppliers to transport IKEA goods. innovation. Our distribution centre TRANSPORT OF PRODUCTS FY14 FY15 • Since January 2015, all IKEA in California, USA, recently bought deliveries in the city centre of its first fully electric shunting truck 1 Net cubic metres of transported goods per shipment 55.4 56.1 Paris, France, have been made and dray truck, and we are testing using biogas vehicles. the same technology in Dortmund, Germany. Shunting trucks in Fengxian, 1 In FY15, m3/shipment replaced the filling rate as the main KPI for product transport. China run on LNG, and our two

RESOURCE & ENERGY INDEPENDENCE | 40 distribution centres in Sweden use for measuring and reducing carbon Performance 20 to four, so that we can better biofuel for their shunting fleet. emissions from transport. IKEA is a secure IWAY compliance, collect more We use forklift trucks to move founding member of Green Freight The ‘Let’s Go Virtual’ initiative was accurate carbon emissions data, and products at our distribution centres Asia and Green Freight Europe (GFE), launched in May 2014 to promote support our co-workers to choose and stores. IKEA GreenTech, our initiatives that aim to increase the use awareness of the virtual meeting tools more sustainable travel options. wholly owned venture capital com- of ‘green transport’ in supply chains. available to co-workers. Improved pany, invested in Alelion, a company We received a ‘green leaf’ from GFE, guides, engaging films and ambassa- CUSTOMER TRAVEL that manufactures lithium batteries for representing the first phase of their dors in each market inform co-workers forklift trucks. Our goal is that by Sep- new labelling system to recognise ef- about the benefits of using virtual IKEA stores around the world had tember 2016, all new forklifts ordered forts to measure, report and reduce meeting facilities instead of travelling 771 million visitors in FY15. Most of by our stores will use lithium ion bat- carbon in transportation. to meetings. our stores are outside town centres, teries instead of traditional lead-acid We have invested in video meet- and while more than 90% of existing batteries. Lithium ion batteries are CO-WORKERS’ MEETINGS ing facilities at 265 sites (compared stores and all new stores are acces- more energy efficient, have a faster AND TRAVEL to 134 in FY14). In FY15, hours spent sible by public transport, many of our charging time, require less mainte- in virtual meetings (combined web customers make this journey by car. nance, and because they do not use We encourage co-workers to con- and video) increased by 28%. Holding But car journeys can be expensive lead or acid, are better for the environ- sider the purpose of their meetings, larger virtual meetings with more and contribute to air pollution and ment and pose fewer risks to safety. and use the principles of simplicity, than 50 participants enables us to cut congestion, and car ownership is They are also good for business, with a efficiency, safety, sustainability, and travel time and emissions even more. declining in many countries. payback time of less than eight years. cost-consciousness to assess whether During FY15 we held virtual meetings We are making our stores, prod- Our stores in Belgium and Croatia they really need to travel. Maintaining for more than 18,000 participants. ucts and services accessible without already use these batteries; IKEA a work-life balance and spending time From FY15 we are using a different needing to rely on private cars, and in Umeå, Sweden, has ordered a full fleet with family is important too. way of measuring business travel this way reducing our carbon footprint. of lithium-powered forklifts; and IKEA By working closely with travel related to sales. We will now track For example, in some markets, like cheaper and more sustainable than DS is investigating the possibility of suppliers we can select options with travel costs as a percentage of yearly Denmark, we work with municipali- using two separate vehicles. We are switching. Our distribution centre in the lowest environmental impact. Our sales, with a goal to reach 0.35% by ties and bus companies to better align also testing the possibility of using Lyon, France, became the first site in global system for gathering travel 2020. In FY15, business travel costs timetables with store opening hours. biodiesel shuttle buses in Norway. all of Europe to use hydrogen fuel cells data enables us to track costs, travel were 0.41% of yearly sales. We support customers by displaying More than 120 stores in 22 mar- in forklift trucks. patterns and booking behaviour, and We have reduced the number of bus and train timetables, and provide kets now offer free electric vehicle Together with industry partners, identify ways to improve our approach companies we use to plan and book free shuttle buses between stores charging stations. In the UK, the we are developing new methodologies in the future. travel arrangements from more than and city centres in several markets. number of customers using these Whether customers travel by public charging points has grown threefold transport, by bicycle or on foot, we in the past year. In FY15, the chargers want to make sure their journeys delivered enough green electricity to are cost-efficient, convenient and enable vehicles to travel more than BUSINESS TRAVEL FY10 FY11 FY12 FY13 FY14 FY15 good for local communities and the 1.5 million zero tailpipe emissions Number of web and phone meetings 82,434 104,920 146,015 189,416 235,121 303,933 environment. kilometres. From autumn 2016 the profits from IKEA UK and Ireland’s Number of hours of video meetings 760 2,800 6,900 12,407 19,081 16,219 Performance solar panel sales will be invested in IKEA sites with video meeting facilities - 70 110 130 134 265 making stores more accessible to We are exploring alternative methods customers and co-workers – for Business travel expenditure index (travel costs in 67 66 72 63 71 - of transport, like car-sharing and pro- example, through better communi- relation to sales: FY07 = 100) viding trailers for hire. In FY16, IKEA cation about existing facilities and Norway will pilot a new home delivery encouraging walking, cycling and Travel costs as a percentage of yearly sales 0.39 0.41 system – taking the customer and the use of public transport. their goods home together – which is

RESOURCE & ENERGY INDEPENDENCE | 41 CARBON EMISSIONS

IKEA CARBON FOOTPRINT (tonnes CO2) FY15 Scope 1 (IKEA owned energy generation from gas, biomass and oil boilers and diesel 138,106 generators)

Scope 2 (purchased electricity and district heat) 596,167

Total scope 1 + 2 1 734,273

Scope 3 (raw materials production, emissions from suppliers, goods transport, business 37,179,145 travel, co-worker commuting, customer transportation, product use and product end-of-life)

Total scope 1,2 and 3 emissions 37,913,418

SCOPE 1 AND 2 EMISSIONS - IKEA FY10 FY11 FY12 FY13 FY14 FY15

BUILDINGS (tonnes of CO2) Stores 442,400 420,205 361,838 358,004 333,576 338,720

Distribution centres 47,847 47, 393 32,853 33,769 28,251 29,883

IKEA Industry 328,798 366,076 330,753 393,274 422,851 358,444

2 Tracking our emissions helps us with limited access to renewable IKEA Components - - - 819 1,095 1,178 monitor progress towards our goal to energy. We are ramping up efforts Offices 4,730 4,791 4,641 3,766 3,481 3,346 tackle climate change (see page 9 ) to reduce carbon emissions at these and identify the best ways to reduce units – for example, in our factory in Total 823,775 838,465 730,085 789,632 789,593 731,571 our carbon footprint. Novgorod, Russia, we are installing a biomass boiler that will be powered CARBON EFFICIENCY (carbon foot- FY10 FY11 FY12 FY13 FY14 FY15 3 Performance by waste wood and will reduce carbon print per product sold, kg CO2/m ) emissions by 30% across IKEA In FY15, absolute carbon emissions Industry Division Board. As more Scope 1 and 2 emissions 34.5 33.5 27.6 28.3 27.3 24,2 from our own operations (Scope 1 of our newly purchased windfarms and 2) decreased by 7% compared to become operational, this will further CARBON EFFICIENCY (% improve- FY11 FY12 FY13 FY14 FY15 FY15 FY14 to 734,273 tonnes, accounting reduce our carbon emissions – read ment against FY10 baseline) GOAL for 2% of our total carbon footprint more on page 37 . Stores 9.3 26.3 30.7 37.8 39.6 50 in FY15. As well as tracking absolute Our relative carbon emissions, emissions from our operations, we Distribution centres 6.9 35.6 34.6 51.2 54.1 50 which measure carbon per cubic metre measure carbon per product sold to of products sold, were 30% less than give our carbon efficiency. We aim to IKEA Industry Group Divisions Flatline -6.4 16 5.5 18.3 30.9 50 and Solid Wood the FY10 baseline, which is a long way grow our business without increasing from our goal to reduce emissions by our impact on the environment, and IKEA Industry Group Division Board 26.3 19.4 -4.0 3.4 19.1 50 50%. This is partly due to delays in reducing our carbon per product sold Base year: FY11 energy efficiency improvements in (or improving our carbon efficiency) IKEA Components Base year: 2012 - - - 7.8 33.8 50 our retail units. Since FY10 we have is one of the ways of measuring our opened new IKEA Industry facilities, progress. See page 43 for more Total 2.9 20 18 20.9 29.9 50 and many of these more energy about carbon emissions in our entire 1 This figure includes a small amount of emissions related to purchased electricity at IKEA wind farms, which are not included in the scope 1 and 2 emissions of IKEA intensive operations are in markets value chain. buildings below.. 2 IKEA Components data is reported for the calendar year.

RESOURCE & ENERGY INDEPENDENCE | 42 THE ENTIRE IKEA CARBON FOOTPRINT – FROM RAW MATERIALS TO PRODUCT END-OF-LIFE

Measuring carbon emissions at every step of our total IKEA carbon footprint was 37,976,243 tonnes value chain – from raw materials to products’ in FY15. To read about how we work to reduce end-of-life – enables us to identify the areas that our carbon emissions, follow the links in the table contribute most to our footprint, and where we below. should focus our efforts to reduce emissions. The

1 IKEA CARBON FOOTPRINT (tonnes CO2) FY15 Read more about how we work to reduce carbon emissions

Raw materials 17, 393, 20 4 Ensuring our raw materials are from more sustainable sources, see page 23

Production and distribution 4,018,914

Suppliers 2,998,089 Finding more sustainable ways to design and make products, see page 32 Home furnishing, catalogue and food suppliers Supporting suppliers to reduce emissions in their operations, see page 48

Goods transport 975,632 Working with suppliers to reduce transport emissions, see page 40 Excludes customer delivery suppliers

Business travel 45,193 Providing more sustainable options for co-workers’ meetings and travel, see page 41

IKEA 857,47 9

Buildings 734,273 Making IKEA buildings more efficient, see page 38 Investing in renewable energy, see page 37

Co-worker commuting 123,205 Making business travel and travel to stores more sustainable, see page 41

Customers 14,874,703

Transportation to stores 2,499,048 Providing more sustainable ways for customers to reach our stores, see page 41

Product use 12,375,655 Developing products that enable customers to reduce their carbon footprint, see page 12

Products’ end-of-life 769,119 Creating recycling and reuse solutions for products’ end of life, see page 47

Total 37,913,418

1 We use reported data for carbon emissions in our operations and tier 1 suppliers, and models and estimations to assess our full value chain.

RESOURCE & ENERGY INDEPENDENCE | 43 WATER

Becoming water positive means mak- Performance analysed volume and quality of water ing responsible water management the used. It enables us to identify oppor- norm across our value chain, whether Water use in IKEA buildings increased tunities for recycling water at all our on farms or in supplier factories, our by 2.2% to 6,669,504 million m3. factories, for example, our facility in stores and distribution centres. We IKEA Industry water use increased by Kazlu Ruda, Lithuania, reuses waste used an estimated 770 million m3 1.8% compared to FY14, to a total of water in the glue forming process. of water every year in our own 1,494,951 m3. This is partly because We also strive to improve the qual- operations and across our extended we decided to use more water to filter ity of our waste water, so that it can supply chain. Less than 1% of this is air emissions from factories because be reused or safely released to the used in buildings owned and operated of increasingly strict air quality environment. For example, IKEA Pisa by IKEA. requirements. in Italy, uses a membrane bioreactor In our stores we measure water We look for ways to minimise the – a type of water filtration system – to efficiency by comparing the amount of water we use, for example by using clean waste water so that it can be water consumed to the number of visi- rainwater unless drinking water quality used for irrigation and sanitation. IKEA tors. By FY17, we aim to improve water is needed. IKEA Distribution Services Catania, also in Italy, passes its waste efficiency by 20%, and 30% by FY20, France invested in rainwater capture water through a number of filtering compared to a FY13 baseline. Facility for their fire sprinkler systems, with systems including a basin of pond managers collect and share this data expected water savings of 4,800 m3 plants, which help purify the water with country sustainability managers, a year. before it is released back into the who feed it to Group level through the We created the IKEA Industry environment. Energy and Water Performance Year water manual based on the results Cycle – see page 38 for more detail. of a water mapping exercise that

WATER USE BY IKEA UNIT (m 3) FY10 FY11 FY12 FY13 FY14 FY15

Stores 3,927, 551 4,438,075 4,608,175 4,775,3091 4,853,478 4,945,101

Distribution centres 265,524 228,772 223,292 224,430 197,953 179,981

IKEA Industry 766,373 1,014,603 1,315,821 1,280,350 1,468,498 1,494,951

IKEA Components - - - 4,830 4,711 8,011

Total 4,959,448 5,681,450 6,147,288 6,284,919 6,524,640 6,669,504

1 Data for stores in FY13 restated from FY13 report (3,853,637) as it was not complete.

More on managing water when we source raw materials on page 24 . More on how we encourage suppliers to reduce their water impact on page 49 .

RESOURCE & ENERGY INDEPENDENCE | 44 WASTE WASTE PRODUCED IN FY15 (%) HOW WASTE IS DISPOSED OF IN FY15 (%)

Stores 81 Recycled 77.8 IKEA Industry 9 Incinerated for energy recovery 11.1 Distribution centres 9 Landfill 9.2 IKEA Components 1 Aerobic and anaerobic digestion 1.6

Incinerated without energy generation 0.3

WASTE PRODUCED (tonnes)1 FY10 FY11 FY12 FY13 FY14 FY15

Stores 279,778 307,877 335,167 338,463 370,040 435,725 Distribution centres 34,369 41,758 41,933 39,428 39,196 46,710 IKEA Industry 2 41,191 50,798 48,146 43,054 47,9 83 49,561 IKEA Components - - - 1,391 20,495 3,013 Total 355,338 400,433 425,246 422,336 477,714 535,009

1 Excludes waste wood used for energy recovery or reused in products. 2 Figures restated from FY13 due to changes in the methodology used in Division Board, and the integration of Division Board and Divisions Flatline and Solid wood (formerly Swedspan and Swedwood).

Our aim is to eliminate waste from our handbook, launched in FY14, outlines management. We will share detailed Performance 76.9% was material recycled. This own operations. That means creating a common approach to waste across guidelines and working methods on increase was partly due to better less waste and changing our mind- all our countries. Our waste data waste management by FY16. In FY15, we generated 535,009 tonnes data collection. Once more of our set to think of waste as a resource. reporting system enables us to track The waste to resources working of waste, of which 88.9% was recy- waste saving initiatives start to By FY20, 90% of our waste will be performance and identify areas for group brings together co-workers cled or energy recovered (77.8% and generate results, we expect this recycled or sent for energy recovery, improvement. At the moment, respon- from across IKEA to share information 11.1% respectively). number to decrease. of which 80% of the waste from stores sibility for waste management varies and develop best practices for waste- We have a separate target to A large volume of store waste and distribution centres and 90% from by store; by FY18, all facility manage- related initiatives. reduce waste from stores by 10% comes from packaging. As well as IKEA Industry Group will be material ment teams will be responsible. Being by FY20, because this is where the designing our products to use less recycled. clear about roles and responsibili- majority of our waste is generated.1 packaging, we ensure the packaging

The IKEA waste management ties will enable more efficient waste In FY15 waste from stores increased 1 Baseline year: 12.5 kg/m3 in FY13. This is measured by 18% compared with FY14, and as kg/m3 sold goods.

RESOURCE & ENERGY INDEPENDENCE | 45 we use is easily recyclable. Equipment • using spare parts to repair items if reduce the number of items dam- food waste, and resulted in reductions of chemicals including adhesives in our stores, such as baling machines, they are damaged either in store or aged pre-sale by 4.2%. We now have of 25%. and surface coating. We take great help us handle waste more efficiently, when returned by customers repackaging machines in 70% of our IKEA Industry uses large quantities care not to harm people’s health increase recycling options, and reduce • offering discounted prices for prod- distribution centres too. of wood to make IKEA products and or the environment by having a the journeys needed to remove mate- ucts that cannot be repackaged or Many of our stores and buildings product parts. In FY15, IKEA Industry structured way of working with rials from stores. We are always look- repaired. have customer and co-worker res- produced 1,054,968 tonnes of waste mandatory manuals for chemicals, ing for new ways to reduce our impact taurants, and we aim to implement a wood, 98.3% of which was reused to waste and water. The manuals outline in these areas. Since launching, we have installed global programme to deal with food make new products, sold on as a raw current legal requirements and future Recovery Direction, launched in repackaging machines in 214 stores – waste. In the UK and the USA, we are material, or converted into pellets trends at national and regional levels, FY14, is a strategy for preventing more than two thirds of all our stores exploring ways to use digital technol- or briquettes that can be used for and include instructions for imple- unnecessary costs due to damaged globally. This has enabled us to repair ogy to track data on food waste to fuel. Four of our units in Poland have menting these requirements. packaging and products, and increas- and repackage 27% of the damaged adjust food production and kitchen already achieved the FY20 goal of It is important that all relevant ing our revenue and reducing waste by items that were returned by custom- practices. This has enabled stores to material recycling more than 90% co-workers clearly understand the giving our products a second chance. ers, or damaged during transport or reduce food waste by around a third, of their waste. best ways of working with chemicals – We do this by: in-store. In FY15 the volume of prod- with the potential to divert 11 tonnes both day-to-day and in emergencies – ucts repackaged and sold in FY15 rose of food from landfill every year. We Managing chemical use at IKEA to protect their own health, ensure • identifying and addressing the root by 6.4%, representing a sales value of plan to roll out the technology globally Industry the safety of others and to avoid causes for damages and returns EUR 25 million. By raising awareness by FY17. ‘Clear your plate’, an initia- accidental release or exposure into • repackaging products with damaged of product damage and how to avoid tive in our store in Shanghai, China, As part of the product manufacturing the environment. boxes it, Recovery Direction has also helped encouraged co-workers to think about process, IKEA Industry uses a number

WASTE RECYCLING RATE (% total FY10 FY11 FY12 FY13 FY14 FY15 waste recycled or energy recovered)1 Stores 84 86 88 89 90 87.6 Distribution centres 91 90 94 95 92 96.5 IKEA Industry2 - - - 79 77 92 IKEA Components - - - 98 100 99.7 Total 82 85 86 88 89 88.9

HOW WASTE IS DISPOSED OF IN FY15 Recycled Incinerated Sent to Incinerated (%) 3 for energy land fill without energy recovery recovery Stores 76.9 10.7 10.1 0.4

Distribution centres 86.8 9.7 2.9 0.1

IKEA Industry 75.9 16.1 8.0 0

IKEA Components 96.7 3 0.2 0

1 Excludes waste wood used for energy recovery or reused in products. 2 Figures restated from FY13 due to changes in the methodology used in Division More on how we’re encouraging sustainable consumption on page 19 . Board, and the integration of Division Board and Divisions Flatline and Solid wood (formerly Swedspan and Swedwood). 3 A small amount of waste is disposed of in other ways, including aerobic or anaerobic digestion.

RESOURCE & ENERGY INDEPENDENCE | 46 up-cycling and recycling possibili- The empty bottles are collected, ties. Used products are seen as sorted and used to make resin for ‘banks of materials’ for the future. new IKEA bottles. • Resource chain – Increasing • Some of the plastic film used to demand and availability of sec- package our products is being ondary materials and developing recycled to make the SKRUTT our ability to use more of these desk pad, which contains 50% types of materials. Stimulating recycled plastic. the recycling industry by using recycled materials more. These are just a few examples. Creating a truly closed-loop Although still in the early stages, economy will be challenging. It we are already seeing examples will change the way we select of circular thinking in practice. materials, work with our suppliers, For example, customers can return make our products, and interact unwanted IKEA furniture to many with customers. This is the start stores to be resold or donated of an exciting journey towards a to charity. circular IKEA.

• Customers returned used mattresses through our mattress take-back scheme, which was rolled out to 20 countries by the end of FY15. The used mattresses are sent for energy recovery or are material recycled, depending on local infrastructure. • All IKEA Norway stores are collecting customers’ used and unwanted textiles – not just from IKEA products – with the aim of CONVERTING TO increasing awareness about the value of reusing and recycling A CIRCULAR ECONOMY home furnishing textiles. In FY15, we collected more than 25 tonnes of used textiles, of which we Many of the world’s resources are 100 (CE100), a global platform • Prolonging product life – Our donated around 80% to charity being consumed at an unsustain- established by the Ellen MacArthur customers receive clear and second hand shops and recycled able rate. If we want to meet the Foundation to encourage companies simple solutions for repairing the rest. needs and dreams of millions of new to move towards a circular econo- and re-using home furnishing • In Australia, we closed the loop on customers by making affordable, my, where waste is eradicated in a products. Options for renting, plastic bottles by working closely high quality products, while staying cycle of repair, reuse, refurbishment sharing, and reselling products with carefully selected suppliers within the limits of our planet, we and recycling. This work has led us are provided. to make high quality, food-grade need to find new ways of working. to the ‘Circular IKEA’ concept, which • Designing for circularity – recycled plastic (PET) for our We are part of the Circular Economy has three elements. Products are designed for easy water, juice and smoothie bottles.

RESOURCE & ENERGY INDEPENDENCE | 47 ENERGY AND WATER PEOPLE & PLANET STATUS PERFORMANCE IN FY15 IN OUR SUPPLY CHAIN POSITIVE TARGETS Encourage and enable our direct suppliers to Our suppliers are now 17.6% more energy efficient than become 20% more energy efficient by August they were in FY12. 2017, compared to FY12.1

3 By August 2015, reduce carbon emissions of In FY15, suppliers’ carbon emissions were 69.9 kg CO2/m our suppliers by 20%, compared to FY12.2 of goods produced, which is 12% lower than FY12.

1 Defined as total energy consumed/m3 of goods. 2 3 In relative terms, measured by CO2/m goods purchased. Achieved Ongoing Not achieved

WORKING WITH SUPPLIERS

Understanding our suppliers’ suppliers on energy and water saving approach to sustainability is an projects, and other improvements that important starting point. It enables are ‘beyond IWAY’. Because energy SUPPLIER SUSTAINABILITY us to learn together and find ways to and water management are often INDEX (index score out of improve performance. The Supplier closely linked, it almost always makes 100, weighted by production volumes) Sustainability Index tool enables us sense to tackle the two topics at the to measure progress in three areas: same time. 75 energy management and energy- efficient production, renewable Performance energy and raw materials efficiency. 64 Index scores feed into the Product We aimed to make yearly improve- Sustainability Scorecard (see ments of 20% on the index score page 32 ). between FY13 and FY15. The Supplier 51 Sharing ideas and good practice Sustainability Index score is now 75 is one of the best ways to make out of 100, an improvement of 17% progress. We hold annual global compared to FY14. This is thanks to 39 supplier days and local and regional the many new and ongoing energy meetings through the year to bring and water projects in FY15 (see page 33 suppliers together. The meetings are 49 ). The score is based on data an opportunity for suppliers to discuss from suppliers covering 99.2% of our and share their sustainability achieve- purchasing volumes. FY15 IKEA has 978 home furnishing goals. We constantly work together ments with pride. In many cases it is From FY16 we will be using a new FY14 suppliers, and the success of our to find ways to be even more resource them, not us, that can inspire other version of the Index that looks at FY13 business relies on them. As our and energy efficient. It is good for the suppliers to join the sustainability additional areas including water, partners, we can learn a lot from planet but it also saves money – for journey and build momentum across waste and people and community. FY12 each other, and it is important they them, for us, and for our customers. the entire industry. We worked with suppliers to create FY11 share our values and environmental Our regional sustainability devel- the new Index in a way that reflects opers work with our home furnishing many of their goals as well as ours.

RESOURCE & ENERGY INDEPENDENCE | 48 ENERGY IN OUR SUPPLY CHAIN WATER IN OUR SUPPLY CHAIN

suppliers in any way we can to make energy audit to find opportunities to energy and carbon savings. The increase energy efficiency and the Suppliers Go Renewable (SGR) project potential share of renewable energy. focuses on working with higher impact On average, the changes identified suppliers on energy- and carbon- could save suppliers an average of saving projects, for example by 15% in energy, carbon and costs. improving energy efficiency and Together we will track progress as increasing generation and use of they implement these changes over renewable energy. the coming years, and we plan to use what we learn from these projects to Performance support and train more suppliers to improve the way they use energy. Our tier 1 home furnishing suppliers Because we want to see a trans- have achieved a 17.6% increase in formation to a low-carbon economy, energy efficiency since FY12. Although we are also looking for opportunities absolute carbon emissions were 5% to decarbonise our supply chain. above the FY12 baseline, emissions Using information about our carbon relative to the volume of products pur- footprint (see page 43 ), we can chased were 12% lower than in FY12.1 identify the parts of our value chain Carbon emissions from our tier 1 We implemented 54 SGR projects with the biggest environmental home furnishing, catalogue and in 22 countries, bringing our total to impact, and where we can most food suppliers accounted for 7.9% 94 and achieving our goal to com- effectively work with sub-suppliers of our total carbon footprint in FY15, plete 90-100 projects during FY14 and to become more efficient. and it is important to support all our FY15. The projects each begin with an 1 3 Measured using GHG emissions intensity (kg CO2e/m )

TIER 1 HOME FURNISHING (HF) SUPPLIER ENERGY FY12 FY13 FY14 FY15 CONSUMPTION AND CARBON EMISSIONS

Energy consumed (MWh) 7,852,933 7,132,305 6,743,521 7,726,63 8 Our global network of sustainability water. See page 28 for more about developers collaborates with suppliers our work to source cotton from more Energy efficiency (kWh/m3 product purchased) 308.0 274.0 250.0 253.9 to improve water efficiency and qual- sustainable sources. ity, just as they do with energy. The ‘Water Guidelines for Textile Increase in energy efficiency tier 1 HF supplier compared to FY12 (%) - 10.9 18.8 17.6 We focus on working where we Suppliers’ provide a starting point for Renewable share (%) 24.8 25.3 26.6 28 can have the greatest positive influ- improving water efficiency. The guide- ence. For example, textile and metal lines focus on practical options for

CO2 equivalent (tonnes) 2,024,195 2,061,295 1,888,114 2,126,674 suppliers use the most water and water management, including ways to have the biggest water impact. This reduce, reuse, recycle and replenish CO efficiency (kg CO /m3) 79.4 79.2 70.0 69.9 2 2 may be because they operate in water water. As we gain experience in this Reduction in relative carbon emissions from our tier 1 HF suppliers - -0.3 11.8 12.0 scarce areas such as Bangladesh, area, we will continue to update the compared to FY12 (%) China and Pakistan, or because their guidelines together with our suppliers. manufacturing processes use a lot of

RESOURCE & ENERGY INDEPENDENCE | 49 Performance in FY15 resource efficiency projects. So far, IKEA CATALOGUE SUPPLIERS we have identified ways to save 167 Total water use at tier 1 home million litres a year in China, and 1.4 find ways to reduce carbon emissions furnishing suppliers was 25.7 million million litres of water a year in India. early on in the design process. Before m3 in FY15, 4.8% more than in FY14. As well as saving water, one of STWI’s we start working with suppliers we ask But their water efficiency, measured priorities is to find solutions that them to report against a number of in litres per cubic metre of product prevent the release of chemical environmental KPIs so we can choose produced, improved by 37.3% dyes into water systems. ones with the best performance. In compared to the FY12 baseline. October 2015 we made this data avail- We have joined forces with able for all suppliers to see, so they other textile retailers to create the can compare their performance to Sweden Textiles Water Initiative others. We also carry out third-party (STWI). Some of the members share audits and regular meetings to sup- the same textiles suppliers, and by port catalogue suppliers to improve working together we can develop their environmental performance. consistent water guidelines for the textile industry. Since January 2015, Performance we have been working on STWI-led water saving projects with three The total carbon footprint of our suppliers in China, and a supplier printed catalogue was 156,415 tonnes and four sub-suppliers in India. This in FY15, which is 5.1% less than FY14. is one of the first times we have Carbon emissions per printed copy fell directly engaged sub-suppliers in by 2.6%. Total energy use decreased by 11% compared to FY14, but we did not meet our FY15 target to reduce energy use by 10% compared to FY11. More than 32% of the energy used TIER 1 HOME FY12 FY13 FY14 FY15 FURNISHING by our catalogue suppliers came from (HF) SUPPLIER renewable sources. WATER USE This environmental data relates to Eagerly awaited around the world, the will now turn towards reducing carbon the printed version of the catalogue. Total water 34,340,809 35,548,668 24, 507,975 25,692,285 IKEA Catalogue tells the stories behind emissions, both for the printed and To meet our new carbon neutrality use (m3) our products and inspires our custom- digital catalogues. Each platform has target we will need to understand the Water efficiency 1,346 1,367 908 844 ers to furnish their homes with style. its own sustainability challenges and environmental footprint of the digital (litres/m3) Available in print, app and online, in opportunities. For example, the digital versions too. In FY15, we carried out FY15 we printed 211 million copies of platforms use a lot of energy and most a life cycle analysis (LCA) of the digital Improvement in - -1.6 32.5 37.3 the paper catalogue and received 54 of this comes from non-renewable catalogue and in FY16 we will use this water efficiency compared to FY12 million visitors to the digital versions. sources. data to help us work towards our new (%) In FY14 we reached our goal to We collect suppliers’ environmental target with the support of industry print the IKEA Catalogue using only data and share it on our new online leaders and stakeholders. FSC™ Mix Credit certified paper, and dashboard, similar to the Product it remains the world’s largest print run Sustainability Scorecard (see page ever to be produced using 100% FSC 32 .) It supports co-workers who More about how we support Mix Credit certified paper. And since work with the IKEA Catalogue to catalogue suppliers to comply More on how we are working to become water positive on page 24 . FY13, 100% of our suppliers have get a better understanding of the with IWAY, our supplier Code of More on how we manage water in our own operations on page 44 . been ISO 14001 certified. Our focus catalogue’s environmental impact and Conduct, on page 61 .

RESOURCE & ENERGY INDEPENDENCE | 50 ENVIRONMENTAL DATA FOR TOTAL FY10 FY11 FY12 FY13 FY14 FY15 CATALOGUE PRINT PRODUCTION

Printed number of catalogues (millions) 197 208 212 211 217 211

ISO 14001 certified paper suppliers (%) 89 100 94 100 100 100

Catalogue paper (tonnes) 102,476 108,450 107, 373 107,0 83 102,077 100,390

FSC certified Chain of Custody fibre (% of virgin 21 30 23 68 100 100 fibre content)

Recycled fibre content (%) 11 4 2 2.3 0 0

Share of renewable energy (%) 50 48 42 51 44 32.35

Total carbon emissions from production of 95,905 88,916 90,744 92,308 164,843 1 156,415

catalogue (tonnes CO2) Total energy used from catalogue suppliers 584 569 570 587 603 536 (MWh)

Total water use from catalogue suppliers (m3) 2,815,209 2,832,017 2,833,300 2,870,188 3,379,956 -

Total delta water consumption (m3) 2 269,780

ENVIRONMENTAL DATA PER PRINTED FY10 FY11 FY12 FY13 FY14 FY15 CATALOGUE COPY

Water consumption (litres/copy) 14.26 13.55 13.39 13.62 15.6 -

Delta water consumption (litres/copy) 2 1.28

Energy consumption (kWh/copy) 2.96 2.72 2.69 2.79 2.78 2.54

Total carbon emissions from production and 0.49 0.43 0.43 0.44 0.76 0.74

transport from forest to paper mill (kg CO2/ copy)

Emissions to air (g Volatile Organic Compound/ 1.12 1.15 1.12 1.01 1.05 0.50 copy)

Emissions to waste water (gr Chemical Oxygen 3.49 3.47 4.29 3.94 1.92 1.18 Demand/copy)

1 The significant increase in reported carbon emissions and water use is largely due to improvements to our data collection methodology. 2 From FY15 we have replaced the ‘total water use’ KPI with ‘total delta water consumption’, which is the difference between water withdrawn and water discharged.

RESOURCE & ENERGY INDEPENDENCE | 51 A BETTER LIFE FOR PEOPLE AND COMMUNITIES

Our vision is to create a better everyday life for the many people. Across our value chain, from our 155,000 co-workers through to the millions of people who work in our extended supply chain, we can make a big difference to people’s lives around the world. We believe that everyone deserves the right to prosper, regardless of their background and situation, and we always strive to promote equality, diversity and respect for human rights in everything we do.

BETTER LIFE FOR PEOPLE & COMMUNITIES | 52 BETTER LIVES PEOPLE & PLANET STATUS PERFORMANCE IN FY15 FOR OUR CO-WORKERS POSITIVE TARGETS Following the IKEA Group Diversity and Updated the IKEA Diversity & Inclusion Approach, setting out Inclusion Approach (see page 56 ), six steps to guide our leaders in creating a diverse and inclusive every IKEA unit has defined actions to workplace. The Supervisory Board of INGKA Holding B.V. (the ensure a diverse co-worker population. parent company of the IKEA Group) includes 3 women, compared Our goal is to reach gender balance in with 2 in FY14. Group Management includes 3 women (33%), key leadership positions and to reflect compared with 2 in FY14. Extended Group Management1 is the diverse nationalities of our market. 41% women, compared with 38% in FY14. 48% of all managers are women, compared with 47% in FY14.

PEOPLE STRATEGY 2020 STATUS PERFORMANCE IN FY15 TARGETS

Ensure every co-worker has an agreed, 76%2 of our co-workers have an individual development plan, individual development plan. which includes regular meetings with their managers to review their career aspirations.

By FY20 50% of managers will be 48% of managers are women. women.

By FY20 achieve a Leadership Index Achieved a Leadership Index result of 75 in our VOICE survey. result of 75 in our VOICE survey.

By FY20 achieve an index of 725 in our Achieved an index of 725 in our VOICE survey. VOICE survey.

1 The Extended Group Management list represents our 250 most senior management positions in IKEA. Achieved Ongoing Not achieved 2 Of the 112,027 co-workers who completed the VOICE survey and answered positively to: “Have you within the past twelve months together with your manager agreed on a development plan for the coming year?”

We believe in people. We want IKEA to We know it is important to get the see up to five generations 1 of people in individual needs in the workplace be a great place to work, so that co- basics right by providing rewarding a single team, all with different needs. and taking a consistent approach to More on working conditions for workers can explore their talents and work in a safe and healthy environ- And as co-workers become increas- diversity and inclusion across every our co-workers and suppliers develop new skills. Every co-worker is ment – for our co-workers and people ingly connected through modern part of our business. on page 72 . a unique individual and we are com- who work for our suppliers. technologies at home, they expect Doing work that is good for More on our approach to health mitted to making IKEA a welcoming Since we launched the IKEA an equally modern workplace and a people and planet is important to our and safety on page 58 . workplace for them all, where every Group People Strategy 2020 in FY13, more personalised approach to career co-workers. We work to understand person finds a sense of belonging and we have continued to evolve our progression. In FY15, we updated our and meet their expectations of our 1 Refers to: Traditionalists, born prior to 1946; Boomers, purpose. When our co-workers grow, approach to meet the needs of a People Strategy to reflect these global sustainability efforts, so that they born between 1946 and 1964; Generation X, born between 1965 and 1980; Millennials, born between 1981 and so does IKEA. changing workforce. We expect to trends, including a focus on meeting can be proud to be part of IKEA. 1995; and Generation Z, born after 1995.

BETTER LIFE FOR PEOPLE & COMMUNITIES | 53 OUR CO-WORKERS WHY DO YOU WORK AT IKEA? A total of 155,000 co-workers contribute to the everyday running of IKEA operations around the world. In FY15, CO-WORKERS PER REGION FY15 we have changed our definitions of part time and full time workers to:

● Co-workers who worked 20 hours or less per week (17%) ● Co-workers who worked between 20 hours and 34 hours per week (36%) ● Co-workers who worked 34 hours or KAREN DOROTHY ELOISE COLLIGNON JOHN NILAND DASHAWN CLARK more per week (47%). CHAMBERLAIN Home Furnishings Business Business Support Specialist, LQF Supply Quality Coordi- Services Team Leader, Peter- Co-worker, Thiais Store, Internal Digital Channels, nator, California Distribution In FY15, our total co-worker borough Contact Centre, UK France IKEA Group Centre, United States turnover was 19.8%, compared with 19.7% in FY14. We will report the per- “It’s the people that make “I’ve learned a new way “IKEA has given me the “Creating a better every- centage turnover within each revised me want to stay. The IKEA of working at IKEA. I love opportunity to grow as a day life for the many co-worker category (see above) in values and culture are how the way I interact with person in many different people is what IKEA is all future years. I like to live my life. I am my co-workers – the ways, and has always about and I cannot agree The percentage of all co-workers Europe 107,4 0 0 proud to say I work for relationships are simple, offered me a challenging more. My employment that are women was 56% in FY15, North America 20,000 IKEA!” honest and efficient.” and fun place to work.” at IKEA is not just a job, compared with 54% in FY14. Of all Asia and Australia 15,200 but more of hobby and a managers, 48% were women in FY15, journey to be the best Russia 12,400 compared with 47% in FY14. human being I can be.”

CO-WORKER FY11 FY12 FY13 FY14 FY15 TURNOVER (%) Part-time 22.3 18.0 15.4 29.9 see above Full-time 11.5 10.7 11.5 12.2 see above YIDONG ZHUANG SOFYA SOKOLOVA LENKE SZABÓ ALEXANDRE OLIVEIRA All 16.1 16.1 12.8 19.7 19.8 Sales Support Specialist, Sales Co-worker, Customer Relations Manager, Business Navigator, IKEA of Canada Service Office Rostov Store, Russia Budaörs Store, Hungary Sweden, Sweden GENDER FY11 FY12 FY13 FY14 FY15 FY20 DIVERSITY GOAL “I love working at IKEA “IKEA is the place where “We live up to our values “What really keeps me 1 (% of women) because of the great I change for the better in everyday work: how we at IKEA is the genuine All co-workers 55 52 54 54 56 - people and because of and where I am helping communicate with each ambition and execution All managers 40 47 47 47 48 50 the diversity you can take to better the world.” other, the way we work, of our people and planet in your career path.” the solutions we use, the strategy: we care!” 1 Data representing 85% of IKEA headcount. decisions we make.”

BETTER LIFE FOR PEOPLE & COMMUNITIES | 54 GIVING CO-WORKERS A VOICE VALUES AND CULTURE

VOICE is our online survey for all co-workers in the IKEA Group. It helps us to grow IKEA together with our co-workers by understanding their views on three important areas: the individual, the organisation, and leadership. We look at the findings in combination with other information such as customer feedback and financial data, to identify how we can do better. VOICE is conducted by an independent organisation to ensure confidentiality. Each part of the business participates at least once every two years. In FY15, more than 112,000 out of a total of 155,000 co-workers participated in the VOICE survey.1 The results of the survey feed into an overall VOICE index and leadership index. These help us to measure progress. In FY15, our overall VOICE index was 725. A result of 700 or more We are one IKEA – a global team co-workers within a country receive for the overall VOICE index is classi- sharing the same values: we believe the same amount, regardless of unit, fied as excellent by the company that in mutual respect and leading by position or salary level – read more conducts the survey, and suggests example, solving problems together here . We held the first annual the organisation is “well equipped to and being open to change. This celebration of Tack! in December generate business value”. Our VOICE extends across our direct suppliers 2014 and committed an additional leadership index in FY15 was 75. (see page 60 ) and wider supply EUR 100 million to the programme. The survey showed that 79% of chain (see page 70 ). co-workers agree with the statement, We believe in saying thank you, “within my department sustainability and it is part of our culture to is a natural part of the everyday work”, recognise co-workers for their 82% agree with the statement, “I am hard work, through our One IKEA proud of the way that IKEA works with Bonus programme and our loyalty sustainability” and 80% agree with programme for all co-workers – Tack! VOICE RESULTS FY11 FY12 FY13 FY14 FY15 GOAL the statement “I feel responsible for Tack means ‘thank you’ in Swedish minimising the negative impact on the and is our way of showing apprecia- VOICE index 716 712 711 704 725 725 by environment in my daily job”. tion to our co-workers for their FY20 contribution and loyalty to IKEA. Leadership index 74 74 74 73 75 75 by Through Tack!, co-workers receive result FY20 1 In FY15, 112,027 co-workers completed the an additional contribution to their VOICE survey. The results of VOICE are not directly comparable between years as different parts of IKEA pension funds. All eligible full-time and different numbers of people participate.

BETTER LIFE FOR PEOPLE & COMMUNITIES | 55 DIVERSITY AND INCLUSION

and empower women in leadership progress on tracking performance positions at IKEA, while also con- and raising co-worker awareness. In tributing to a more inclusive work FY15, IKEA Switzerland became the environment and gender balance. first company worldwide to reach In FY15, we conducted the IKEA the highest level of gender equality Women Matter survey. It focused on certification from EDGE (Economic the current situation in various IKEA Dividends for Gender Equality).

organisations and countries and the • IKEA LGBT project. In FY14, we infrastructure to support gender formed a workgroup to help us PETER AGNEFJÄLL equality. The survey highlighted a create a plan to support lesbian, President and CEO, IKEA Group strong foundation for gender equal- gay, bisexual and transgender ity: the share of women throughout (LGBT) inclusion at IKEA – see “Diversity and inclusion are natu- the different levels of IKEA is higher feature on page 57 . IKEA US ral parts of our values and vision; than that of the external benchmark scored 90% in the Human Rights IKEA is a company for the many and women are well represented in Campaign Foundation Corporate people but also a company by IKEA leadership generally, but less Equality Index 2015 . the many people. Diversity and so in more senior leadership posi- • Diversity & Inclusion Network. inclusion are also critical for our tions – see page 53 for the current During FY15 we formed a network business success; both for our figures. The survey showed a strong of Diversity & Inclusion ambassa- growth and for our commitment commitment to equality but revealed dors, representing 48 countries to truly become a great place to the need for us to do more to track and organisations. They help to work. It is both common sense progress and ensure co-workers ensure that diversity and inclusion and good business sense.” are aware of goals and practices. are part of our everyday thinking Our updated Diversity & Inclusion and actions. Approach will help us to build on this foundation and make further

We believe in treating people fairly and inclusive workplace, including develop- providing equal opportunities to all ing local action plans and measuring of our co-workers, regardless of age, diversity and inclusion. We place a gender identity, sexual orientation, strong emphasis on creating an inclu- physical ability, ethnicity, race, nation- sive work environment that respects ality or any other dimension of their our co-workers and encourages them identity. We are one IKEA made up of to be themselves. It is part of our many unique and valuable individuals. culture, and we know that diversity Our uniqueness makes IKEA better. stimulates innovation and enables us to better understand the world Performance in which we operate. In FY15 we focused on three We launched the IKEA Diversity & key areas: Inclusion (D&I) Approach in FY13 and updated it in FY15. The updated • IKEA gender agenda. The IKEA Approach sets out six steps to guide Women’s Open Network (IWON) our leaders in creating a diverse and aims to inspire, connect, enable

BETTER LIFE FOR PEOPLE & COMMUNITIES | 56 not reflect the diversity of our sexual orientation and gender customers, we decided to stop identity, as well as guidelines publishing the IKEA Family maga- against discrimination. Ultimately, zine in Russia. The incident has we want to create a truly inclusive highlighted why we must never stop work environment in which every our efforts to share our values on co-worker feels welcome, respected, equality. In FY15, we finalised our supported and valued. new guidelines on human rights in communications – see page 71 . 1 Related to the Federal Law of Russian Federation In FY14, we formed a workgroup No. 436-FZ On Protection of Children from Infor- focused on creating an inclusive mation Harmful to their Health and Development. work environment for lesbian, gay, bisexual and transgender (LGBT) at IKEA, to help us ensure that our LGBT co-workers feel respected, valued and appreciated for who they are. In FY15 we recruited a dedicated project manager to lead this group and launched the LGBT IKEA project. Its aim is to create an inclusive work environment that enables all our co-workers to be themselves, regardless of sexual orientation. Now we are taking the first steps towards developing a strategy for inclusion. These steps include:

• Analysing the legal, political and social factors in each country and reviewing how we support our MIKE WARD LBGT communities across IKEA • Partnering and working with ex- Regional manager for USA, Canada ternal global LGBT organisations and Scandinavia EQUALITY AND DIVERSITY to learn about best practice • Benchmarking to better under- “We’ve learnt a great deal about – NOT JUST A NUMBERS GAME stand our performance relative diversity, but now it’s time to to other global companies. start taking more action. That Our approach to diversity and inclu- journey, not a one-off achievement. included a letter about our commit- means overcoming the fear of sion is grounded in the IKEA values We were reminded of this in FY14 ment to equal rights in the same Work on LGBT inclusion will doing or saying the wrong things. and our belief in people. We work when, for legal reasons,1 we could magazine and we published the continue in FY16. We will also be It means taking risks that will hard to respect human rights and not publish an article featuring a a article in 24 other countries. finalising our Human Rights and help us to create greater di- equality through our communication lesbian couple and their child in our Rather than publish a separate Equality Policy and Standards, versity within IKEA. This isn’t a and actions, and we know this is a customer magazine in Russia. We version of the magazine that did which will include reference to numbers game.”

BETTER LIFE FOR PEOPLE & COMMUNITIES | 57 LEARNING AND DEVELOPMENT Performance HEALTH AND SAFETY

Reaching our goals relies on our most important resource: the talents of our people. We launched the IKEA Group Talent Approach in FY14 as a consistent way of working with talent, succession and learning. We rolled out the approach to all managers in FY14. We will continue to roll it out to all co-workers in FY16, while we develop systematic ways to support the personal development and retention of our co-workers. In FY15, 76% 1 of our co-workers had an individual development plan, which includes regular meetings with their managers to review their career aspirations and how to achieve them at IKEA. This compares to 71% in FY14. In FY15 we launched a new learning platform: My Learning. It hosts all IKEA learning and training content for co-workers in one easily accessible place. We also launched a new Masters course in Innovation through At IKEA, every co-worker is seen as a options and opportunities. Business, Engineering and Design, in Healthy and happy co-workers help We are committed to providing a talent. Whether they are with us part- Our co-workers are full of ideas collaboration with Linnaeus University, make IKEA a stronger, more success- healthy and safe environment for our time or full-time, for two weeks or 20 and we encourage them to test and Sweden. Focused on innovation and ful business. The wellbeing of our co-workers, customers and visitors at years, we want to nurture their talents challenge us as we develop new sustainability, the course opens the co-workers is a top priority. It is an all times. We encourage co-workers and ensure that everyone has the op- products, services and systems. Co- door to a career with IKEA product de- area where we are continually work- to take everyday actions to contribute portunity to flourish during their time workers care about our sustainability velopment for a diverse mix of people. ing to improve. A stable income and to this environment, guided by formal at IKEA. We do not all share the same efforts – our sustainability training Current students are aged 20 to 40 regular working hours contribute to a structures as well as ongoing training, ambitions, so instead of encouraging package is part of a wide range of and come from various disciplines and sense of belonging and job security. tools and awareness activities. IKEA every co-worker along the same path, on-the-job training and courses, backgrounds (including former IKEA And it enables us to build long-term Blue is a risk tool used to identify we focus on each individual’s unique including e-learning relevant to co-workers) in China, Colombia, Iran, relationships with our co-workers so fire, evacuation and life safety issues skills, aspirations and potential, and specific functions. Italy, Kyrgyzstan, Sweden and Turkey. that we can work on improving health where we are not meeting standards. support them to understand their and safety together. Food is the fuel for our everyday Performance work at IKEA, and it is something we More on the role of our co-workers in communicating the sustainability can all enjoy together. We make sure In FY15, occupational accidents at benefits of our products and services to customers onpage 20 . our co-workers have healthy, tasty our stores decreased from 1,363 to 1 Of the 112,027 co-workers who completed the options available throughout the day. 1,116 – largely as a result of increased More on our co-workers’ involvement in community engagement VOICE survey and answered positively to: “Have you Read more about our food sourcing training and incident analysis. In our activities on page 81 . within the past twelve months together with your manager agreed on a development plan for the on page 30 . distribution centres occupational coming year?” This question was new for FY14.

BETTER LIFE FOR PEOPLE & COMMUNITIES | 58 accidents increased from 149 to 151 • New standards in the IKEA operator will be hurt when handling COMMUNICATING WITH CO-WORKERS – here, we have seen a greater level Group Risk Manual. The manual IKEA products. We are assessing of diligence in reporting, but also an provides direction on safety and current ways of working to feed increase in the number of reported security routines and standards this learning into the development fear of reprisal, interference, intimida- cycling accidents to and from work. for IKEA units (including stores, of new standards and training. tion or harassment. We are considering specific actions distribution and shopping centres). Currently we are focusing on unit We use a wide range of channels to remedy this. At IKEA Industry, • SecCheck process. Certified loads, warehouse racking and to reach co-workers globally, such total occupational accidents increased SecCheck reviewers conduct an procedures for forklift operators. as our intranet – IKEA Inside, news- from 1,739 to 2,360. This is due to annual review at units within their • Training of safety champions. letters, meetings, notice boards and increased reporting of less serious ac- countries, analysing compliance with IKEA Industry trained around 200 video screens. Our internal quarterly cidents, which is an important part of IKEA requirements and identifying champions through a five-day magazine, Readme, is designed for all the journey towards a well-developed areas for improvement. Each unit training course. Each champion co-workers, whatever their role – to safety culture. In comparison, lost must address any critical issues has the task of encouraging a safety inform, engage and inspire pride. We time accidents (those requiring time right away and agree a 12 week culture at their own unit, including print 65,000 copies in 20 languages off work) decreased from 159 to 153. action plan to follow up on less running training sessions for all for worldwide distribution and make There were no fatalities on-site urgent matters. The process also colleagues focused on behaviour it available online. Features include among IKEA Group co-workers helps to raise awareness of health, and accidents. in-depth articles alongside co-worker in FY15. safety and security, risks among profiles from around the world. We introduced some new ways co-workers. of working with safety in FY15, to • Safety in goods handling. Performance improve the consistency of our This continuous improvement Our co-workers are many and diverse. approach and develop a shared sense project aims to make sure that no We need to be able to communicate Our co-workers expect the technology of responsibility. These include: co-worker, customer or third-party with every person who works with us, available to them at the workplace to to share news and ideas, understand match their experience at home. In expectations and stay focused on FY15 we merged the news sections common goals. Our co-workers have of our existing co-worker intranet high expectations of IKEA, particu- and extranet into a single website, larly when it comes to our approach and made this available on all IKEA STORES AND SUPPLY OCCUPATIONAL ACCIDENTS (number of FY13 FY14 FY15 accidents requiring three days or more absenteeism) 1 to people and planet. Communicating devices, anywhere at any time for openly with them helps us to make all co-workers.1 We launched a new Stores – total number 1,398 1,363 2 1,116 sure we are meeting their expecta- manager channel on our intranet tions and taking forward their ideas. with the aim of preparing, engaging Supply (distribution centres) – total number 143 149 3 151 We expect all IKEA managers to and inspiring our leaders to build prioritise good communication with a better IKEA. It also gives us a 1 Reporting methods vary between IKEA Industry and stores & supply, so we currently report different metrics for occupational accidents. 2 Figure restated from FY14 (1,287) as figures reported were preliminary.3 Figure restated from FY14 (146) as figures reported were preliminary. co-workers and to lead by example. means of reaching all managers We support them with tools and with important IKEA news. training, and we actively encourage Many co-workers have not open dialogue between co-workers previously had their own IKEA IKEA INDUSTRY OCCUPATIONAL ACCIDENTS 4 FY13 FY14 FY15 and their managers. email address, so in FY15 we started Co-workers can use our trust rolling out e-mail for all co-workers. Total number 1,472 1,739 2,360 line to report any concerns they feel This will enable us to use creative Lost time accidents (accidents requiring one day or more absenteeism) 205 159 153 unable to raise through their manager and engaging ways of communicating or human resources – see page 85 . with co-workers so that we feel more Lost time accident rate (per million hours worked) 6.6 4.6 4.3 We respect the rights of co-workers to connected and informed, and work join, form or not to join a co-worker together as one IKEA. 4 FY13 and FY14 figures corrected from FY14 report. association of their choice without 1 Except in Germany where co-workers cannot access it from private devices.

BETTER LIFE FOR PEOPLE & COMMUNITIES | 59 BETTER LIVES FOR WORKERS PEOPLE & PLANET STATUS PERFORMANCE IN FY15 IN OUR SUPPLY CHAIN POSITIVE TARGETS Maintain the social and environmental improve- 98.9% of home furnishing suppliers IWAY approved, ments reached through the 100% IWAY approval with the remaining 1.1% being phased out. 96% of of all suppliers of home furnishing and other key transportation suppliers, 55% of global food suppliers products and services.1 and 99.2% of IKEA Components suppliers IWAY approved.

By August 2015, expand the reach of our supplier All Indirect Materials and Services suppliers IWAY Code of Conduct, IWAY, by securing approval at approved (87%), pending a scheduled audit local IKEA Food, Indirect Material and Services or being phased out. 85% of retail suppliers IWAY and retail suppliers within the scope of IWAY.2 approved. We are changing the way we work with our food suppliers. In FY15, we continued to map our local food supply chain – the results, including levels of IWAY compliance, will be available in FY16.

By August 2017, go further into our supply chain 92% of critical home furnishing sub-suppliers comply by securing compliance to IWAY Musts3 at all with IWAY Musts – based on the 1,897 sub-suppliers sub-suppliers of critical materials and processes.4 we have identified as critical.

1 Suppliers related to Home Furnishing, IKEA Components, Transport & Services, and Global Food. 2 For the retail operations, the current IWAY focus is on cleaning, Achieved Ongoing Not achieved home delivery, security and waste management suppliers. IKEA Industry also now has a set of phased goals for the application of IWAY – see page 69 . 3 IWAY Musts are the immediate requirements that IKEA suppliers must meet before a contract can be signed. 4 Covers material and processes which have an increased risk of sustainability concerns associated with the raw material or how it is sourced. For example cotton, leather, wood, down & feathers, Our supply chain is a diverse, global and have a positive impact on the palm oil, natural fibres and plants. network. Over 600,000 people in lives of the many people in our supply more than 50 countries work for our chain. The starting point for this is tier 1 home furnishing suppliers our supplier Code of Conduct: IWAY. alone.1 Our suppliers’ own suppliers IWAY sets out our minimum – our sub-suppliers – in turn employ requirements for suppliers on environ- More on our approach to millions of other people. ment, social and working conditions, TOP 5 HOME FURNISHING PURCHASING COUNTRIES preventing child labour, sup- Our suppliers are the story behind while supporting the development (% OF TOTAL FY15) porting vulnerable groups in every IKEA product. We work side by good management systems to aid our supply chain and ensur- side with them throughout the design continual compliance (see page ing decent work across our and production phases. With their 62 ). This helps us to develop long- supply chain on page 70 . help, we are able to use the most effi- term relationships with our suppliers China 25% cient, cost-effective and creative ways so that we can grow together with More on our suppliers’ to bring our designs to life. We are shared values and understanding – Poland 19% environmental performance constantly learning from them, and the average length of our supplier Italy 8% on page 48 . we strive to meet their expectations relationship is more than 11 years and as much as they meet ours. we have worked with some suppliers Sweden 5% More on the IWAY Forestry We are committed to working for several decades. Lithuania 5% Standard on page 27 . together with our suppliers to develop 1 Our tier 1 suppliers work directly with IKEA, providing goods decent jobs, support human rights and services specified by us, without an intermediary.

BETTER LIFE FOR PEOPLE & COMMUNITIES | 60 AN INTRODUCTION TO THE IKEA WAY OUR SUPPLIERS 1 ON PURCHASING – IWAY

CATEGORY NUMBER OF DESCRIPTION What is IWAY? suppliers to maintain compliance, and SUPPLIERS IN we look for opportunities to support IWAY SCOPE IWAY – the IKEA Way on purchas- further economic, environmental FOR FY15 ing products, materials and services and social development in our Home furnishing 978 2 Make our home furnishing products. These were the first – is our supplier Code of Conduct. It supply chain. suppliers to work with IWAY when we launched it in 2000. sets out our minimum requirements IWAY Musts: A minimum set of on environment, social and working requirements all new suppliers must Transport and Services 236 Transport our products to stores and distribution centres by conditions, and is a pre-condition for comply with before we sign a contract providers – land and ocean road, rail, river and sea. No airplanes are used in our goods doing business with us. It helps to with them and maintain at all times supply chain.3 ensure we only work with suppliers during collaboration with IKEA. These that share our values. Watch cover areas such as child labour, Transport & Services providers 66 Deliver directly to our customers and provide product picking the video and read the full forced and bonded labour, business – customer delivery and cus- in-store, assembly and installation services. Not all service IWAY standard online . The IWAY ethics, severe environmental and tomer services providers are contracted centrally – see also Retail service providers below. Standard is available in 31 languages. health and safety issues, minimum Supporting documents such as the wages and accident insurance. IKEA Catalogue 31 Provide the pulp, paper and print services for our printed IKEA Way on Preventing Child Labour IWAY60: An interim step towards catalogue.4 and IWAY Working Methods explain IWAY relating to working hours. It in more detail how the requirements required that suppliers’ employees work IKEA Food (global suppliers) 93 Provide the food and ingredients for the core range in our should be applied in relation to differ- a maximum of 60 hours per week, restaurants and in our Swedish Food Markets. ent types of suppliers and in different including overtime. At the end of FY15 circumstances. we achieved our goal of 100% IWAY Indirect Material and Services 147 Provide the products and services needed to run our busi- Our work does not stop once approval in China, including legislated (IMS) ness. This includes equipment in our stores (such as trolleys, racking and lighting), uniforms for our co-workers and ser- a supplier achieves IWAY approval. working hours (see page 65 ), so we vices such as facilities management and printing. We keep working together with our no longer work with IWAY60.

Retail cleaning, security, waste 389 Service providers to our retail organisation: cleaning, secu- management and customer rity, waste management and customer delivery (separate to delivery service providers the customer delivery providers centrally contracted through 2005 additions include: 2008 additions include: 2012 additions include: our Transport & Services function). - Continuous health and - Energy reduction - Business ethics safety improvements - Health and Safety - Recruitment processes - Benefits committees for migrant workers IKEA Components 252 These companies provide components and materials to IKEA - Written employment - Preventing harassment - Environmental perfor- suppliers and sub-suppliers that are used in IKEA home fur- contacts and abuse mance reporting nishing products.5

IKEA Industry 319 6 IKEA Industry supplies solid wood, board on frame and ONGOING: board-based furniture to IKEA and companies in the IKEA 2000: REGULAR UPDATES 2012: supply chain. LAUNCHED TO FURTHER DEVELOP LAUNCHED IWAY OUR SUPPLIERS AND LATEST VERSION STANDARD TO MEET EMERGING IWAY STANDARD EDITION 1 ISSUES AND EDITION 5.1 EXPECTATIONS

1 Includes tier 1 suppliers within the scope of IWAY. 2 978 suppliers includes IKEA Group's own production operations. 3 Except in (Based on: ILO Declaration 1998 – Fundamental Principles and Rights at Work; The Ten Principles of exceptional circumstances. 4 Does not include digital suppliers. 5 Does not include some suppliers delivering to packaging units. the UN Global Compact Framework 2000; UN Universal Declaration of Human Rights 1948; UN Conven- 6 Includes material suppliers and on-site service providers. tion on the Rights of the Child 1989; ILO Convention on Occupational Safety and Health 1983)

BETTER LIFE FOR PEOPLE & COMMUNITIES | 61 How do we deal with some of 4. Extending IWAY to sub- Who is involved? the challenges of implementing suppliers. An ongoing challenge is IWAY? securing and tracking compliance with Many people are involved in IWAY Musts at sub-suppliers. We have shaping, implementing and 1. Allocating resources to established a process of monitoring IWAY COUNCIL checking the IWAY process. Includes IKEA Group President and CEO, ensure we focus on higher risk and developing sub-supplier compli- Chief Sustainability Officer, Corporate suppliers. Some suppliers are cat- ance in our home furnishings supply Communications Manager, Range & Supply egorised as “IWAY Well Developed” chain and we will work on a more Manager. Responsible for all principal decisions – a group of our best performing consistent approach with our other regarding the IWAY Standard, related suppliers. Following initial IWAY ap- sub-suppliers. documents and goals. proval and proof of consistent performance, these suppliers do not receive Learning about IWAY scheduled IWAY audits. This allows us IWAY COUNCIL WORKING COMMITTEE COMPLIANCE AND MONITORING GROUP to focus our attention on higher risk IWAY training is available to all Appointed by and supports the IWAY Council in Independent from IKEA auditors and business suppliers and countries where suppli- IKEA co-workers. It is based on four operational questions related to the implementation units. Performs calibration audits*, supports ers are likely to need more support different levels: basic, medium and and interpretation of IWAY. Role includes developing training and development of IKEA auditors, in reaching IWAY compliance. Well advanced – step 1 and step 2. Each the IWAY Standard and supporting material, provid- ensures IKEA co-workers follow IWAY Developed suppliers do still receive level is tailored to different needs. ing clarity on interpreting the IWAY Standard and and sustainability standards, and reports resolving disagreements on audit results, reviewing sustainability compliance results to IWAY random unannounced audits to ensure For example, IWAY auditors receive audit results, overseeing auditor training and ap- Council. ongoing compliance, as well as under- extended training and ongoing proving IWAY Working Methods and documentation. taking self-audits. support through the advanced level training, while basic training might 2. Maintaining compliance be- be more suitable for an IKEA store tween audits. Our analysis shows manager or co-worker. that between audits IWAY compliance IKEA AUDITORS tends to fluctuate, which means that Conduct announced and IKEA SUPPLIERS THIRD-PARTY AUDITORS suppliers need to make corrective ac- unannounced IWAY audits Implement and maintain the Drawn from external audit tions within 90 days after each audit of suppliers, review and IWAY requirements at all units companies that are independ- to maintain IWAY approval. Suppliers follow up action plans in producing for IKEA and work to ent of IKEA. Verify IKEA audit that are in the process of implement- the case of non-compliance, secure IWAY Musts at critical results, conduct unannounced support suppliers in IWAY sub-suppliers. and calibration audits,* report ing corrective actions remain “IWAY implementation. results to Compliance and approved” which means that while Monitoring Group. the overall supplier approval rate is 100%, the actual compliance rate can be lower and changes over time. This is an ongoing challenge, as we want to ensure everyday compliance – read REGIONAL / COUNTRY IKEA BUSINESS UNITS Accountable for ensuring IWAY is fully implemented more on page 66 . at suppliers under their responsibility, have regular contact and visits with suppliers to support under- Arrows signify the main 3. Working with many different standing and meeting requirements. lines of contact between types of supplier. IWAY working the different groups. methods are tailored for each type of supplier. We also have various goals for different supplier types –

1 Audits undertaken by the Compliance and Monitoring Group and third-party companies to verify and assess the work done by IWAY auditors and business see page 60 . teams, ensuring a common implementation and judgment level.

BETTER LIFE FOR PEOPLE & COMMUNITIES | 62 A SUPPLIER CONTINUOUS IWAY COMPLIANCE EARLY STAGES IMPLEMENTATION OF ALL IWAY REQUIREMENTS - Ongoing monitoring and support from IKEA, JOURNEY WITH IWAY plus random unannounced audits

IWAY applies firstly to our tier 1 Before business < 9 months after < 14 calendar days < 90 calendar days < every 24 months suppliers, with each IKEA organi- contract is signed: first delivery: after audit report: after the audit: (12 months in Asia): Ongoing: sation defining its own scope and implementation. It also covers some IKEA communi- Contract is signed Supplier un- Supplier IKEA auditor IWAY re-audit Corrective actions sub-suppliers (such as those that are cates IWAY dergoes IWAY agrees verifies that the and timescales permanently present on-site) and Supplier under- approval audit corrective supplier has agreed as needed all on-site contracted labour directly goes initial IWAY and receives action plan implemented assessment audit report 5 with IKEA corrective involved in production. See below for First delivery of days later actions more on how we use IWAY with other Supplier fulfils products to IKEA sub-suppliers. IWAY Musts The IWAY journey varies depending on the type of supplier. Here is a typical journey for a home furnishing supplier. • IWAY Must violations lead to an immediate delivery stop from the relevant production unit(s). After the correction of IWAY Must violations the deliveries can be re-started.

• Suppliers failing to meet full IWAY compliance within the agreed timeframe are phased out.

IWAY AT SUB-SUPPLIERS REGISTRATION COMMUNICATION IMPLEMENTATION VIOLATION?

We can have a big impact on people, < 12 months after < every 24 months Immediately: < 14 calendar < 90 calendar communities and the environment by first delivery: (12 in Asia): days: days: working together with the companies that supply us directly to expand IWAY IKEA supplier IKEA identi- Supplier commu- Supplier under- Supplier re- Supplier reports Supplier Supplier follows to their suppliers. Our suppliers are registers all tier fies critical nicates IWAY re- takes initial audit peats verifica- the violation to agrees a up and verifies responsible for communicating IWAY 1 sub-suppliers sub-suppliers quirements with of critical sub- tion of critical IKEA corrective sub-supplier Must requirements with “critical offsite involved in the and confirms all sub-suppliers supplier compli- sub-supplier Supplier regis- action plan compliance production of sub-suppliers” and ensuring their com- these with ance with IWAY compliance with ters the audit with the IKEA articles in If the violation pliance. Sub-suppliers are defined as the supplier Musts IWAY Musts result and sub-supplier the IKEA sub- is not cor- critical if processes performed are con- Supplier imme- Supplier imme- follow up steps rected within sidered to be potentially highly harmful supplier tracking in SSTS system (SSTS) diately registers diately registers 90 days, IKEA to the environment, health or safety the audit result the audit result and the supplier of the workers, or are in an industry and follow up and follow up together agree or supply setup that is prone to child steps in SSTS steps in SSTS next steps labour or forced and bonded labour.

BETTER LIFE FOR PEOPLE & COMMUNITIES | 63 BOX-TICKERS NEED NOT APPLY WHERE NEXT FOR IWAY? understand the benefit to them. I know we have done our job well We always look for ways to improve when a supplier doesn’t need me our work with suppliers so that we anymore – they are aware of their understand each other better and weaknesses and they already have work together to create positive a plan in place to improve when I changes. In FY15 we conducted visit them.” a hands-on evaluation of worker Our auditors face new chal- rights in our supply chain to help lenges every day. They have to improve our ways of working and adapt quickly to working with guide the development of IWAY. “I’m not a box ticker!” says Sophie many different types of suppliers The IKEA Compliance and RACHEL WILSHAW JOHN PEMBERTON Montavon – an IKEA IWAY auditor – including transport companies, Monitoring Group (CMG) visited of seven years. “I learned more factories and service providers at Vietnam, accompanied by team Ethical Trade Manager, Oxfam Business Development Manager - in my first year as an auditor than IKEA stores – in many situations. members from the IKEA Purchas- Synthetic Textiles, IKEA in my first year at school. Box- And this also gives them opportu- ing Office of South Asia and South “Many companies are still in denial tickers couldn’t do this job – you nities to learn about new systems East Asia, and the Ethical Trade about the deep flaws in social au- “This experience has focused me need to have a passion for learning.” and solutions. Sophie is always Manager from Oxfam, Rachel dits. In light of this, an invitation on working with our suppliers’ Auditors are sometimes seen as happy to share advice and ideas Wilshaw. During their three day by IKEA to spend three days with management teams to help them working at arm’s length, focusing with suppliers. She also shares her visit, the group looked at how IKEA their team talking about workers’ get closer to their factory floors, on checklists rather than collabo- knowledge with new IKEA auditors. handles issues of worker rights rights was very welcome. Together, and we’ve already seen good rating to achieve positive results. “Through our IWAY training such as collective bargaining, we explored why so few concerns results. I think it also highlights But our auditors are far more than programme, we encourage our disciplinary actions, discrimination are raised by workers about issues the importance of consumers that. They are the human link auditors to be open-minded and and harassment. Factory visits, known to be prevalent, and came being aware of the impact of their between our supplier Code of curious,” says Sophie. “Showing workshops and interviews with up with a range of suggestions on decisions on the many people Conduct – IWAY – and our suppliers. an interest in the supplier and workers and suppliers all informed what could be done to improve involved in the supply chain, so Our 87 full time auditors are how they work is the most crucial the discussions about problems practices, including improving they can make informed choices.” IKEA co-workers, so their knowl- quality an auditor should have. You and possible solutions. worker-management dialogue edge stays with us and helps us to need to look behind the wall and We will use the evaluation find- and rewarding suppliers. Given learn and change. Each IKEA audi- understand what is going on in ings to help shape auditing and the ‘can-do’ attitudes the team tor is constantly learning about our people’s heads.” IWAY standard development in the showed, I left feeling optimistic suppliers and thinking about how Auditors help people live better future. One thing that became re- that positive change in IKEA’s we can work with IWAY to improve lives, and this is why Sophie ally clear to us was the importance processes would follow.” environmental and social perfor- loves it. of involving workers in the process mance across our supply chain. “We are doing this for the health of addressing labour issues, to Sophie explains: “When we do and safety of people working at ensure we act in their best interest an audit we have to see things our suppliers, their families and and create working conditions that from the supplier’s perspective. the environment. It is so reward- genuinely have a positive impact Our role is to understand how they ing when we see real change and on their lives. are working, to assess them of investment. It’s not just a paper course, but also to explain why we exercise – we are really making a are asking things and to help them difference.”

BETTER LIFE FOR PEOPLE & COMMUNITIES | 64 PERFORMANCE BY SUPPLIER CATEGORY HOME FURNISHING SUPPLIERS

In FY15, there were 2,083 IWAY au- below). The number of home furnish- with an increase in third-party unan- Supplier performance dits, of which 710 were unannounced. ing supplier calibration audits car- nounced audits to 156 (from 123 in This included 1,178 IWAY audits at ried out by the IKEA Compliance and FY14) – see page 62 for more detail At the end of FY15, 98.9% of home home furnishing suppliers, of which Monitoring Group (CMG) decreased to on the other roles of the CMG. furnishing suppliers were IWAY 627 were unannounced (see table 28 (from 31 in FY14), corresponding approved, including 0.8% pending a scheduled audit. The remaining 1.1% have not been able to meet our requirements and are in the process IWAY AUDIT DATA FOR HOME FY11 FY12 FY13 FY14 FY15 of being phased out. We faced two FURNISHING SUPPLIERS specific issues in FY15: the charging of recruitment fees to migrant Number of IWAY audits/of which are unannounced workers at some suppliers in Taiwan (see page 66 ) and difficulties in Europe 341/144 348/198 337/55 485/87 448/238 meeting working hour requirements Americas 26/12 31/15 31/5 53/8 48/26 at one of our larger suppliers. Both of these issues are now resolved. Asia 626/55 607/517 549/434 617/501 682/363 Total 993/711 986/730 917/49 4 1155/596 1,178/627 Compliance with IWAY work- Number of IKEA Compliance and Monitoring Group calibration audits1 ing hour requirements has been Europe 24 19 19 7 4 a focus for us in China for many years, and included an interim goal Americas 3 2 2 2 2 of IWAY60 (see page 61 ) as a Asia 25 29 19 22 22 step towards full IWAY approval. In FY15, we reached our goal of Total 52 50 40 31 28 achieving 100% IWAY approval Number of third-party audits (unannounced) at suppliers in China, compared with 24% in FY14.1 This means Europe 12 9 23 32 63 that all suppliers in China have THOMAS SCHAEFER Americas 0 2 2 3 10 either complied with IWAY work- Sustainability Manager, ing hour limits or are being phased Asia 32 45 66 88 83 Purchasing, IKEA of Sweden out (approximately 10% of the Total 47 56 91 123 156 total 2). Meeting this target on time “This is a groundbreaking 2 is a significant achievement for us, Terminated businesses, number of suppliers achievement. It is a great but we know that this is just one example of what is possible Exited due to IWAY non-compliance 8 47 26 18 12 step of our journey with suppli- when we work together with ers in China. We will continue to Number of third-party child labour audits suppliers that share our values. work with them to maintain IWAY And it puts us in a good position compliance and make progress on Total 370 365 416 305 350 to face the next challenge of key issues. maintaining IWAY compliance in 1 In FY14, 98.8% of suppliers in China were ap- China next year and beyond.” 1 Audits undertaken by the Compliance and Monitoring Group and third-party companies to verify and assess the work done by IWAY auditors and business proved to IWAY60 and 24% were IWAY approved. teams, ensuring a common implementation and judgment level. 2 Before FY15, terminations were categorised as “due to non-compliance” and “due to non- 2 A total of 39 suppliers are being phased out. compliance and other reasons”. We have replaced these categories with a single category for FY15 to aid clarity. This means figures for FY15 are not directly This represents approximately 10% of our total supplier base in China for Home Furnishing and comparable to previous years. IKEA Components.

BETTER LIFE FOR PEOPLE & COMMUNITIES | 65 Challenges tions in compliance between audits tributed to unstable IWAY compliance (except where a serious or IWAY Must rates. In FY15 we introduced the ‘IWAY An ongoing challenge for us and our violation is found). For example, we Independent Program’. This helps us suppliers is the continuous implemen- know that wages and working hours collaborate with suppliers to integrate tation of IWAY between audits and tend to be the areas where it is most IWAY into their everyday work. We approval. Data analysis over the past challenging for suppliers to maintain have seen an increase in the average five years shows us that: continual compliance, whereas health IWAY compliance rate as a result of and safety is an area where they can measures such as standardising work- • New suppliers have an average com- maintain standards after making initial ing methods, improving staff engage- pliance rate of 78% when they start changes. Our goal is to work together ment and internal communications. with us (although they must show with suppliers to maintain continual Currently nine suppliers are taking the potential to reach 100% at this compliance with all IWAY require- part in the programme. stage 1) ments. To help us measure and man- In South Asia we introduced a new • Suppliers reach 100% (approved) in age our improvement in this area, we induction process for suppliers, which the first 12 months plan to introduce compliance rate as a highlighted the relevance of IWAY to • At consecutive audits the compliance performance indicator alongside over- everyone within a suppliers’ organisa- rate averages 87% all approval from FY16 onwards. tion, from the shop floor through to • After each audit suppliers have 90 We work with our suppliers to senior management. days to get back to 100% (at which embed IWAY into everyday business In China and East Asia we identi- point they are approved). processes and maintain IWAY perfor- fied several IWAY Must violations in mance. In South East Asia, we have relation to working hours as a result of This means that a supplier can remain seen a lack of integration of IWAY into falsification of records. In all cases the IWAY approved but still show fluctua- management systems, which has con- violation led to an immediate halt in deliveries from the relevant production units until the issue was resolved, and in some cases we terminated business with the supplier completely. In FY16, IWAY approval at home FY11 FY12 FY13 FY14 FY15 we aim to develop a more structured furnishing suppliers, %1 supplier development programme in China to further enable suppliers to Tier 2 home furnishing (HF) suppliers FY13 FY14 FY15 Europe 90 100 100 99.5 100 share ideas and best practices for Total number of HF tier 2 suppliers 14,000 16,561 18,954 Americas 94 100 100 96.2 98 achieving continual IWAY compliance. As part of our efforts to ensure the Total number of HF tier 2 suppliers with identi- 2,200 1,691 1,897 Asia, total 41 92 97.8 97.8 98 responsible recruitment of migrant fied critical materials and processes workers (see page 74 ), we have China 30 90 99.2 98.8 98 Share of HF tier 2 suppliers with identified 20 91 92 been working together with home critical materials and processes compliant South Asia 65 93 92.2 95.9 95 furnishings suppliers in Taiwan to with ‘IWAY Musts’, % ensure jobseekers do not have to South East Asia 562 97 96.7 94.7 99 bear the cost of recruitment fees. All regions 67 96 99 98.6 98.9 Opportunities historically associated with poor working decent working conditions and fair pay

1 Data for home furnishing suppliers includes IKEA Industry factories. Excludes new suppliers that conditions, child labour and exploitation in IWAY compliant factories close to have up to 12 months to be approved. Suppliers that have a non-compliance identified and are still We always look for opportunities to by middlemen. In 2010, we started the homes of the weavers. Five years within the 90-day period allowed to correct it, are categorised as approved. Suppliers pending a scheduled audit are categorised as approved as long as the previous audit has not expired (applies tackle key issues such as fair wages working with carefully selected sup- on, approximately 10,000 weavers to 0.8% of the total in FY15). In FY15, the remaining 1.1% applies to suppliers being phased out. and working conditions in higher risk pliers and sub-suppliers in India and 2 Figure restated from FY14 (65%). 1 In some areas, such as South East Asia and East Asia, we areas of our supply chain. Bangladesh to produce high quality do not start business with a supplier if the initial compliance For example, carpet weaving is handmade IKEA rugs, while ensuring rate is below 90%.

BETTER LIFE FOR PEOPLE & COMMUNITIES | 66 and other workers are involved in TRANSPORT & SERVICES SUPPLIERS FOOD SUPPLIERS this initiative. We have trained more than 600 people in two dedicated In FY15, IWAY approval rate for sup- conditions for drivers of international weaving schools, where trainees are pliers that transport our products to transport companies – including pay- paid at least the local minimum wage stores and distribution centres was ing workers at least the minimum while they learn. Read more about 100% for ocean transport providers wage in the country where they are our efforts to ensure decent working and 99.5% for land transport pro- working. We engage in dialogue with conditions within our own operations viders. IWAY approval for centrally the transport unions so that together and supply chain on page 72 . contracted transport suppliers who we can find ways to contribute to the Suppliers now have even more deliver directly to customers, was positive development of the transport hands-on support following the 86%, compared with 100% in FY14. industry. Through IWAY we are work- restructure of our sustainability This decrease is due to a change of ing closely with our service providers compliance and sustainability devel- scope – we included parcel carriers for to secure good working conditions for op-ment functions. This enables us the first time in FY15 and are working drivers. In FY16, we will also begin to focus our efforts on working with them to reach IWAY compliance. spot checks at our distribution centres together with suppliers to meet We approve of the principle of free and stores of the conditions under IWAY requirements and tackle wider trade within the European Union (EU). which contract truck drivers work. sustainability challenges. Instead of But we recognise that it also brings repeating the Global Sustainability challenges. For example, some sup- Days held in FY14, we integrated pliers pay their drivers the minimum the theme of sustainability into our wage of their country of origin, which annual IKEA supplier days – read is often lower than local wages where more on page 48 . the drivers predominantly work. IKEA always requires suppliers Sub-supplier performance to comply with laws and regulations, as well as IWAY requirements. We Approval with IWAY Musts at our welcome the development of the EU critical tier 2 home furnishing sub- directive aiming to improve working suppliers in FY15 was 92% globally FY15 was a year of change for our food volume products and wholesalers fell (see table on page 66 ). In South business. We hired a Sustainability & within scope. IWAY Must verifications East Asia all critical sub-suppliers are Health Manager, who is leading the have been carried out with 93% of IWAY Must approved and in other development of a new global health these ‘in-scope’ suppliers. A total of regions we have continued to work IWAY approval of FY11 FY12 FY13 FY14 FY15 and sustainability direction – read more 55% of suppliers of our core global with suppliers to increase this figure. transport and service on page 30 . We are also working food range were approved following For example, in South Asia we suppliers (% IWAY towards setting a framework for a full audit and we will continue to have continued to build the capacity approved) our entire food business in a more work with our suppliers to increase of our suppliers to undertake sub- centralised way, which presents compliance rates to 100% over the Customer delivery 53 91 93 100 86 supplier audits by offering training opportunities to develop closer next two years. Figures are therefore suppliers, % of centrally and providing more focused support contracted suppliers relationships with our global suppliers, not comparable to previous years. where it is needed. In China, as well approved build a better understanding of our We continued work to map our as continuing to work to secure IWAY local food supply chain and achieve local food supply chain in FY15, and Musts at tier 1 sub-suppliers, we are Ocean transport providers, 95 100 100 100 100 more sustainable outcomes. will provide a more complete map of encouraging some well performing % approved We developed a new IWAY work- our local food suppliers and their level sub-suppliers to progress to full IWAY Land transport providers, 82 100 100 100 99.5 ing method and started to implement of IWAY compliance once this work is compliance. % approved IWAY at our food suppliers according complete in FY16. to a roadmap for food in FY15. High

BETTER LIFE FOR PEOPLE & COMMUNITIES | 67 IKEA INDIRECT MATERIALS AND SERVICES (IMS) SUPPLIERS RETAIL SUPPLIERS

• Consolidation. Having fewer suppliers means we can develop stronger relationships and get better value for products and services. • Standardisation. We can reduce our environmental and social impacts and ensure quality by offering a carefully selected, streamlined selection of products and services. • Relevance. To make sure we get the most benefit from consolidation and standardisation, we work to understand the needs of IKEA stores and co-workers so that IKEA IMS solutions are useful and well-used. In FY15, we continued to focus on supplier in FY15 was 85%, compared auditing higher risk supplier with 40% in FY14. categories: cleaning, security, waste In FY15 we tested a new way management and customer delivery of working in three countries – service providers – the customer transferring responsibility for IWAY delivery service providers managed implementation to IMS (while by our retail operations are in addition retaining ultimate accountability to those managed by our Transport & within Retail). The results were IWAY APPROVAL OF Services business. The IWAY approval positive, so we plan to roll out this INDIRECT MATERIALS AND rate for these four categories of approach more widely in FY16. SERVICE (IMS) SUPPLIERS (% approved)

87 IWAY approval of retail cleaning, secu- FY13 FY14 FY15 77 rity, waste management and customer delivery service suppliers

Total number of IWAY audits conducted at 136 179 314 53 retail suppliers

At the end of FY15, all IMS suppliers where our next step will be to go Total number of retail cleaning, security, 539 448 389 under the IWAY scope were IWAY further into the supply chain and waste management and customer delivery approved (87%), pending a scheduled secure IWAY compliance with selected 32 FY15 service providers 27 audit or being phased out. This is an sub-suppliers. FY14 Retail cleaning, security, waste management 19 40 85 important milestone, but we need Our wider work with IKEA IMS FY13 and customer delivery service providers, % to work together with suppliers to suppliers in FY15 continued to focus FY12 approved maintain compliance – especially in on creating business value in three the more complex service sector, key ways: FY11

BETTER LIFE FOR PEOPLE & COMMUNITIES | 68 IKEA CATALOGUE SUPPLIERS IKEA COMPONENTS SUPPLIERS In FY15, 99.2% of IKEA Components units and their suppliers achieved suppliers to implement their corrective IWAY approval or had a scheduled action plans. We undertook 30 audits audit pending. During FY16 we will in FY15 and plan a further 40 in FY16, IWAY approval at IKEA Components and FY13 FY14 FY15 extend the scope to include more keeping us on track to audit all cata- suppliers suppliers delivering to our own logue suppliers by the end of FY16. packaging units. The suppliers will IKEA Components units, % approved 100 100 100 All suppliers continue to under- be IWAY approved during FY16. take self-assessments twice a year, Total number of IKEA Components suppliers 226 242 252 In China we achieved the target based on IWAY and industry-specific of 100% IWAY approval for IKEA Total number of audits conducted at IKEA 146 187 195 requirements for pulp, paper, print Components suppliers. Components suppliers and digital. In FY15, we commissioned * more third-party audits to increase IWAY Components suppliers, % approved 100 99.2 99.2

the reliability of the industry-specific * Figure corrected from FY14 (100%). environmental data gathered from our supply chain, going beyond IWAY. They enable us to score suppliers, discuss corrective action plans with them support with IWAY expertise and IWAY and assess how to improve energy IKEA INDUSTRY SUPPLIERS standard training of business teams efficiency, renewable energy content, and suppliers. This team will also waste and water use. Read more IKEA Industry’s Division Purchase IWAY audited and approved. support the implementation of IWAY about the environmental performance function was formed in September • By the end of FY20 all direct at our suppliers, starting with critical of our catalogue suppliers on page 2014 to develop a centralised and material suppliers will be IWAY suppliers. IWAY approval for our catalogue sup- 50 ). standardised approach to IKEA Indus- audited and approved. In FY15 IKEA Industry audited pliers at the end of FY15 was 70%, try purchasing. In FY15, we focused In FY15 we achieved our goal of veri- all of its permanent on-site service compared with 55% in FY14. We on getting the basics in place, such fying IWAY Musts at all direct suppliers providers, supported by step-by- achieved this increase by completing as performance indicators, govern- in FY15. We achieved our goal of all step guidelines and audit training for IWAY audits with more suppliers and ance and new processes. In FY16 we critical direct suppliers being ready for human resources and sustainability supporting previously non-compliant will continue to strengthen purchasing audit by the end of FY15. We focused a managers at each unit. The focus was processes and supplier development. lot on improving our sourcing of wood on social conditions, although environ- We are taking a phased approach to from more sustainable sources – read mental and safety findings were also IWAY compliance with our suppliers, more on page 25 . corrected within 90 days of the audits.

1 which includes the following goals: In FY16 we will form a Division IWAY and industry spe- FY11 FY12 FY13 FY14 FY15 1 IWAY 5.1 is the latest version of the IWAY cific approval at IKEA Purchase Sustainability Team to Standard. catalogue suppliers • By the end of FY15 all direct material suppliers will have IWAY Musts Share of catalogue paper 90 89 82 55 70 verified, and all critical direct mate- IWAY approval at IKEA Industry and suppliers 1 FY15 and print suppliers that are rial suppliers will have implemented IWAY approved (%) IWAY 5.1 1 and be ready for auditing. Total number of suppliers 960 Share of catalogue paper 72 70 66 68 46 • By the end of FY17 all critical direct and print suppliers that are material suppliers will be IWAY Number of suppliers within IWAY scope 319 approved according to the audited and approved. Number of audits conducted 261 industry specific require- • By the end of FY18 all direct mate- ments (%) 2 rial suppliers will have implemented IWAY approved suppliers 207

IWAY 5.1 and be ready for auditing. 1 1 The decrease from FY13 to FY14 is partly as a result of more accurate data – specifically an increase Includes material suppliers and on-site service providers. Figures are not comparable with previous in IWAY audits rather than supplier self-assessments. • By the end of FY18, 50% of all years as a result of the formation of a new organisation with a new fully defined supplier base. 2 64.9% of suppliers within IWAY scope. direct material suppliers will be

BETTER LIFE FOR PEOPLE & COMMUNITIES | 69 SUPPORTING PEOPLE & PLANET STATUS PERFORMANCE IN FY15 HUMAN RIGHTS POSITIVE TARGETS Develop and implement a transparent and Began a project in South East Asia with the International reliable system for the responsible recruit- Organization for Migration to learn more about the ment of migrant workers at first-tier suppliers processes and challenges of recruiting migrant workers, in identified critical areas by August 2017. with the aim of developing action plans and goals to support ethical recruitment throughout our supply chain.

Continuously identify and develop setups Focused on improving working conditions in our supply for home-based workers to improve working chain in South East Asia, including audits and improve- conditions, protect labour rights and prevent ments at weaving centres in Indonesia and Vietnam, and child labour. By August 2020, all home-based collaboration with the International Labour Organization workers are transitioned into improved set- in Indonesia to analyse working conditions in our rattan ups and part of our handmade development supply chain. programme.

Advocate for children’s rights by influencing Took part in a range of external advocacy activities, policy development, raising awareness including contributing to UNICEF training programmes and supporting families in vulnerable for business, speaking at Global Compact meetings and communities. supporting country launches of the Children’s Rights and Business Principles. Updated the IKEA Way on Preventing Child Labour and Supporting Young Workers. The work of the IKEA Foundation centres on the rights of children and their families – see page 77 .

Support the development of small-scale Launched five new collections through local and social entrepreneurs into IKEA suppliers international partnerships with social entrepreneurs, leading to demonstrable social benefits, such bringing the total to nine collections launched since FY13. as tackling poverty and empowering women. Launched in-store sewing service with local partnerships. Sewing service and five new limited edition collections from the IKEA Social Entrepreneur initiative launched in three countries before February 2015.

Achieved Ongoing Not achieved

We want to empower people to create everything we do. We always work to a better everyday life for themselves. protect the rights of the most impor- For many, this is becoming increas- tant people in the world: children. Read more about our efforts to contribute to a better everyday life at work for our co-workers on page 53 ingly difficult because of conflict in And we focus on supporting specific and for our first tier supply chain onpage 60 . their homelands and the disruptive groups in our extended supply chain, pressures of climate change. Respect such as migrant workers, home work- for human rights is at the centre of ers and social entrepreneurs.

BETTER LIFE FOR PEOPLE & COMMUNITIES | 70 Example – child labour OUR HUMAN RIGHTS JOURNEY We take a “prevent and protect” approach to decent work for young workers 2 through the in our own operations. application of our supplier Code We also look for opportunities of Conduct – IWAY. Our aim is to to have a wider influence on global prevent child labour at suppliers, issues, like children’s rights. Greg while protecting young workers explains: “We started by looking by making sure suppliers provide at the issue of child labour in our them with suitable positions and own supply chain using IWAY. decent work – this enables learning And the programmes of the IKEA and skills development through Foundation are tackling the root quality work experience. causes of child labour. Now, we want Our procedure for handling and to encourage all of our co-workers following up on suspected child to see the relevance of children’s labour violations within our supply rights to their own work, and we’re chain is set out in our IWAY working working with Save the Children and methods. It involves a step-by-step UNICEF to drive wider progress. process from fact collection through “Respecting human rights has “We don’t have all the answers. HUMAN RIGHTS GOVERNANCE to confirming the consequences for always been key to how we work, Our recent experience in Russia the suppliers’ future business with although we may not always have (see page 57 ) shows that we We communicate the importance with our business by focusing our IKEA, while ensuring that all actions called it that. It’s about having a still have more work to do. And we of respecting human rights to our attention on areas where we have are taken in the best interest of positive impact on people and are working with our partners to co-workers and suppliers through the greatest potential impact within the child. communities,” says Greg Priest, understand and take action on a number of codes, policies and our supply chain – see page 62 In FY15 there were five suspected Head of Sustainability Policy, complex issues like eliminating standards. These are all approved – and by keeping our policies and cases of child labour, all of which IKEA Group. fees charged to migrant workers by Group Management and include: standards up to date with emerging were confirmed. Using the IWAY The IKEA supplier Code of (see page 74 ) and ensuring fair risks and expectations. Working Methods, we worked with Conduct – IWAY – is central to our wages globally (see page 72 ). • The IKEA Way on Preventing Child In FY15, we developed new the supplier in each case to resolve human rights approach. It enables We have an opportunity to play a Labour and Supporting Young guidelines on human rights in the situation while making sure the us to identify risks in the supply leading role.” Workers communications to make sure our child’s wellbeing was protected. chain and to support suppliers to Greg is clear about the future: • The IKEA Way on Purchasing commitment to human rights is Specific actions included ensuring make changes in their own opera- “We have to remember that real Products and Services (IWAY), clear in all we say and do. In FY16, that every child had to access tions. The UN Guiding Principles on people are affected by everything our supplier Code of Conduct we will finalise our updated human education, providing support to Business and Human Rights and we do, and we must work on the • IKEA Group Code of Conduct rights standard: the IKEA Group their families and putting follow the Children’s Rights and Business areas where we can have the most • IKEA Group Standard on Human Policy on Human Rights and Equality. up reviews in place. Principles have supported us to go impact. Focusing on what’s good Rights This reflects the value we place on Read more about our work on further. They helped us to bench- for people is a key part of building • IKEA Group Policy on People equality for all those who work with children’s rights on page 72 . mark our progress and develop a a strong, sustainable business. In

• IKEA Group Standard on People IKEA – as co-workers (see page 53 ) 1 The steps an organisation takes if it finds it has more structured approach. We have fact, it’s the reason I work for IKEA • IKEA Group Policy on or suppliers (see page 60 ). caused or contributed to human rights violations. improved our analysis of human – to help create a better everyday 2 Definition of a young worker according to the Sustainability Where human rights risks are Children’s Rights and Business Principles: A child rights risks and involved key stake- life for the many people.” identified, we strengthen our due (below the age of 18) who is above the minimum holders from inside and outside legal working age and engaged in economic activi- We strive to prevent any negative diligence processes and, when nec- ty. It is an age group that is subject to designation the business to help prioritise our human rights impacts associated essary, provide access to a remedy.1 as child labour if the work or working conditions actions across the value chain and are hazardous.

BETTER LIFE FOR PEOPLE & COMMUNITIES | 71 CHILDREN’S RIGHTS THE RIGHT TO DECENT WORK Children are the most important sure that every aspect of our business people in the world. But today, one makes children’s lives better. approach to assess wages alongside billion children are deprived of The Children’s Rights and other important factors like social services they need to survive and Business Principles (the Principles) benefits and wage discrimination grow1 – including education, health- – developed by UNICEF, the UN Global against part time workers. In FY14 care and protection from harm. Compact and Save the Children our assessments led us to make Climate change will only increase – are the first comprehensive set of changes to our wage structure in the pressures already felt by children principles to guide companies on Japan and the USA. In Japan we DANIEL VAUGHAN- and their families in some of the children’s rights. The Principles link introduced equal pay between full WHITEHEAD world’s most vulnerable communities. directly or indirectly to everything time and part time co-workers for Founder of the Fair Wage We are working to secure we do, and we are using them as a equivalent hours. In the USA we Network children’s rights across our entire base to develop our work on children’s increased minimum wages to match value chain. This is a complex and rights, building on the belief that our the cost of living. We have since The Fair Wage approach pro- evolving area and, while we have actions should always have the best made further wage increases in the vides businesses with the tools been working on children’s rights for interests of the child in mind. USA in line with cost of living, and to improve wage practices. It is many years, we know that there is Everyone should enjoy going to we strongly believe these changes not an audit exercise but a form much more to do. We want to make 1 See http://childrenandbusiness.org/ work. Whether they are our co- will contribute to a reduction in staff of cooperation and partnership workers or the people working in turnover. to help factories or stores make our supply chain, we want to make In FY15, similar assessments led THE CHILDREN’S RIGHTS the best possible assessment sure that all the people involved us to increase our standard mini- AND BUSINESS PRINCIPLES of wage practices, identify the in our business have decent work mum wage in the UK and Ireland root causes and apply the and working conditions. It is a basic in line with the cost of living. We Reinforce goverment appropriate remedy. right, not a privilege. started to extend our approach to and community efforts Elimination IKEA has a unique and lead- to fulﬁll children´s rights of child labour Our internal guidelines and our suppliers, by carrying out fair wage ing approach – promoting fair supplier Code of Conduct (IWAY – assessments with some suppliers wages among both its suppliers see page 60 ) help to ensure we in Turkey and all of our suppliers in and its stores, making it a front reach minimum standards on issues Bangladesh. Learning from these Decent work for young runner in this area. workers, parents and like discrimination in the workplace, pilots will guide us to make changes Protect children caregivers By focusing on its co-workers in emergencies excessive working hours and over- across other parts of our business first, IKEA will enhance its cred- time, and payment of legal minimum and supply chain. ibility with suppliers, partners wages. But in some countries, the In FY16 we will carry out further and customers. Extending this legal minimum wage is not enough work on conditions of employment approach to suppliers is key to to support the basic needs of work- in our own operations, to make sure building capacity and promoting Commitment to ers and their families – including our co-workers have enough hours Children´s rights children’s rights good wage practices across the in security Protection and clothes, education, food, housing of work to support themselves IKEA supply chain and beyond. arrangements safety of children and insurance. We think it is impor- and their families. This will include tant to assess what a “fair wage” introducing standards on aspects is – one that enables families to such as minimum contract hours, thrive, not just survive. limited and unlimited contracts, We work with the Fair Wage and shift work. Respect children´s rights Network to assess our own in relation to environment Safe products and operations and those of our and land aquisition services for children suppliers – using a holistic Responsible marketing and advertising Graphic:UNICEF 10 BETTER LIFE FOR PEOPLE & COMMUNITIES | 72 Performance to play, to be functional, fun and grounded in our knowledge of child STAKEHOLDER CHALLENGE In FY15, we strengthened our focus development through work with on children’s rights, starting by talking external organisations and experts. IKEA has a strong approach to selecting and supporting suppliers that share its values to people within and outside of IKEA We have zero-tolerance to any health through its supplier Code of Conduct, IWAY. Does it stop there, or can IKEA really help to to develop a detailed assessment of or safety risks, and you can learn tackle the complex issue of child labour deeper in its global supply chain? our progress against the Children’s more about how we make our Rights and Business Principles. products safe on page 35 . In Through this process, we are identify- FY15 we completed the biggest and consequence of child poverty, so we can work together to tackle ing stakeholders who will support us piece of research ever undertaken but is also exacerbated by the child labour. to improve and achieve our goals, as on play, interviewing almost 30,000 lack of alternatives and a lack of Contributing to the develop- well as supporting co-workers to take parents and children in 12 countries awareness of children’s rights. ment of the Children’s Rights and ownership of the issues relevant to for our Play Report 2015. It has taught The IKEA Foundation has taken Business Principles and using the their own work. We will use the results us more about play and how people a very proactive role to address analysis tool from UNICEF and of the mapping to develop an action spend time together all around the education, women’s empower- Save the Children really helped us plan in FY16, focusing on the areas world, and will guide us as we develop ment, and strengthening of child to focus and look at every aspect where we know we can do more. products and services for children in protection systems in supply chain of our business through the lens We updated the IKEA Way the future. ANDREW MAWSON communities. The challenge for of supporting children’s rights. on Preventing Child Labour and We know we cannot become IKEA is to take this further – to We recently strengthened our Supporting Young Workers in FY15 and complacent – we want to ensure Chief – Children’s Rights use its influence and leverage with IWAY Standard documentation will engage suppliers and co-workers everyone at IKEA understands that and Business, UNICEF suppliers, peer companies, and on the treatment of young in FY16 to refresh their awareness and respecting and supporting children’s governments to contribute to the workers because we want young understanding of children’s rights. rights is part of their everyday work. Child labour in complex global sup- Sustainable Development Goal to people who are legally able The way we develop the Children’s We will continue to map our progress ply chains is a challenge for many eliminate the worst forms of child to work to access decent jobs IKEA range demonstrates how we and build our capability to capture businesses. It becomes increasingly labour by 2025. with appropriate support. When consider the child’s perspective in our performance data, so that we can difficult when considering deep factories meet all IWAY require- work. Every product in the range is develop further goals and share best and expansive supply chains with ments, they have all the pre- designed to promote children’s right practice in a systematic way. multiple tiers, informal production and child labour in the production conditions necessary to be a safe of raw materials. and healthy workplace for young UNICEF supported IKEA in the workers. Since 2012, we have development of the IKEA Way of trained our direct suppliers to Preventing Child Labour in 2000. perform IWAY Must audits at Clearly communicating expectations their critical sub-suppliers, and standards to suppliers is an helping to ensure that our important first step in addressing requirements on the prevention child labour. UNICEF also welcomes of child labour are fulfilled further SASKIA DIELEMAN-JAMIN IKEA’s commitment to the Children’s along our supply chain. Rights and Business Principles in Compliance Manager, IKEA Group We know we need to do more its sustainability strategy for 2020, to move our wider supply chain and its efforts to undertake a gap We’ve focused on securing chil- from compliance to genuine analysis of business practice using dren’s rights in our supply chain commitment. We will continue the Principles framework. for many years through IWAY – it working with our suppliers and Sustainable solutions also require enables us to have a shared under- others outside of IKEA to drive looking at the root causes. At its standing with our suppliers about respect for children’s rights even core, child labour is both a cause the importance of children’s rights, further into the supply chain.

BETTER LIFE FOR PEOPLE & COMMUNITIES | 73 MIGRANT WORKERS

challenging to meet IWAY standards. To support our suppliers in tackling these problems we are partnering with the International Organization for Migration (IOM) on a project in South East Asia. Together, we are mapping the recruitment corridor from the supplier back to the workers’ home countries, to better understand the challenges and potential solutions. We will use the findings to develop action LARA WHITE plans and goals to support ethical re- Senior Labour Migration cruitment of migrant workers, with the Specialist, International long-term aim of contributing to lasting Organization for Migration changes. We will complete this project by March 2016. “Tackling the complex issues We know that we cannot solve related to labour exploitation this alone, and that a broader global and human trafficking requires effort is needed to create sustainable partnership and commitment. change. We have been working closely That’s why we are pleased to be with NGOs and other businesses to set collaborating with IKEA as part of up a cross-sectoral initiative that will its efforts to promote the ethical help drive the transformational change recruitment and fair treatment required in the global recruitment of migrant workers – working industry. together to learn more about the Read more about our approach to ‘migration stories’ of workers in workers’ rights in our transport supply the IKEA supply chain. I look for- chain on page 67 . ward to seeing IKEA use learning from this project to bring trans- formative change to recruitment standards affecting its supply chain. I hope it will also mobilise suppliers and other companies in their commitment to fair labour For many people, the opportunity – in the worst cases – bonded labour. Performance practices.” of work leads to a move away from We are committed to the responsible home. Around 232 million people in the recruitment of migrant workers and we Recruitment processes in many world today are international migrants, set clear standards for the recruitment countries involve complex layers and 105 million of whom are working. and employment of workers through practices, sometimes by multiple The process of recruiting and em- IWAY. We do not tolerate forced labour organisations. Lack of transparency ploying migrant workers can some- or human trafficking, and expect in the recruitment industry, as well times be associated with unethical and suppliers to respect rights such as as the fact that these issues often exploitative practices. The promise of a non-discrimination and transparency lie outside our suppliers’ sphere of better future can turn into a burden of of terms and conditions. influence and are difficult for them large debts from recruitment fees and to tackle on their own, can make it

BETTER LIFE FOR PEOPLE & COMMUNITIES | 74 HOME-BASED WORKERS SOCIAL ENTREPRENEURS

We want people to be able to work conditions of homeworkers. The minimum wage, and often more. Many in a way that fits with their everyday project reviewed and analysed the of the artisans are shareholders in the lives. For many who live in poverty, employment relationships and work- social enterprise where they work. working at home in the ‘informal’ ing conditions of these workers in One of our partners has reached full sector is an important way to bring in our rattan supply chain. The analysis IWAY compliance and all have at least family income. Short-term jobs such showed good performance in prevent- reached our minimum set of supplier as weaving can be very flexible and fit ing forced, bonded or child labour requirements – IWAY Musts (see page well around home life, but often offer and promoting basic safety at work. 61 ). We recommend our partners no guarantee of safe and fair working Increased health insurance coverage undertake third-party social impact conditions. was also observed among workers at audits and we are developing a social We work with suppliers in parts weaving centres. The areas requiring impact report template to guide this of our supply chain that traditionally improvements included the use of process. The template includes indica- rely on home-based workers – im- a written contract, payment of tors in areas such as expenditure plementing new working methods to minimum wages, strengthening on education, health insurance and standardise employment processes occupational safety and health, awareness, salary and skills increase, and conditions. And we partner with and increasing awareness on and waste and recycling. The results social entrepreneurs (see right) to labour standards – especially among of the first of these audits will be develop new avenues of employment women workers. The link between available in FY16. for traditionally home-based workers. sub-contracting, productivity and wages is complex. We are working Performance Performance to understand this better so that we can assess cases where the minimum In FY15, we continued our interna- In FY15, we focused on improving wage is not being reached and work Social entrepreneurs are people who artisans – mostly women who live tional partnerships with Rangsutra and working conditions in a supply chain with suppliers to remedy this where establish a business with the aim of in rural areas, with previously limited Industree in India and the Doi Tung in South East Asia traditionally needed. solving a social problem or effecting or no access to paid work and sustain- Development Project in Thailand, associated with the informal The project also identified some social change. able income. Now these women are launching three new collections and sector: natural fibre. specific challenges facing our rattan We have realised the huge poten- able to open bank accounts to save expanding production capacity. We carried out 573 audits at supply chain: supply issues (including tial of working with these enterprises. money. They are empowered to chal- We developed collections with two villages and weaving centres across irregular orders and rising produc- They fit a unique position, operating lenge cultural norms by developing a local partnerships in Denmark and the our natural fibre supply chain in tion costs) and the shortage of skilled on a much smaller scale than our profession outside the household while USA. Learn more about our partner- Indonesia and Vietnam, leading to weavers due to the trend for young larger suppliers (see page 60 ). continuing the local craft heritage. ship with the US-based Multicultural IWAY approval of of 406 villages and people to look for jobs elsewhere. We By forming solid long-term business We also collaborate with social Refugee Coalition (MRC) and their 65 weaving centres.1 We provided will use the findings to support our relationships with social entrepreneurs entrepreneurs providing work to subsidiary Open Arms here . We also training to third-party and suppliers’ suppliers in tackling these challenges. that share our values, we co-create immigrant and refugee women who continued a partnership with Yalla own auditors, increasing their capac- More on our natural fibre supply chain limited edition collections of unique are struggling with entering the local Trappan in Sweden, and formed a ity for future audits. The audit process on page 31 . handicrafts available in selected labour market. These local partner- partnership in Indonesia with APIKRI has led to improvements in working stores. These partnerships supply up ships supply one or two of our stores (The Indonesian People’s Handicraft conditions and labour rights for to 31 stores in five countries, using within the same country with limited Foundation) with the aim of developing home-based workers and within traditional handicraft methods such edition collections of upcycled IKEA a local handicraft collection. the weaving centres. as embroidery and weaving, and textiles and in-store sewing services. In FY16, we will launch at least 1 Often many households within a village are In Indonesia, we collaborated with involved in IKEA production, so we register villages natural materials such as banana Selection of social enterprise three further collections from our a project of the International Labour rather than individuals on our sub-supplier tracking fibre and ceramics. partners is based on the positive international partners, including one system. IWAY approval of a village is based on the Organization (ILO) which supports audit of a sample of households within a specific The social enterprises we partner social impact they have on their from Thailand and two from India. strategies to strengthen the labour community. with internationally employ local community. All pay at least the local

BETTER LIFE FOR PEOPLE & COMMUNITIES | 75 INVERKAN with Doi Tung Devlopment Project, Thailand (21 stores in STADIGT AND KRYDDGLAD with Rangsutra / Industree Producer Transform, India (31 stores in 5 countries) 3 countries) Rangsutra gathers together thousands of artisans into production cooperatives near their homes in remote This is the fourth collection from our partnership with the Doi Tung regions of Rajasthan and Uttar Pradesh. Many women in the world’s poorest communities struggle to maintain Development Project, which aims to enable the tribal villages in Chiang independence, and live with uncertainty about what the future holds for their families. We partner with social Rai to develop a self-sustained livelihood away from opium production. The enterprises like Rangsutra to offer new business opportunities and independence to these women. Project employs 1,700 people, including 470 artisans working with handicrafts. Its social mission is to revive lost natural forests and to improve healthcare and education in the community.

COLLECTIONS LAUNCHED IN FY15: 5

TOTAL COLLECTIONS LAUNCHED SINCE FY13: 9

NUMBER OF ARTISANS INVOLVED IN FY15: MORE THAN 2,000

VIBRERA with Place de Bleu Denmark (1 local store) HÅLLNING with Open Arms, USA (2 local stores) Place de Bleu supports immigrant women who are struggling to enter the Open Arms is breaking the cycle of poverty by providing refugee women with labour market in Denmark. The women sew, knit and crochet handmade living wage work through the manufacturing of textiles. Open Arms works with textiles, including our VIBRERA collection of 2,000 hand-sewn pillow and the Multicultural Refugee Coalition to provide sewing training and a variety of cushions – made from recovered IKEA materials. other social, community and educational support for refugee community.

BETTER LIFE FOR PEOPLE & COMMUNITIES | 76 LASTING CHANGES FOR PEOPLE & PLANET STATUS PERFORMANCE IN FY15 COMMUNITIES POSITIVE TARGETS Engage customers and co-workers in annual cam- As a result of the Brighter Lives for Refugees paigns for good causes to improve children’s lives campaign, the IKEA Foundation donated in some of the world’s poorest communities. Each EUR 10.8 million for UNHCR. And the Soft Toys for campaign will aim to raise EUR 15 million a year. Education campaign generated EUR 10.1 million.1

By August 2020, more than 500 co-workers from Since 2012, more than 300 co-workers from 33 around the world will have participated in IKEA countries have been on 46 IWitness trips across Foundation IWitness trips by visiting schools and the globe. communities that are supported by IKEA’s annual good cause campaigns.

All IKEA Group units will engage in local community We created a cross-organisational working group to activities in line with People & Planet Positive, look at how we work with local communities, with based on local needs assessment and co-worker the aim of developing a consistent approach and engagement. enabling us to better assess impacts.

IKEA FOUNDATION TARGETS 2 STATUS PERFORMANCE IN FY15

By June 2015, the IKEA Foundation will implement Expansion of the Child Protection Programme with programme(s) to promote children’s rights, fight Save the Children in Pakistan will support as many child labour and create opportunities for families as 1.5 million Pakistani children living in cotton living in cotton supply chain communities in India growing communities. New partnership with Forest and Pakistan, and leather supply chain communities Trends started working with children and families liv- in Brazil. ing near leather supply chain areas of the Amazon.

By December 2015, the IKEA Foundation will develop Partnership with Water.org finalised in 2015. programmes to help families and communities Programme activities will start in early 2016. We are part of a global community, Group. It supports projects in some of secure access to safe water in water stressed areas and we want to empower people to the world’s poorest and most vulner- of India and Indonesia. create better lives for themselves, able communities, with a particular whoever and wherever they are. focus on children and their families. By 2015, the IKEA Foundation aims to have launched Partnership with UNDP launched in October 2015. Many diverse economic, environ- Locally, we want our stores and a programme to help women in India develop the mental and social pressures can make other facilities truly to be part of their skills they need to improve their income and succeed it difficult for families and communi- community by contributing time, in India’s changing economy. ties to lift themselves from poverty. resources and expertise in whatever Our efforts to enable positive change way is most useful. We encourage By end of 2020, the IKEA Foundation will contribute Committed EUR 400 million through 2020. become even more important as our co-workers and customers to EUR 400 million to support families and communities climate change magnifies these chal- get involved in creating change, who are most impacted by climate change. lenges – contributing to conflicts, often through partnerships with altering living conditions and further local organisations. 1 Figures for the Soft toys for Education campaign are from November limiting access to already precious Read more about our wider and December 2014, figures for the Brighter lives for refugees campaign Achieved Ongoing Not achieved are from February and March 2015. resources. The IKEA Foundation is the contributions to socio-economic 2 IKEA Foundation targets from the People & Planet Positive strategy have been updated to reflect evolving focus and ambitions. philanthropic arm of Stichting INGKA development on page 86 . Foundation, the owner of the IKEA

BETTER LIFE FOR PEOPLE & COMMUNITIES | 77 THE IKEA FOUNDATION

A good example is the development Foundation’s Brighter Lives for of the Better Shelter unit. This began Refugees campaign . These as a partnership with the United funds will enhance the lives Nations High Commissioner for of 380,000 refugees in Refugees (UNHCR) and the Refugee Bangladesh, Chad, Ethiopia Housing Unit, with the aim of and Jordan by providing solar developing a safer, more durable street lights, solar lanterns and emergency shelter for refugee other renewable energy solutions, families. Following the testing of as well as education. around 50 prototype shelters in • Leather is used in some IKEA prod- 2014, the lightweight flat-pack shelter ucts. The IKEA Foundation’s partner- is now a commercial product. ship with Forest Trends contributed This collaborative effort, combining to a better future for children in technical innovation with Democratic leather supply chain communities Design ideas (see page 32 ), led in the Amazon , by enabling more to a practical and affordable shelter sustainable incomes and preserving that provides safety, dignity and cultural traditions within the Surui comfort for displaced families. and Yawanawa tribes. Read more here . • Cotton is one of the main materials In June 2015, the IKEA Founda- used in IKEA products. Expansion tion’s partner, Médecins Sans Fron- of the IKEA Foundation’s Child tières (MSF), ordered 50 Better Shelter Protection Programme with Save units to use as temporary healthcare the Children in Pakistan will facilities following the devastating support as many as 1.5 million earthquake in Nepal. The shelters Pakistani children living in the enabled MSF to provide survivors with cotton growing communities by basic primary healthcare until more providing better access to education, permanent buildings could be con- local child protection committees The IKEA Foundation is the philan- more at www.ikeafoundation.org and a commitment of EUR 600 million structed. The IKEA Foundation also and healthcare. thropic arm of Stichting INGKA www.facebook.com/IKEAfoundation . for investments in renewable energy, gave UNICEF EUR 3 million and Save Foundation, the owner of the IKEA combining to a total commitment of the Children EUR 100,000 to fund life- Group. It aims to improve opportuni- In 2015,1 the IKEA Foundation: EUR 1 billion for action on climate saving support for the many children ties for children and youth in some change. Read more here and affected by the tragic earthquake. 1 Data from the IKEA Foundation applies to the calendar year from 1 January 2015 to of the world’s poorest communities • Donated funds to 45 organisations on page 9 . 31 December 2015. Figures below are correct by funding holistic, long-term pro- globally 2 New and continuing projects as at 11 November 2015. 2 The IKEA Foundation annual review, due to be grammes that can create substantial, • Supported 178 million children since Innovating together published in March 2016, will include the total lasting change. The IKEA Foundation 2009 Here are some of the ways the IKEA amount donated to these organisations. works with strong strategic partners • Celebrated 15 years of working in The IKEA Foundation and its partners Foundation enabled children to build a applying innovative approaches to India value innovation to create better op- better future in 2015: achieve large-scale results in four • Added a new focus on climate portunities for children and families. More on our leather supply fundamental areas of a child’s life: change with a commitment of This enables each project to reach • Sales of LED light bulbs in our chain on page 30 . a place to call home; a healthy start EUR 400 million through 2020 to as many people as possible and stores during February and March in life; a quality education; and a support communities most affected. creates sustainable change with 2015 generated EUR 10.8 million More on our cotton supply sustainable family income. Learn During FY15 the IKEA Group made limited resources. for UNHCR through the IKEA chain on page 28 .

BETTER LIFE FOR PEOPLE & COMMUNITIES | 78 SOFT TOYS FOR EDUCATION

Our Soft Toys for Education cam- build children’s educational projects. up 40 community early-childhood pre-recorded lessons and radios to engage co-workers, customers and paign started in 2003. The idea was Since then, the campaign has development centres in China, pro- families impacted by the Ebola virus partners on children’s rights. Next simple: the IKEA Foundation would raised EUR 77 million, supporting 99 viding educational support for care- in Sierra Leone. Read more about the year, we will broaden our focus be- donate EUR 1 for every soft toy sold projects in 46 countries. Most impor- givers and children with disabilities in campaign here . yond the soft toys campaign so that in participating IKEA stores during tantly, these projects have reached Indonesia, developing community- The Soft Toys for Education we can have an even bigger impact. November and December each year, more than 11 million children.1 based child-protection systems in campaign has been successful, but 1 Includes data up to IKEA Group FY15 (November for Save the Children and UNICEF to Projects have included setting Myanmar (Burma) and providing we think we can do even more to and December 2014)

BETTER LIFE FOR PEOPLE & COMMUNITIES | 79 ELAINE CHAN, HONG KONG TATIANA MARRA, ITALY Visiting China, September 2012 Visiting Bangladesh, May 2014

“With our support, children not “Leaving this area is difficult. We only get essential stationery, met people who have touched the desks and a nice campus, but heart. The last call through the car also find the confidence to build window is the demand from a kid: their future, bringing hope to their ‘Do not forget us’.” families”

IWITNESS

What difference does the sale of a what a difference this funding makes even more of a difference at home. single light bulb make? Can a soft toy in the lives of children in some of the These trips enable co-workers to change lives? The IWitness pro- world’s poorest communities. connect the work they do with the SATU LÄNTINEN, FINLAND PEDRO LUKAU, AUSTRIA gramme enables co-workers from Since 2012, more than 300 co- work of the IKEA Foundation, and we Visiting Mozambique, June 2015 Returning home to Angola, around the world to learn about the workers from 33 countries have been hope it makes them proud to be part September 2014 wider impacts of their everyday work. on 46 IWitness trips across the globe. of the campaigns. Each year, co-workers are given They have visited countries from Our goal is for more than 500 “…the most inspiring parts of our “Seeing the positive changes the opportunity to visit projects run Angola to Vietnam. We are proud of co-workers from around the world to journey were the meetings with is priceless. The IWitness pro- by Save the Children, UNHCR and the difference IWitness has made – have participated in IKEA Foundation children. A chance to participate gramme has left a very big UNICEF, supported by the IKEA not just to the communities visited IWitness trips by August 2020. in their games and activities and impression on me. This trip has Foundation through the Brighter by our co-workers, but also to the Read more here , and watch the IWitness many joyful and some- changed my life.” Lives for Refugees and Soft Toys co-workers themselves. Many of them video of our co-workers talking times shy performances. This for Education campaigns. return from their experiences feeling about their experiences. journey will surely stay in our Co-workers get to see first-hand emotional, inspired and ready to make memories for a long time.”

BETTER LIFE FOR PEOPLE & COMMUNITIES | 80 CUSTOMER AND CO-WORKER INVOLVEMENT WITH LOCAL COMMUNITIES

to provide nine temporary houses for homeless people in Geneva. A second partnership with Kinderspital Zurich saw CHF 200,000 and the efforts of 100 co-workers contribute to the renovation and redecoration of the parents’ house – an important place for parents of seriously ill children to rest close to the hospital. • USA. Our distribution centre in Savannah, Georgia began a partnership with non-profit organisation Emergent Structures in FY12, sharing a vision for a community greenhouse made from recycled materials. Their aim was to support sustainable farming practices in a low income neighbourhood, providing fresh organic produce free of charge to residents with limited access to nutritious groceries. In FY15, co-workers were involved in putting the finishing touches to the “Dug- House”, including installing solar panels and a rainwater catchment system. • Vietnam. In January 2015, co-workers joined with the Lien Tam charity group and supplier partners to distribute packages containing food and other useful items to prepare Our stores, distribution centres and Performance Here are some examples of local and • Slovakia. IKEA Industry Jasna for Tết – Vietnamese New Year. They factories are proud to be part of their regional community engagement ac- participated in several community delivered 350 packages for house- local communities. They provide In FY15, we created a working group tivities in FY15: projects in FY15. These included holds and 150 for children, brighten- jobs, goods and services, and work to look at how we can improve and educating kindergarten children ing the celebrations for families that to make positive contributions to the measure our contributions to commu- • Netherlands. Our IKEA Baren- about the environment, providing could not otherwise have afforded to local economy and environment. We nities around the world. The group is drecht store donated EUR 1 from furniture to Red Cross crisis centres join in. Later in the year, co-workers encourage customers and co-workers developing a structured approach and every children’s meal sold in FY15 and supporting the reconstruction contributed to the improvement of to work together to enable better lives identifying the best ways to assess to two local hospitals. This funded of a wheelchair-accessible park for a educational facilities at schools in for their local communities. We know the impacts of our many community a kitchen to provide healthy food to local school. Vietnam and Indonesia by renovat- from experience that even the small- activities. We hope this will enable us bedridden children and a house for • Switzerland. IKEA Switzerland ing classrooms and providing new est changes can make a big difference. to share good examples and contribute families visiting their children with partnered with Carrefour-Rue, do- equipment. more to the vitality of community life. cancer. nating furniture and design expertise

BETTER LIFE FOR PEOPLE & COMMUNITIES | 81 GOVERNANCE AND ETHICS

Sustainability is one of the cornerstones of our business strategy, and we want it to be integral to the daily work of all our co-workers. This will help to create a more sustainable business, enabling us to achieve our vision of a better everyday life for the many people. There are many things we cannot do alone, so we partner with others to increase the impact that we can have.

GOVERNANCE AND ETHICS | 82 IKEA GROUP OF COMPANIES

The IKEA Group of companies Group, located in Leiden, the The IKEA Group operates (INGKA Holding B.V. and its con- Netherlands. As per 31 August throughout the whole value chain trolled entities) has an ownership 2015, its Supervisory Board from range strategy and product structure that ensures independ- consists of: Lars-Johan Jarnheimer development to production, ence and a long-term approach. (Chairman), Stina Honkamaa distribution and retail. This Stichting INGKA Foundation in Bergfors, Tore Bertilsson, Luisa includes our own manufacturing the Netherlands is our owner, and Delgado, Jonas Kamprad, Göran units, purchasing operations its funds can be used in only two Lindahl, and Lone Fønss Schrøder. offices, distribution and customer ways: it can be reinvested in the Ingvar Kamprad, the founder of distribution centres, shopping IKEA Group or donated for charita- IKEA, is senior advisor to the centres and 328 stores in 28 ble purposes through the Stichting Supervisory Board. The IKEA countries. In total, the IKEA IKEA Foundation. Group is led by its President and Group has operations in 43 INGKA Holding B.V. is the CEO, Peter Agnefjäll, together with countries. parent company of the IKEA the Group Management team.

Charity Stichting IKEA Foundation THE IKEA GROUP Stichting INGKA Foundation OPERATES STORES UNDER Owner of the IKEA Group Management of financial assets Stichting IMAS Foundation FRANCHISE AGREEMENTS

The IKEA Group is one of 13 franchisees, operating IKEA stores under franchise agreements with Inter IKEA Systems B.V., the owner The IKEA Group Chairman of the supervisory board: Lars-Johan Jarnheimer (INGKA Holding B.V. and its controlled entities) President and CEO: Peter Agnefjäll of the IKEA Concept and the worldwide IKEA franchisor. Inter IKEA Systems B.V. is based in the Netherlands and owned by the Inter IKEA Group. Inter IKEA Group and IKEA Group are RANGE & RETAIL & PRODUCTION GROUP FUNCTIONS two separate groups of companies with differ- SUPPLY EXPANSION 43 Business Navigation & Finance • Property ent management and different owners. Production Units 9,500 328 Corporate Communications • HR All IKEA franchisees – also IKEA franchisees 20,500 Products IKEA Group Stores Legal & Governance • Sustainability that do not belong to the IKEA Group – pay a Co-workers 27 116,500 3 % franchise fee to Inter IKEA Systems B.V. Trading Service Offices Co-workers Risk Management & Compliance The franchise fee gives us, as an IKEA retailer, Strategy, Process, Organisation & IT 15 the right to operate stores under the IKEA Customer Distribution Centres Concept and IKEA brand. It grants access to systems, methods and proven solutions as well 33 CENTRES Distribution Centres Shopping centres as staff trainings, manuals and updates of the IKEA concept such as store layouts, fittings and 18,000 Co-workers display concepts. ASSET MANAGEMENT Financial & Core related assets

GOVERNANCE AND ETHICS | 83 SUSTAINABILITY GOVERNANCE AND MANAGEMENT

Sustainability is central to everything Compliance, Sustainability Communi- LEARNING FROM STAKEHOLDERS and responsibility to inspire our 771 more sustainable life at home and cre- we do. It is one of the four corner- cation and Sustainability Innovation. million visitors to our stores and 1.9 ate a better future for people and the stones of the IKEA Group direction, The group helps to co-ordinate efforts We learn a lot from working with billion visitors to IKEA.com to live a planet. To read more see page 20 . ‘Growing IKEA Together’, and critical and make key decisions on sustainability. our partners and listening to our to our success. Each business plan for Progress against our sustainability ob- stakeholders. We regularly invite our Topic Partnership Page every IKEA business unit specifies how jectives is reported to Group Manage- customers, suppliers, NGOs and other Ellen MacArthur Foundation CE100 – a global platform 47 it will contribute to our sustainability ment and the Board of Directors every stakeholders to give feedback on Circular economy of companies and innovators aimed at accelerating the objectives. three months. our sustainability performance and transition to the circular economy. Our Chief Sustainability Officer, Risks or concerns relating to direction. Using their advice we can We Mean Business – a coalition of organisations that 10 Steve Howard, has overall respon- sustainability are flagged by Group develop our strategy and improve Climate change brings together businesses, organisations and investors sibility for performance against the Sustainability to the IKEA Group Risk the way we work. to accelerate action on climate change. sustainability commitments within Committee. The committee includes Our dedicated Advisory Group, RE100 – an international initiative to support companies Growing IKEA Together and the three members of Group Management, established in FY13, has provided 10 aiming to be 100% renewable. People & Planet Positive strategy. and meets around four times a year. valuable input to help us develop Steve is a member of Group The most serious risks are commu- and strengthen our People & Planet Fair wages Fair Wage Network – an NGO committed to promoting fair 72 wage practices in companies’ own operations and in their Management and reports directly nicated to Group Sustainability and Positive strategy over the years. The supply chain. to the Group President and CEO, the IKEA organisations concerned for Advisory Group did not meet in FY15, Peter Agnefjäll. further action if needed. as the planned meeting was delayed. Migrant NEW: International Organization for Migration (IOM) – an 74 inter-governmental organisation that works with migrants, All co-workers are responsible for We plan to engage them during FY16 workers governments and businesses to respond to growing sustainability in their area of work. WORKING WITH OTHERS and will report on the outcomes in our migration challenges. Hundreds of people across IKEA have next Sustainability Report. Forest Stewardship Council (FSC) – a multi-stakeholder 25 social and environmental objectives as We can achieve much more when In FY15, we have focused on de- Responsible sourcing initiative that aims to promote the responsible manage- part of their formal job description. we join with others. We partner with veloping a more strategic engagement ment of the world’s forests. Each business unit and country retail governments, industry organisations, strategy. We are conducting a mapping World Wide Fund for Nature (WWF) – an international NGO. 24-27 organisation has a sustainability NGOs and trade unions across our sus- exercise to ensure that we have identi- We focus our work together on transforming the market 50 organisation, and the larger busi- tainability focus areas, to strengthen fied the organisations and individuals for cotton and wood to more sustainable sources. ness units have their own dedicated our efforts and increase our positive most critical to our focus areas. We Better Cotton Initiative (BCI) – a multi-stakeholder 28 sustainability team and sustainability impact on people and the planet. anticipate that by taking a more sys- initiative that aims to improve global standards in managers, some of whom are also Our partnerships stretch across our tematic approach, we can have a much cotton production. members of the management teams value chain – from sourcing, to pro- greater impact in the areas that mat- Aquaculture Stewardship Council (ASC) and Marine Stew- 30 of those organisations. They are sup- duction, stores and even customers’ ter most to us and our stakeholders. ardship Council (MSC) – leading organisations that provide ported by the central Group Sustain- homes. certification for the sustainability of aquaculture and sea- ability team, which reports to Steve Read more about our key partner- ENGAGING CO-WORKERS AND food, respectively, and drive the sustainability agenda. Howard and focuses on sustainability ships in the relevant sections of this CUSTOMERS NEW: United Nations Food and Agriculture Organization 26 policy and compliance, reporting, and report, listed to the right. (FAO) – an international organisation that leads efforts communications and innovation. All 155,000 of our co-workers play to defeat hunger. Our work will focus on eliminating the The Sustainability Management The IKEA Foundation’s partnerships an important role in achieving our barriers to sustainable forest certification, promoting Group, chaired by Steve, brings with UNICEF, War Child, Médecins sustainability goals. We run regular sustainable forest management and improving everyday together sustainability managers Sans Frontières and others focus on engagement campaigns and commu- life for people in rural areas. from the main business areas – Retail improving the lives of children and nications to engage them in sustain- NEW: VIA (Value and Impact Analysis) Initiative – a 26 and Expansion, Range and Supply refugees in some of the world’s ability. To find out moresee page 20 new collaboration coordinated by the ISEAL Alliance to and IKEA Industry – as well as the poorest communities. and page 53 . promote the benefits of using legal, responsibly sourced Heads of Sustainability Policy and We also have a great opportunity and sustainable timber, and establishing the role of FSC in securing this.

GOVERNANCE AND ETHICS | 84 BUSINESS ETHICS

Honesty, respect, integrity and fair- to third parties, such as suppliers and were considered out of scope as they distribution, manufacturing or any In FY15, our total tax charge was more ness are core to our way of working. shopping centre tenants. did not involve IKEA co-workers, or other business, we pay our taxes in than EUR 1.5 billion. We also collected We work hard to ensure co-workers there was insufficient information full compliance with national and substantial taxes on behalf of across the company feel this culture ANTI-CORRUPTION available. international tax rules and regulations. governments, such as VAT and and understand the way we do busi- Corporate income tax increased employee taxes. ness. We lead by example to help co- Corruption of any kind conflicts with TAXES to EUR 822 million, with an effective By growing our business we create workers understand and comply with our goal of achieving low prices and corporate income tax rate of 18.9 % jobs, both within the IKEA Group and our Code of Conduct, ‘Good Business contributing positively to the com- We are committed to managing (19.3 % in FY14). Local and other among our suppliers and partners, with Common Sense’. We have a zero- munities where we operate. Inspired our operations in a responsible taxes, such as property, business and which contributes to the local economy tolerance policy for corruption, alcohol by the UN Global Compact guidance, and sustainable way. Wherever the environmental taxes together with by generating tax incomes. and drug abuse, and harassment. we assessed risks of corruption across IKEA Group is present with stores, custom duties, totalled EUR 700 million. It is important to us that all our our business in FY15. This helped us co-workers act in line with our values. identify and prioritise high-risk areas, We provide clear guidance to manag- and we are reviewing our internal anti- ers and co-workers on how to handle corruption policy and standard as a re- cases of suspected misconduct. Risk sult of the findings. We will complete a FY11–FY15 TAX managers conduct regular risk assess- more extensive risk-mapping exercise Over the last five years (FY11–FY15), corporate income tax ments on co-worker misconduct at in FY16, which will also include IKEA and other taxes amounted to approximately EUR 7.2 billion. regional and country level. We inves- Centres. tigate all suspected policy breaches No one acting on behalf of the promptly and thoroughly. In FY15, we IKEA Group may accept or offer updated the IKEA Group Rule of Inves- bribes, kickbacks or loans, or engage Millions of Euros tigation to enhance consistency and in any other corrupt practices. Our accountability in our internal investiga- Code of Conduct and detailed Rules 1,600 tions into misconduct. on Prevention of Corruption outline We always strive to communicate our expectations of co-workers and 1,400 in an open and honest way and we suppliers, and explain what to do if 1,200 encourage co-workers to raise any corruption or misconduct is suspected. concerns about misconduct. Anyone To ensure co-workers understand the 1,000 reporting a concern in good faith will importance of this issue, we hold Code be treated with respect and fairness. of Conduct training for all co-workers, 800 Co-workers can raise concerns which includes a focus on anti-corrup- confidentially by phone or online tion. Range & Supply, our purchas- 600 through our trust line – now open 24/7 ing operations, are considered more and available in local languages across exposed to corruption risks. We have 400 43 countries. Trust line managers therefore launched a learning offer on 200 evaluate all concerns and escalate to business ethics for a specific group of HR or Risk managers where appropri- co-workers working in this area. 0 ate. In FY15 we rolled out the trust In FY15, the trust line received 2011 2012 2013 2014 2015 line in France and Germany as well as 18 reported incidents of crime or in IKEA Centres, our global shopping corruption, 13 were investigated, and centre company. We are also explor- of these, 8 were allegations relating Corporate Income Tax Other Taxes and Duties ing the potential to make it available to corruption. Those not investigated

GOVERNANCE AND ETHICS | 85 PUBLIC POLICY AND ADVOCACY

By sharing what we do, and taking 3. People & Planet Positive. We ad- Russia, Sweden, and the USA. Their action, and beyond, we will be an ac- More on our approach to tackling clear positions on the issues that mat- vocate for change in society that engagement efforts helped to secure tive voice for a low-carbon economy. climate change on pages 9-10 . ter most, we can contribute to positive benefits people and the planet, some important achievements: change in society. That is why we en- including policies that tackle climate • During the United Nations Frame- Forestry. By 2020, 100% of the gage in public policy debates and work change and unlock the business • IKEA France played a key role in work – Convention on Climate wood we source will be from more with governments, NGOs and other innovation and investment needed the lead up to the COP21 meet- Change (UNFCCC) in Bonn in June sustainable sources. We want to businesses to tackle big issues that af- to accelerate the transition to a ing in Paris in December 2015. The 2015, IKEA Group and the IKEA have an impact beyond our own fect business and communities. low-carbon economy. IKEA France Country Manager met Foundation announced a total of supply chain, and so we advocate for In FY15, we rolled out our Corpo- 4. IKEA as a great place to work. with the French President, François EUR 1 billion for climate action, effective legislation that conserves the rate Communication and Public Affairs We will show what we do as a Hollande to discuss our position on made up of EUR 600 million from world’s forests and prevents illegal Strategic Plan. The plan will streamline responsible employer while also climate policy. IKEA Group for investments in re- logging. We work closely with NGOs, our public policy and advocacy activi- responding to customers’ expecta- • The IKEA USA Country Manager met newable energy, and EUR 400 million governments and other businesses ties. The four key areas of action are: tions and needs. We will strive for with members of Congress to build from IKEA Foundation to support globally to achieve this. co-worker relations that reflect our relationships and discuss key topics the communities most impacted by 1. Our contribution to investments and values, with equality and human such as the minimum wage, renew- climate change. See page 9 . • In FY15 we responded to the public growth in society. We explain how rights as top priorities. able energy and our growth across • Through initiatives like We consultation on the EU Timber our growth, expansion and invest- the USA. Mean Business, RE100 and the Regulation (EUTR) by relaunching ment plans bring value to society at We are implementing this plan across • IKEA China is supporting RE100, a #go100percent campaign we are the Timber Retail Coalition with fel- large and environmental solutions. the countries where we operate, to group of companies committed to working to inspire and encourage low founding members: Kingfisher, 2. Product market requirements. We ensure public policy and advocacy going all-in on renewable energy other organisations and millions of Carrefour and Marks & Spencer. are working on product safety, activities are implemented in a way campaign, as it seeks to identify people globally to take action on The coalition advocates for sustain- standardisation, chemical require- that is relevant to the local market ways to scale up renewable energy climate change. See page 10 . able forest management and we ments, labelling and communication and situation. In FY15, the plan was in China. This shows our commit- • Our Chief Sustainability Officer, are working together to advocate for consumers, and healthy, safe piloted in eight markets: China, ment to renewable energy and Steve Howard, discussed the with all levels of government in the and sustainable food. France, Germany, India, Poland, enables us to have a dialogue with European Council’s Energy Union EU to ensure that regulation is both policy makers and specialists. strategy with seven European heads effective and workable. Our Global of state at a meeting hosted by the Forestry Manager spoke at the Euro- STEFAN SJÖSTRAND, Country Retail ADVOCACY Prime Minister of Denmark, Helle pean Parliament to share our experi- Manager of IKEA Canada, speaking at Thorning-Schmidt. Steve also repre- ences on implementing the EUTR. the Climate Summit of the Americas in During FY15, we engaged with local, sented IKEA at Climate Week in New • We contributed to the global forest July 2015 national and regional governments York in September 2015, following debate at the XIV World Forestry on a number of sustainability issues. the success of Climate Week in 2014 Congress in South Africa, advocating Our main public policy activities on when both Steve and our CEO, Peter for responsible forestry and a halt to sustainability were: Agnefjäll represented IKEA at the illegal logging and deforestation. People’s Climate March in New York. • We also work closely with WWF to Climate change. Strong policies are • We led discussions on the business fight illegal logging and boost levels critical to create the stable, long-term case for renewable energy at the of FSC certification, see page 24 . framework needed for businesses to World Future Energy Summit (WFES) invest in transforming their opera- in Abu Dhabi, alongside other busi- More on our approach to sourcing tions and providing the products and nesses and organisations that are wood from more sustainable sources services for the future. World leaders members of RE100. And we continue on page 25 . gathered in Paris in December 2015 to contribute to discussions with the to agree a way forward on climate European Commission on EU 2030 change. In this critical year for climate energy and climate targets.

GOVERNANCE AND ETHICS | 86 Circular economy. The traditional More on our work to convert to a ABOUT OUR REPORTING linear business model of creating ‘Circular IKEA’ concept on page 47 . products that eventually become waste is outdated. We support the In FY15, we wrote to a number of This Sustainability Report updates provided by Inter IKEA Systems B.V. in society. See page 8 . shift to a circular economy, and are new European Union Commission- stakeholders on the progress IKEA is We aim to measure and manage our We seek input to the strategy from using our influence and reach to ers to welcome them and set out our making in creating positive change for impacts across our full value chain. We our key stakeholders to ensure that its advocate for change. In FY15, we approach on key topics, including: people and the planet. We are ambi- use reported data for water use and focus and commitments are as close responded to public consultations resource efficiency and the circular tious in our objectives, which means carbon emissions in our operations to their expectations as possible. on the circular economy and the economy, climate change, energy that we may not always achieve our and tier 1 suppliers, and models and The document is designed primar- way waste markets work. efficiency and renewable energy, and goals. We are open about our chal- estimations to assess our full value ily for our stakeholders who want a sustainable food. IKEA is also repre- lenges and setbacks, as well as our chain. detailed account of our approach and • We met with Members of Cabinet sented in the Board of Directors of successes, and listen to feedback to During FY15, we opened 13 new performance relating to our sustain- from the offices of Commissioners Eurocommerce and in the Business help us improve. Sometimes we make stores in nine countries. IKEA Industry ability strategy. Katainen, Vella and Timmermans, to Group of European Retail Round Table mistakes, and when this happens we began operations in one new factory We also produce a summary of our feed into the new circular economy (ERRT) where we try to engage in are committed to putting things right. in Stalowa Wola, Poland. Data from key achievements for our co-workers, proposal by the European Commis- policy discussions at early stages. The information in this report, these units is included from when they which we make available externally. sion. The package will be launched We continue to encourage the Europe- unless otherwise stated, is for the began operation. This report is an account of our at end of 2015. an Commission to develop a compre- financial year 2015 (FY15) from 1 Sep- performance against our People & • We work with other businesses hensive policy on endocrine disrupting tember 2014 to 31 August 2015. Data Defining the report’s content Planet Positive strategy. Targets, key through the Circular Economy chemicals (EDCs) for all EU states, from the IKEA Foundation applies to performance indicators (KPIs) and 100 (CE100) group, and the Ellen which takes into account their poten- the calendar year from 1 January 2015 The commitments and targets in our content relate to this strategy. When MacArthur Foundation. tial to harm people and wildlife. to 31 December 2015, unless other- People & Planet Positive strategy are additional information is necessary to • Together with a director from the wise stated. based on the most significant sustain- give a full account of our sustainability European Commission, our Head The information and data in ability issues across our value chain, performance or to meet the needs of of Sustainability for Retail & Expan- this report covers all wholly owned and the areas where we can make the our stakeholders, we include content sion is the co-chair of the Retailers’ companies in the IKEA Group (see greatest positive difference. The strat- and KPIs relating to other strategies Environmental Action Programme page 83 ), except for IKEA Cen- egy defines our vision for ensuring such as the IKEA People Strategy. (REAP) - an EU multi-stakeholder tres, our new global shopping centre the long-term success of IKEA – how initiative exploring sustainable organisation which is excluded due to we are making the company fit for a production and consumption. lack of internal reporting systems to sustainable future and how we can gather this information. IKEA Cen- contribute to accelerating that change tres was formed in FY15, to combine the former Inter IKEA Centre Group (IICG), Ikano Retail Centres and our We support the UN’s 2030 Development existing Russian shopping centres. It now owns and operates 58 centres agenda, “Transforming our world”, and across 13 countries. We are taking the 17 Sustainable Development Goals action to be able to include data from IKEA Centres in future reporting. Data published in September 2015. for IKEA stores operated by other retailers outside the IKEA Group is not reported. Any other exclusions are stated in the text. In some cases, data For more on our approach to these goals and progress against them, has been estimated and this has been see pages 88-91 . indicated in the text. Information and data regarding the IKEA catalogue is

GOVERNANCE AND ETHICS | 87 GRI, THE UN GLOBAL COMPACT AND THE SUSTAINABLE DEVELOPMENT GOALS

Global Reporting Initiative (GRI) different ways we are already contributing, based on our People & Planet UNITED NATIONS GLOBAL COMPACT (UNGC) PRINCIPLES LOCATION IN FY15 REPORT We use the Global Reporting Initia- Positive strategy. tive (GRI) guidelines on sustainability Human rights reporting to inform our reporting. We welcome the GRI’s G4 focus on mate- Principle 1 Businesses should support and respect the Supporting human rights, page 70 riality and reporting of impacts across protection of internationally proclaimed human the value chain. We align with this rights; and approach by focusing our reporting on Principle 2 make sure that they are not complicit in human Supporting human rights, page 70 our People & Planet Positive strategy, rights abuses. Better lives for workers in our supply chain, page 60 which covers our material impacts across the value chain. Labour

United Nations Principle 3 Businesses should uphold the freedom of Better lives for our co-workers, page 53 Global Compact (UNGC) association and the effective recognition Better lives for workers in our supply chain, page 60 of the right to collective bargaining; Supporting human rights, page 70 We are a signatory to the United Nations Global Compact, a set of Principle 4 the elimination of all forms of forced and Supporting human rights, page 70 compulsory labour; Better lives for workers in our supply chain, page 60 10 principles in the areas of human rights, labour, environment and anti- Principle 5 the effective abolition of child labour; and Responsible sourcing, page 23 corruption. The UN Global Compact Supporting human rights, page 70 Reference Table (right) shows where Better lives for workers in our supply chain, page 60 we report our progress regarding the Better lives for our co-workers, page 53 10 principles. SIMON HENZELL-THOMAS Principle 6 the elimination of discrimination in respect of Better lives for our co-workers, page 53 employment and occupation. United Nations Sustainable Stakeholder Engagement & Supporting human rights, page 70 Better lives for workers in our supply chain, page 60 Development Goals Partnerships Manager, IKEA Group Environment In September 2015, the United Nations “We welcome the SDGs as a launched the Sustainable Development tool for encouraging progress Principle 7 Businesses should support a precautionary Resource and energy independence, page 22 Goals (SDGs) as part of Transform- towards a more sustainable and approach to environmental challenges; ing Our World – the 2030 Agenda for equal world. All parts of society Sustainable Development. These goals have a role to play in contributing Principle 8 undertake initiatives to promote greater A more sustainable life at home, page 11 build on the Millennium Development to their success, including busi- environmental responsibility; and Resource and energy independence, page 22 Goals. ness. IKEA can do a lot through Principle 9 encourage the development and diffusion of A more sustainable life at home, page 11 We will work with the SDGs to its own actions, and we have a environmentally friendly technologies. Resource and energy independence, page 22 assess our approach and progress great opportunity to inspire towards creating a positive impact for others to act, including our Anti-corruption people and the planet. See the table suppliers, co-workers and on page 89 for examples of the customers.” Principle 10 Businesses should work against corruption in all Business ethics, page 85 its forms, including extortion and bribery.

GOVERNANCE AND ETHICS | 88 SUSTAINABLE DEVELOPMENT PEOPLE & PLANET POSITIVE STRATEGY WHAT IKEA GROUP AND IKEA FOUNDATION ARE DOING GOAL

End poverty in all its Our vision is to create a better everyday life for the many peo- • Contributing to better lives for people and communities throughout our value chain, page 52 forms everywhere ple. We are committed to having a positive influence on people’s • Working with social entrepreneurs to effect social change, page 75 lives across our value chain; supporting positive economic, • The work of the IKEA Foundation aims to improve opportunities for children and youth in some of social and environmental development, promoting equality and the world’s poorest communities, page 78 placing respect for human rights at the centre of what we do.

End hunger, achieve We aim to enable and encourage a more balanced and healthy • Responsible sourcing of ingredients for IKEA Food products, and promoting sustainable farming food security and diet, and we strive to source our ingredients from more sustain- practices, page 30 improved nutrition and able sources that are better for people and the planet. • Offering healthier and more sustainable food products for our customers and co-workers, promote sustainable page 14 agriculture

Ensure healthy We want to inspire and enable our customers to live a more • Promoting and enabling more sustainable and healthy life at home through our products lives and promote sustainable and healthy life at home. and solutions, page 14 well-being for all at • The IKEA Foundation prioritises giving children a healthy start in life, page 78 all ages

Ensure inclusive We offer our co-workers excellent learning and development • Launching a new way of working with talent, succession and learning for all co-workers, page 58 and equitable quality opportunities in their daily work. Our global campaigns for a • IKEA Foundation aims to ensure children get a quality education, for example it is expanding education and promote good cause, such as Soft Toys for Education, engage customers its Child Protection Programme in cotton growing communities with Save the Children, lifelong learning and co-workers to improve children’s lives. page 78 opportunities for all • The IKEA Foundation has donated EUR 77 million since 2003 for 99 children’s education projects in 46 countries as a result of the annual Soft Toys for Education campaign, page 79

Achieve gender We want to create a fairer and more equal society. Starting in • Updated the IKEA Group Diversity and Inclusion Approach to guide our leaders in creating a equality and empower our own operations, our goal is to reach gender balance in key diverse and inclusive workplace, page 56 all women and girls leadership positions. • Supporting more women into leadership positions through the IKEA Women's Open Network (IWON), page 56 • Partnering with social enterprises that employ artisans – mostly women who live in rural areas - and empowering them to develop sustainable incomes, page 75 • IKEA Foundation supports women’s empowerment programmes, page 77

Ensure availability We aim to become water positive by promoting water steward- • Supporting our suppliers to improve their water management and water treatment practices, and sustainable ship throughout our value chain. We contribute to improved page 49 management of water management in water stressed areas where we operate, • Reducing the amount of water we use in our own operations, page 44 water and sanitation focusing on both water use and water quality, and improving • Developing products that enable customers to reduce water use, page 18 for all access to clean water. • Working with WWF on water projects in India and Pakistan, page 24

Ensure access to We will become energy independent by being a leader in • Invested EUR 1.5 billion in renewable energy since 2009, and committing another EUR 600 million affordable, reliable, renewable energy and improving energy efficiency in our in 2015 as we aim to generate renewable energy equivalent to all the energy we use, page 9 sustainable and operations. By August 2020, we will produce as much • Making residential solar panels affordable for our customers, page 16 modern energy for all renewable energy as we consume in our operations. • Improving energy efficiency in our own operations, page 38

GOVERNANCE AND ETHICS | 89 SUSTAINABLE DEVELOPMENT PEOPLE & PLANET POSITIVE STRATEGY WHAT IKEA GROUP AND IKEA FOUNDATION ARE DOING GOAL

Promote sustained, We contribute to a better life for the people and communities • Employing 155,000 co-workers around the world (page 53 ), and stimulating employment for inclusive and sustain- across our value chain, from supporting decent work millions of people throughout our extended supply chain, page 60 able economic growth, throughout our supply chain, to being a great place to • Improving environmental and social standards in our supply chain through IWAY, our supplier Code full and productive work for our own co-workers. of Conduct, including respect for human rights and promoting safety and health at work, page 61 employment and • Assessing wages against the cost of living, making wage increases in our own operations and decent work for all extending our approach to suppliers, page 72 • Improving working conditions for migrant workers and home-based workers, pages 74-75 • Promoting a diverse and inclusive workplace for all through the IKEA Group Diversity and Inclusion Approach, IKEA Women’s Open Network, IKEA LGBT project and Diversity & Inclusion Network, page 56 • Partnering with social enterprises who employ vulnerable groups, so they can create independent and sustainable incomes, page 76

Build resilient infra- Sustainability drives innovation and transformational change • Working with our suppliers to improve resource and energy efficiency, page 48 structure, promote across our business, from factories and farms, to stores, • Investing in sustainable technology and innovation throughout our supply chain, page 48 inclusive and sustain- customers’ homes and our products’ end of life. • Launched a new Masters course in Innovation through Business, Engineering and Design, able industrialization in collaboration with Linnaeus University, Sweden, page 58 and foster innovation

Reduce inequality We want to create a more equal world for the people and • Respecting human rights, including specific groups in our extended supply chain, such as within and among communicates our business reaches. And we support migrant workers, home workers and social entrepreneurs, page 70 countries children, vulnerable groups and communities to build a • Assessing wages against the cost of living, making wage increases in our own operations and better everyday life. extending our approach to suppliers, page 72 • Working to secure children’s rights across our entire value chain, page 72 • Applying our Democratic Design principles of form, function, quality, sustainability and a low price to ensure our products are accessible to the many people, page 32

Make cities and human We take a lead, together with our customers and others • Reducing waste, increasing the amount we recycle (page 45 ) and encouraging customers settlements inclusive, in society, in re-thinking the nature of future homes and to recycle through awareness raising and our products and solutions, page 18 safe, resilient and communities to enable attractive, affordable and • The IKEA Foundation partnered with UNHCR to develop the Better Shelter unit – a safer, more sustainable sustainable living. durable emergency shelter for refugee families, page 78 • The IKEA Foundation donated EUR 10.8 million to UNHCR as a result of the Brighter Lives for Refugees campaign, which will be used to enhance the lives of refugees by providing solar lighting and education, page 78

Ensure sustainable We strive to make all our home furnishing materials either • Using renewable, recycled and recyclable materials in our products, page 33 consumption and renewable, recyclable or recycled. We take a lead in turning • Converting to a circular economy through the ‘Circular IKEA’ concept, page 46 production patterns waste into resources. We will develop reverse material flows • Creating products that enable and inspire our customers to live more sustainable lives at for waste material, ensure key parts of our range are easily home, page 11 recycled, and take a stand for a closed loop society. • See what our Chief Sustainability Officer, Steve Howard, and the President of the World Business Council for Sustainable Development, Peter Bakker, have to say about IKEA and Sustainable Consumption on page 19

GOVERNANCE AND ETHICS | 90 SUSTAINABLE DEVELOPMENT PEOPLE & PLANET POSITIVE STRATEGY WHAT IKEA GROUP AND IKEA FOUNDATION ARE DOING GOAL

Take urgent action to We are going all-in to tackle climate change, for example • Going all-in to tackle climate change across our value chain, page 9 combat climate change by committing to produce as much renewable energy as we • Advocating for strong policies on climate change and supporting the transition to a low- and its impacts consume in our operations by 2020, and switching our entire carbon economy, page 86 lighting range to LED. We are joining with others to take a stand • Improving the sustainability of our operations, for example by producing more renewable and call for positive change, and inspiring others, including our energy and improving energy efficiency, page 36 customers, to take action. • Creating products and solutions to enable our customers to live a more sustainable life at home, page 11

Conserve and sustain- We promote sustainable fisheries and aquaculture by sourcing • Sourcing the fish and seafood for our restaurants and Swedish Food Markets responsibly, ably use the oceans, our fish and seafood from sustainable and responsible sources. from ASC or MSC sources, page 31 seas and marine resources for sustainable development

Protect, restore and We take a lead in the responsible sourcing of raw materials. • Sourcing our key raw materials, like cotton (page 28 ) and wood (page 25 ), from more promote sustain- All of the cotton and 50% of the wood we use now comes sustainable sources, page 22 able use of terrestrial from more sustainable sources. • Using only FSC certified paper to produce our catalogue - the world’s largest print run ever to ecosystems, sustain- be produced using 100% FSC Mix Credit certified paper, page 26 ably manage forests, combat desertification, and halt and reverse land degradation and halt biodiversity loss

Promote peaceful and We want to create a better life for the people and communities • Supporting human rights (page 70 ), and creating a better everyday life for the many people inclusive societies for impacted by our business. Through our Code of Conduct and and communities across our value chain, page 52 sustainable develop- our supplier Code of Conduct, IWAY, we promote ethical and • Ensuring an ethical approach to the way we do business, through our Code of Conduct, page 85 ment, provide access sustainable business practices throughout our value chain. to justice for all and build effective, accountable and inclusive institutions at all levels

Strengthen the means By building collaborations and partnerships with other • Partnering with organisations to extend our impact beyond our own business across many areas, of implementation and companies, suppliers, NGOs and UN bodies, we work towards from climate change to migrant workers, page 84 revitalize the global becoming people and planet positive and contributing to • Partnering with others to take clear positions on the issues that matter most, and advocating for partnership for sus- change in society. stronger climate policy, the transition to a low-carbon economy, sustainable forestry, resource tainable development efficiency and waste management, page 86

GOVERNANCE AND ETHICS | 91 PERFORMANCE AGAINST KPIs

Enabling change

COMMITMENTS GOALS FY14 1 FY15 2

Enabling change throughout our business to become people and By August 2017, 95% of IKEA co-workers state that “sustainability is a natural part of the 79% 79% planet positive. everyday work”.

By August 2017, at least 95% of co-workers view IKEA as a company that takes social and 83% 82% environmental responsibility.3

By August 2015, 70% of customers view IKEA as a company that takes social and 41% 41% environmental responsibility.4

A more sustainable life at home

COMMITMENTS GOALS FY14 FY15

Take the lead in developing and promoting products and solutions By August 2020, achieve more than a fourfold increase in sales from products and solutions EUR 1,015 million EUR 1,311 million that enable customers to live a more sustainable life at home. inspiring and enabling customers to live a more sustainable life at home.5 (58% more than (105% more than FY13) FY13)

Take a lead in more sustainable food by enabling and encouraging a balanced diet. See page 14

Resource and energy independence

COMMITMENTS GOALS FY14 FY15

Strive for resource independence; securing long-term access By August 2017, at least 50% of our wood will come from more sustainable 41% 50% to sustainable raw materials, ensuring a positive impact on the sources. By August 2020, we aim to source 100% of our wood, paper and communities where we source and using resources within the cardboard from more sustainable sources.6 limits of the planet. By August 2015, all cotton used in IKEA products will be sourced from more 76% 100% sustainable sources 7 and we will continuously investigate complementary fibres with improved sustainability performance compared to cotton.

By August 2020, 90% of the total sales value will come from home furnishing 52% 54% products classified as more sustainable.8

By August 2015, all our home furnishing materials, including packaging, 98% 98% will be either made from renewable, recyclable (in at least one market on an industrial scale) or recycled materials.

1 Results are based on the VOICE survey of 87,644 co-workers. Results are not directly comparable between years as different parts of IKEA and different numbers of people participate. 2 Results are based on the VOICE survey of 112,027 co-workers. Results are not directly comparable between years as different parts of IKEA and different numbers of people participate. 3 Measured through the VOICE question “I am proud of the way IKEA works with sustainability” and Brand Capital. 4 Based on response to the Brand Capital survey. 5 A fourfold increase corresponds to sales of approximately EUR 2.6 billion per year, as of FY20 with baseline year FY13. 6 Defined as FSC-certified or recycled wood. Once the 2017 more sustainable sources goal has been met, we will re-evaluate this criterion. 7 Include Better Cotton, cotton from farmers working towards Better Cotton Initiative standards, and cotton grown to other regional standards such as e3 Cotton Program in the USA. 8 Through the sustainability product scorecard.

GOVERNANCE AND ETHICS | 92 Resource and energy independence

COMMITMENTS GOALS FY14 FY15

Strive towards energy independence through being a leader Become 20% more energy efficient in our own operations by August 2015 and Stores: 15.1% Stores: 14.6% in renewable energy, and becoming more energy efficient 9 30% by August 2020, compared to FY10. Distribution centres: 25% Distribution centres: 26.8% throughout our operations and supply chain. IKEA Components 10: 25.9% IKEA Components 12: 48% IKEA Industry Group IKEA Industry Group Divisions Flatline and Solid Divisions Flatline and Solid Wo o d: 17.9% Wood: 12.6% IKEA Industry Group IKEA Industry Group Division Board11: 1.6% Division Board 13: 4.7%

By August 2015, produce renewable energy equivalent to at least 70% of our 42% 53% energy consumption and by August 2020, on Group level, produce as much renewable energy as we consume.14

Better life for people and communities

COMMITMENTS GOALS FY14 FY15

Contribute to better lives for workers by supporting decent work Maintain the social and environmental improvements reached through 98.6% 98.9% throughout our supply chain. the 100% IWAY approval of all suppliers of home furnishing and other key products and services.15

By August 2015, expand the reach of our supplier Code of Conduct by securing IMS suppliers: 77% IMS suppliers: 100% IWAY approval at all local IKEA Food, Indirect Material and Services and retail Retail suppliers: 40% IWAY approved (87%), suppliers within the scope of IWAY.16 pending a scheduled audit Local IKEA Food or being phased out suppliers: 29% Retail: 85% Food: We are changing the way we work with food suppliers, see page 67

By August 2017, go further into our supply chain by securing compliance to 91% 92% IWAY Musts 17 at all sub-suppliers of critical materials and processes.

Develop and implement a transparent and reliable system for the responsible See page 74 recruitment of migrant workers at first tier suppliers in identified critical areas by August 2017.

Continuously identify and develop setups for home based workers to improve See page 75 working conditions, protect labour rights and prevent child labour. By August 2020, all home based workers are transitioned into improved setups and part of our handmade development programme.

9 Compared to FY10 in relative terms, measured by KWh/m2 for retail operations and kWh/m3 purchased goods for trading operations. 10, 12 Baseline year: 2012. 11, 13 Baseline year: FY11. 14 Own operations relate to distribution centres, stores, offices, IKEA Industry Group factories. 15 Suppliers related to Home Furnishing, IKEA Components, Transport & Services, and Global Food. 16 For the retail operations, the current IWAY focus is on cleaning, home delivery, security and waste management suppliers. IKEA Industry also now has a set of phased goals for the application of IWAY – see page 69 . 17 IWAY Musts are the immediate requirements that IKEA suppliers must meet before a contract can be signed.

GOVERNANCE AND ETHICS | 93

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