Annual & Sustainability Summary Report | FY18

INGKA HOLDING B.V. AND ITS CONTROLLED ENTITIES Where we are 03 Table THIS IS We are Ingka Group 05 Ingka Group at a glance FY18 06 INGKA GROUP A message from Jesper Brodin 07 of contents A message from Pia Heidenmark Cook 09

Healthy and Sustainable living 44 Life at Home 11 Listening and Learning 48 Creating a people movement 13 Meat-free movement 49 Health and wellbeing in the workplace 16 Clean energy for all 50 Business ethics 17 Circular and climate positive 51 Equality works better 18 Eliminating emissions 59 Creating a new IKEA in three years 19 Ingka Group in Portugal – towards Our 10 jobs in three years 20 people and planet positive 60 A message from Tolga Öncu 22 PEOPLE AND Fair and inclusive 61 Drivers for change 24 OUR BUSINESS Designed to create jobs 65 London calling 25 PLANET POSITIVE Empowering refugees to fulfil Evolution at home 27 their potential 66 The task at hand 29 Playing with time 67 Bringing affordable home furnishing About our reporting 69 to India 30 Sustainability governance A message from Barbara Martin Coppola 32 and management 70 Ingka Centres 33 Assurance report of Ingka Investments 38 the independent auditor 71

The financial year 2018 (referred to as FY18) A message from Juvencio 73 of the Ingka Group (Ingka Holding B.V. and its Our Financial Year 74 controlled entities) refers to the period between 1 September 2017 and 31 August 2018 and the Taxes 75 entities controlled by Ingka Holding B.V. during GROUP FINANCIAL Figures 2018 76 this time. PERFORMANCE AND Ingka Group ownership structure and governance 78 Ingka Group franchises the IKEA Retail system GOVERNANCE Supervisory Board 79 and methods from Inter IKEA Systems B.V. in the Netherlands. Inter IKEA Systems B.V. is the INDICES 80 owner of the IKEA Concept and the worldwide IKEA franchisor. This is Ingka Group

Russia 14 Stores 14 Shopping Centres North America Europe 1 Store Distribution site 62 Stores 244 Stores 1 Customer Distribution site 5 Pick-up and Order Points 13 Pick-up and Order Points 8 Store Distribution sites 28 Shopping Centres 11 Customer Distribution sites 16 Store Distribution sites 22 Customer Distribution sites

Asia Ingka Group is: 37 Stores 2 Pick-up and Order Points • Part of the IKEA legacy. 3 Shopping Centres • Responsible for representing the 5 Store Distribution sites IKEA brand in 30 markets. 1 Customer Distribution site • A strategic business partner in the IKEA franchise system, representing 90% of total IKEA 367 Australia retail sales in FY18. IKEA stores in 10 Stores • The main partner in logistics 1 Store Distribution site and service operations and in 2 Customer Distribution site providing digital developments 30 countries and solutions to Inter IKEA Group. In FY18 we had ecommerce • The main development and in 29 of 30 markets and innovation partner to Inter IKEA ecommerce sales grew by 45% Systems B.V., the owner of the IKEA Concept and worldwide IKEA franchisor.

3 | Ingka Group Annual & Sustainability Summary Report FY18 This is Ingka Group | Introduction

THIS IS INGKA GROUP

THIS IS INGKA GROUP | OUR BUSINESS | PEOPLE AND PLANET POSITIVE | GROUP FINANCIAL PERFORMANCE AND GOVERNANCE | INDICES

4 | Ingka Group Annual & Sustainability Summary Report FY18 This is Ingka Group | Introduction

Who we are

e are Ingka Group and We operate 367 thriving IKEA stores we’re driven both by the that welcome over 830 million visits vision to create a better per year and receive 2.35 billion visits everyday life for the to IKEA.com. Together they generated Wmany people, and by our strong values, EUR 34.8 billion in total retail sales in which include togetherness, simplicity, FY18. Ingka Centres owns and manages leading by example and giving and over 40 vibrant shopping centres across taking responsibility. This unique Europe, Russia and China, always foundation was laid many years ago, anchored by an IKEA store. Ingka when Ingvar Kamprad founded Ingka Investments helps to develop what we to bring IKEA into people’s lives – and do today, and contributes to our financial it’s what continues to unite our 158,400 freedom with a long-term perspective, colleagues and how we work today. by purposefully investing in our IKEA Retail business and helping us to become We’ve come a long way, and during people and planet positive – again, in line our journey we have brought the IKEA with our key values. Brand to 30 countries and into millions of homes. We play a key role in the We’re curious about the world strategic development of IKEA in areas around us and want to make a positive such as logistics and digital, and our difference in people’s lives. Together with co-workers generate around 90% our customers, partners and others in of the total IKEA sales. We operate society, we’ll lead home furnishing into that business in our retail markets the future, creating a better everyday life as a franchisee of the IKEA franchise for more of the many people by putting system, which has existed since the our customer’s needs at the heart of all 1980s to support a strong and vital that we do. And as we embark on one IKEA Concept. Our core business of the biggest transformations in IKEA is IKEA, but we also operate two history, our belief that a better everyday important businesses that complement life starts at home continues to drive us, what we do: Ingka Centres and Ingka and has never been more important in Investments. people’s lives.

5 | Ingka Group Annual & Sustainability Summary Report FY18 49.4% Ingka Group 2.35 billion Female visits to IKEA.com managers At a glance FY18 Today, more than half 182 million of our co-workers visits to the are women, as are catalogue and 158,400 co-workers 49% of our managers and 44%* of Group store apps Management. IKEA Retail 152,100 Ingka Centres 2,250 Ingka Holding B.V. and its controlled entities Other 4,050 *This number has changed for FY18 due to a new management structure.

EUR 367 IKEA stores in 30 countries 34.8 441 billion total retail sales 124 million IKEA Family At the end of FY18 we also had: (EUR 34.1 billion in FY17) members 45 Shopping Centres in 14 countries We own and operate 441 wind turbines in Belgium, 20 Pick-up and Order Points in 11 countries Canada, Denmark, Finland, France, Germany, Ireland, 31 Store Distribution sites in 18 countries Total retail sales translated into Euro increased by Lithuania, Poland, Portugal, Sweden, the UK and the Our most loyal customers are members of IKEA 37 Customer Distribution sites in 16 countries 1.9%. Adjusted for currency impact, total retail sales USA. We also have 900,000 solar panels on the roofs of Family. And more than 38,000 new members 29 out of 30 markets offering ecommerce increased by 4.7%. Total revenue EUR 37.1 billion. our stores and warehouses. join every day!

We have EUR partnerships with 58 social 30% entrepreneurs corporate income tax and social businesses in 14 countries Refugees in 11 countries are 1.5billion net profit Corporate income tax amounted to EUR 0.6 billion receiving support to develop globally, which equals an effective corporate tax rate of (EUR 2.5 billion in FY17) 30% (24,9% in FY17). Our total tax bill, including other new skills for employment taxes and duties, amounted to approx. EUR 1.1 billion.

We own approx. 180,000 Over hectares of responsibly 437,50 0 kg 230% managed forests 838 million growth in Home Solar The forests we own are in Estonia, Latvia, Lithuania, IKEA store visits of food was The number of Home Solar customers grew by 230%, Romania and the USA. and each customer saved or will save on average EUR saved 400 per year on their energy bill. 475 million Shopping Our food waste initiative saved Centre visits nearly 865,000 meals from going to waste in our kitchens This is Ingka Group | A message from Jesper Brodin

A MESSAGE FROM JESPER BRODIN We’re excited about creating our future

This is the year that’s seen us open in new markets, achieve solid sales and take the first steps on our transformation journey to becoming more accessible, convenient and people and planet positive. We’re in an exciting moment!

t’s been a year of successes same day, or next. And few can offer a and challenges. Now it’s time well-designed range of such value for to build on 75 years in the money. business of home furnishing and Iour deep knowledge of life at home, Our vision remains, always, to retail and logistics, to welcome the create a better everyday life for future’s challenges and opportunities. the many people. So, after many This pairs with doing our part to good years in kitchens and bedrooms, address climate change and become we’ve boosted our offer in living rooms people and planet positive. We’ve with more comfortable, lower priced supported people to realise their sofas and fresh solutions for organising dreams and needs at home, but in and storage. In all our markets – reality, we’ve only just begun our including India, where we embarked journey. on a new adventure by opening a store in Hyderabad – our IKEA stores are We live in fast-changing times. reflecting this new, modern approach. We know the world’s population is growing and more people will move to Climate change is no longer a big cities. This creates a big need for distant threat, but a visible reality, better small-space solutions. We’re affecting the lives of many millions of seeing changes in people’s attitudes people around the world. Disruption towards consumption – that they caused by climate change – already want to save both money and time. affecting our business today - will This means they’re more demanding continue to increase business costs and of us, and rightly so. We want to be harm the health and wellbeing of our there for them, because few can offer customers and co-workers everywhere, the inspiring customer experience undermining the foundations of our that we do. Few can deliver a sofa the success. …

7 | Ingka Group Annual & Sustainability Summary Report FY18 This is Ingka Group | A message from Jesper Brodin

… We want to lead change in the critical but-important formula that optimises topics facing society. We do this to form, function, quality and sustainability live up to our vision and contribute to at a low price. Because, combined with our the safeguarding of communities and knowledge of life at home, our range is ecosystems that sustain our business. how we make people’s everyday life better. In 2018, we have taken the first steps in contributing to the IKEA ambition to Our plan: 10 jobs in three years. become climate positive by 2030 and We’ve ignited the biggest transformation fulfilling our commitment to the Paris of our business in modern times. With Agreement. our existing and new store formats, more delivery options, assembly and installation Our goals are ambitious, but we know services and unique digital solutions, that challenges can become opportunities we’re becoming more accessible to people and lead to amazing innovations. They wherever they are, whenever they want. will challenge us to work in new ways, and This journey is also about being more will drive innovation and renewal in our affordable and more sustainable, because business. Good intentions are important. it’s by transforming in all these ways that Words give them power. But to spark real we’ll meet the needs of the many people. change, it’s action that speaks loudest of all. We’re led by a people movement! We believe in the nearly-160,000 talented Now there are more invitations to people in Ingka Group and our future discover IKEA, with Ingka Centres holds more opportunities to create even creating shopping centres that are even better places to work and develop. We also better experiences for a great day out for believe in our customers, and listening the whole family. to and learning from them shows us the trends and shifts that lie ahead of us. We’re fast-tracking what we know and are developing new opportunities, as Our values are at the heart of what Ingka Investments ensures the financial we do. Simplicity, cost consciousness, stability of our company – just as we did entrepreneurship and togetherness are this year with the acquisition of TaskRabbit. important to us. With humbleness, we want to lead by example and contribute to But still, the most important focus a better tomorrow for our customers, our for us are our stores, which will be business and ourselves. digitally enriched festivals of inspiration, offering food and interaction with our Most things remain to be done. There’s many knowledgeable, enthusiastic home so much potential, and that’s what I’m furnishing coworkers. excited about. Because the future we face is a glorious one. Democratic Design continues to be what makes IKEA unique. Every IKEA Jesper Brodin product is designed to match a challenging- President and CEO, Ingka Group

8 | Ingka Group Annual & Sustainability Summary Report FY18 This is Ingka Group | A message from Pia Heidenmark Cook

A MESSAGE FROM PIA HEIDENMARK COOK Working towards a sustainable future

Our commitment to becoming people and planet positive is The benefits to our business are clear. at the heart of our business transformation as we develop By expanding our home solar offer and to meet customer needs and grow our business sustainably. rolling out zero emissions home deliveries to all markets by 2025, and by developing The ambitious sustainability strategy we’ve set for 2030 will new circular services, we’re showing our challenge us, but I’m confident that we are laying the right commitment to sustainable innovation foundations now to make it happen. and growth. We’re also able to develop and grow our business by working with social entrepreneurs and expanding limate change is impacting change their behaviour to reduce their our refugee employment programmes. the lives of people impact on the climate. Being able to We’re contributing to the economic everywhere. Extreme weather support them is a huge opportunity for empowerment of people and communities, events, such as heatwaves in us. while making our business more diverse CJapan and Europe, and the catastrophic and inclusive, which makes us better wildfires in the US, Greece and even the We updated the Ingka Group decision makers. Arctic Circle, have made more people Sustainability Strategy in FY18 in realise that there’s no time to waste. response to the challenges of climate Consumers are more demanding The recent Intergovernmental Panel change, unsustainable consumption and than ever in expecting brands to do the on Climate Change report leaves us in inequality1. We focus on three areas where right thing for people and the planet. no doubt that the next 12 years will we can make the biggest difference: Our co-workers are deeply committed to determine the world we will pass on to promoting healthy and sustainable living, achieving our goals. They’re proud of what future generations. becoming a circular and climate positive we’ve done so far, and challenge us to go business and becoming a more fair and further and faster. While the urgency is clear, there are inclusive company and employer. many reasons to be optimistic. I’m I’m excited to see what we can and inspired by the grassroots movements We want to inspire and enable 1 will achieve. We don’t underestimate the we see growing around the world on billion people to live better lives work to be done, but with nearly 160,000 issues like climate change, plastic within the limits of the planet by co-workers across 30 countries, together pollution, human rights and inequality. 2030. It’s a huge, ambitious target. But with our customers and communities, we This sends a clear signal to governments it’s possible because we are part of the know we can make a positive impact. And and businesses that people expect everyday lives of so many people around there’s never been a better time to act transparency and leadership on these the world through the home furnishing than now. issues. In our Climate Action Starts at solutions and services we offer, and Home research study, we learned that through the communities where our co- Pia Heidenmark Cook more than 90% of the people want to workers live and work. Chief Sustainability Officer, Ingka Group

9 | Ingka Group Annual & Sustainability Summary Report FY18 1In Spring, Inter IKEA Systems B.V. will publish the IKEA Sustainability Report, which reports on all companies in the IKEA franchise system and value chain. Our business | Introduction

OUR BUSINESS

THIS IS INGKA GROUP | OUR BUSINESS | PEOPLE AND PLANET POSITIVE | GROUP FINANCIAL PERFORMANCE AND GOVERNANCE | INDICES

10 | Ingka Group Annual & Sustainability Summary Report FY18 Our business | | Life Life at at home Home Report FY18

“Now I’ve got The way people everything I want in a home. I’ve got think about the security and life at home comfort and the love and everything that is changing comes with having a home. It ticks all profoundly the boxes for me. So OUR PHYSICAL HOMES are getting now I can say ‘I’m 1 smaller, smarter, busier and noisier, home’” so it’s no wonder that life at home Mary, London is changing too. Lots of people find themselves battling between available space and optimal location, particularly Doing it differently as our cities continue to grow. Time with the IKEA matters as well, so when forced to Catalogue choose, 64% of people say they would LIFE AT HOME rather live in a small home in a great Thanks to a new-look layout, the 2019 location than a big home in a less IKEA Catalogue shows a more holistic convenient one. view of life at home through our range. Tanja Dolphin, Global Catalogue Life is on the move – it’s Change also offers up new Manager, IKEA Communications AB, opportunities, and the majority of Inter IKEA Group, explains: “We time for home to catch up people say that they’re ready to create want to relate to what customers find a home that’s different from the one challenging in their own lives, and they grew up in. Here Ingka Group can using insights from the Life at Home really help, by providing knowledge, Report gave us the freshest view on inspiration and services that reflect our what matters most to people.” In hen Mary wants to get one in three people all over the world changing world, make the connection particular, Tanja and her team were struck by how relatable the insights some privacy, she heads say that there are places where they to solutions within the IKEA range and from the 2017 Life at Home Report outside. She lives with feel more at home than they do in the help people create the home they need were, because they showed real her young family in space where they actually live. So what and want. frustrations. Tanja continues: “Some WLondon and it can be difficult for her does this mean for life at home, and why of these insights helped us show to get that elusive ‘me time’ at home. is it important for IKEA? We explored homes in a way that is not typically Instead, she heads to a park bench with these questions with more than 22,000 expected from IKEA. We loved playing views of the city, and takes the time to people in 22 markets, and published our with the Myth of Minimalism – one of the five major findings from the 2017 disconnect and reflect. These moments findings in the 2018 Life at Home Report. Report – to show that you can be help her feel more at home. The many things we learned will help us bold and display your cherished items Mary is one of an increasing number design better solutions to meet people’s and memories, and still be happy in of people who feel at home in places needs and dreams. Here are three ways a space that feels full. We wanted to beyond their own four walls. In fact, we’re talking about life at home today: show that we can do it differently.”

11 | Ingka Group Annual & Sustainability Summary Report FY18 Our business | Life at Home Report FY18

There are five Creating a emotional needs home furnishing movement in which give us the India ‘feeling of home’ When IKEA Hyderabad opened its doors in July 2018, it marked the beginning of a home furnishing EVERYONE NEEDS SECURITY, movement in India. Not long after, 2 privacy, ownership, comfort and Melani Schultz, Team Leader, belonging to feel at home. Most people Com&In, IKEA Retail India, joined believe it’s important that their own the IKEA Retail India team in home gives them these needs, but for Bangalore, and one of her most many the reality falls short. Nine in 10 important tasks is to help drive that movement. “Indians are people want their home to give them extremely proud of their homes” the feeling of comfort, for example, but Melani explains, “but they have a less than half of those who live with different view of home furnishing friends say they get this feeling where than we, at IKEA, do. We asked: “I think no matter if it’s in a house or they live. As a result, people head to ‘How can we better connect with in a flat, or if it’s a place I bought or a places outside their home to give them people?’. We realised it starts with the feelings they lack where they live, us – each and every co-worker.” place I rented, as long as the person just like Mary does with her ongoing Melani and her colleague Hetty I love is there, that is my home.” Lavrijsen, Competence Developer, search for privacy. Com&In, IKEA Retail India, were Tang, Shanghai We believe that IKEA can help so inspired by the report, they bridge the gap, by demonstrating how started organising workshops to our products can meet both people’s get co-workers thinking about functional and emotional needs. For their own life at home. “We many people, the solution could be began with the interactive quiz simple, like a playful FJANTIG hook – from the 2018 report; it’s such Home is a network an interesting and simple tool it provides somewhere to hang their because it starts with you as coat, but it also fosters a feeling of of places and spaces an individual. Then connecting ownership of their space when they to the idea of home furnishing come through the door and know creating a better everyday life THE FEELING OF HOME can We also see how online communities, where to put their things. becomes more tangible.” Melani 3 exist in multiple places, all at like social media, help enhance a Home hopes this ‘starting with the same time. For lots of people, feeling of belonging, even amongst continues to be the ourselves approach’ creates life beyond four walls can offer up those who live with people they know most important deeper understanding and richer experiences that meet their and love. place in the world, encourages colleagues to which is why we’re emotional needs and help them feel Thinking of home as a network share their knowledge and committed to helping more content when they think about of spaces and places with emotional inspiration with their nearest everyone find that and dearest. “We see a lot of home. Almost half of people who say needs at their heart helps IKEA feeling of home, no Melani potential to use the Life at Home they love where they live also feel that explore solutions within and beyond matter where or how Schultz Report in our daily work.” community is an extension of home. four walls. they live.

12 | Ingka Group Annual & Sustainability Summary Report FY18 Our business | Creating a people movement

Creating a people movement

OUR INGKA GROUP PEOPLE STRATEGY to be a part of. Our values are at the heart of puts the focus on our co-workers, and everything we do – and we’re proud of that. provides a framework and guidance for our We believe its those values make us stand priorities. It’s there to ensure we stay close out, and we continue to emphasise and show to our vision and culture and get even closer how we live them in our daily reality. to our customers. Attracting and retaining We aim to attract competent and talented the right competence and talent is essential people who share our values, by improving for us to reach our growth ambitions and how we reach out to potential co-workers. new digital competence is in focus for the We continue to develop and integrate more coming years. digital functionality into our recruitment We want to be an IKEA where customers process – functionality such as our job portal meet passionate, knowledgeable and and our new digital recruitment solution. service-minded co-workers, who understand This makes it easier to connect with and life at home and help make dreams a reality. identify the great talent we need, because As customers’ demands are changing, we are this is what will result in a better customer changing too. As we create a new and better experience. During FY18, we welcomed IKEA – one that’s more equipped for the 40,368 new co-workers to help us meet our future – we find ourselves in an interesting goals and add to our in-house competences. phase. We’re creating innovative solutions, Building competence within IKEA remains focusing on competence and new capabilities an important focus area. To encourage and investing in digitalisation. We’re letting development across functions, units and go of old ways of doing things, replacing countries, we organise global initiatives them with improved ones. to bring out the best in our people. One such activity is our Talent Focus Week, Within the People strategy are three central which in FY18 saw over 63,000 co-workers pillars that are key to meeting our ambitious participating in different development goals within the 30 markets in which we activities around the theme ‘Let us use our operate: talents’. During that week we called on our • People choose IKEA for what we stand for co-workers to join us in making IKEA even • Engaged IKEA people with customers at better, and in the coming spring we are heart launching our third edition of the week, with “We know that our co-workers are energised by our vision, • Creating a modern, lean and agile IKEA fit the theme ‘Think beyond. Dare to try. Keep by our belief in people and by the way we behave to­wards for growth on growing’. each other. Other sources of inspiration include our culture, We are committed to going all-in on People choose IKEA for what we equality. Equality is a fundamental human the possibilities to grow and the opportunities to learn.” stand for right and it’s reflected in our values. To Ulrika Biesèrt, People & Culture Manager, Ingka Group We want to be a company that people want reach true equality, we focus both on the …

13 | Ingka Group Annual & Sustainability Summary Report FY18 Our business | Creating a people movement

… diversity of our workforce and on fostering a Our goal is to achieve gender balance culture of inclusion in our work environment. in all leadership positions by 2020. Today Our goal is to create an inclusive culture 49.4% of our leaders and 54% of our ­ where everyone is valued for their unique co-workers are women. However, achieving contribution, and where they can be gender balance is only the beginning. We themselves. By making equality one of our also focus on integrating diversity in all In FY18 we signed a number of competitive advantages, we increase our areas of our work processes and business commitments: ability to serve a diverse customer base and practices. … contribute to positive change in all areas of our business and society. In October, we joined In September, Sari Brody, 1 Stonewall, a non-profit 3Equality, Diversity & Inclusion organisation dedicated to Manager, Ingka Group, signed improving the lives in workplaces the EPIC Pledge (Equal Pay all over the world, of people International Coalition). This who are lesbian, gay, bisexual, is a part of the UN Sustainable transgender, plus people of all Development Goals, and is an sexual orientations and gender important step in ensuring that identities (LGBT+). women and men receive equal pay for work of equal value. We In February, Jesper Brodin, are developing a framework and 2President and CEO, Ingka approach to equal pay, and in Group, signed the Women’s signing the pledge, we’re also Empowerment Principles committed to rolling out this (WEPs). The WEPs provide a framework during 2019, to the 30 framework for businesses on markets in which we operate. how to empower women in the workplace, marketplace and To reinforce Equality, community. By signing the WEPs, 4Diversity & Inclusion in our we strengthen our commitment markets, we collaborated with the to equality and show consistency European Commission. In 2018, in our cooperation with the United all 18 Ingka Group markets in Nations (UN). the European Union signed their national Diversity Charter, making a commitment to promote equal opportunities in the workplace and in society.

14 | Ingka Group Annual & Sustainability Summary Report FY18 Our business | Creating a people movement

… Engaged IKEA people with customers An additional component for engaging at heart and retaining our co-workers is rewarding We know how important the interaction their efforts, and this can come in many between our customers and co-workers is, different forms. For example, during 2018, so having engaged, happy co-workers is not the Ingka Group programme Tack! (‘Thank only better for our work environment, but you’ in Swedish) shared EUR 103 million it’s also better for our customers and our with co-workers worldwide, as a way of business. We therefore strive to empower saying thank you for their commitment and our co-workers, recognising them and contribution. The total global funding since providing the right work environment for the introduction of Tack! in FY14, is EUR 612 them to flourish. million. To develop and retain our co-workers, We are also working to develop an we aim to give them the right preconditions approach to fair pay for everyone within to succeed. We’ll provide the right tools for the Ingka Group. We support the principle them to perform brilliantly in a multi-channel of equal pay for work of equal value, landscape, and to continuously develop independent of life situation – and we are themselves and the business, because when working to achieve this by developing an our people grow, our business grows too. approach to close the gender pay gap. As our business changes, it’s critical People in the workplace should be able that everyone knows how to lead in to work reasonable hours under good transformation, with speed and agility – conditions. The Ingka Group Approach both in terms of self-leadership and leading to Employment Standards ensures we others. We have introduced a new approach apply consistent principles to employment for leadership in the new era, focusing on relationships and contracts, scheduling, entrepreneurship of the many, performance working hours, equality of treatment and with a meaning and working together in a open communication. We respect the rights much more profound way. of our colleagues to form and to join or IKEA is built on an entrepreneurial not to join a co-worker association of their spirit, which is an essential part of leading choice. in a changing business. Unleashing the Our units have developed a range of entrepreneur in everyone creates a better, offerings for co-workers at different life more innovative IKEA; therefore, we stages, including shared or equal parental encourage this approach to bring out the leave, job sharing, remote working, childcare best in every one of our co-workers. provision and providing equal hourly pay and Staying close to our people is an benefits for full and part-time co-workers important part of delivering to the customer, doing the same job. and listening to our co-workers plays an essential role in understanding how well we, A modern, lean and agile Ingka fit for as a company, are delivering on our goals growth and ambitions. By launching a new, more In FY18 we started to transform our business dynamic and simpler way of conducting to be ready for the future, and over the co-worker surveys, we create a platform for next three years we will make the changes even better sharing and dialogues. needed to be in an even better position …

15 | Ingka Group Annual & Sustainability Summary Report FY18 Our business | Creating a people movement

… for our long-term growth. This means same time approximately 7,500 may be Health and wellbeing that we’re assessing all parts of our made redundant, mainly focusing on global organisation in order to simplify how we functions and offices in 30 markets. in the workplace lead, work and organise and, at the same Throughout this period of change, time, acquire new capabilities. we realise that we will face exciting During the year we increased our opportunities, but also some challenging efforts and investments in becoming more dilemmas. To guide us, we will continue to affordable, convenient and sustainable. focus on our culture and values, and have While this has had an impact on our an open dialogue with our co-workers on A SAFE, ERGONOMIC and inclusive work EACH BUSINESS UNIT IS RESPONSIBLE results, it was a conscious decision for any changes we make so that we do this environment is the standard in any of our for its own working methods, but we will us to start this three-year period of together. We’re clear on where we want to units. We want to be an attractive, modern proactively provide support with a new set of transformation. We are also developing go and how we will get there; and know and inclusive workplace, where co-workers training solutions. We’ll update and provide how we are organised to ensure we can that it will be only possible if we stay true are physically and mentally healthy, satisfied global tools and processes including better better meet the needs of our customers in to who we are and continue to deliver to with their work and have the energy to incident reporting, training packages and the future. As a result, in the coming years our vision of creating a better everyday life engage with and inspire customers. We benchmarking. 11,500 new jobs will be created, but at the for the many people. closely monitor the health and safety of our co-workers, and have noticed a slight OCCUPATIONAL HEALTH AND SAFETY increase of accidents in our workplaces over GUIDELINES, where standardised risk the past three years. This partly reflects our assessment methods for individual working efforts to encourage reporting of incidents positions need to be implemented, is another by co-workers, but also highlights the need area to develop. Also, the reorganisation of for us to take even more action. our incident reporting system will support a more focused analysis and, indirectly, better DESPITE PREVENTATIVE MEASURES, safety management. There were no on-site accidents and incidents are occuring mainly fatalities involving Ingka Group co-workers in the logistics and food areas of our retail in FY18. stores, as well as in the customer fulfilment distribution units. The majority occur when WE HAVE NOW STARTED the work to build using hand tools or in material handling a Health and Wellbeing framework in Ingka in general, and are often down to human to look beyond just safety and focus on more error. We we plan to update our training dimensions of wellbeing” programmes to try and reduce the number of incidents in the future.

Ingka Group Occupational Accidents: RETAIL AND CUSTOMER FULFILMENT

FY16 FY17 FY18 Severe accidents (reported as medium or high severity) 736 821 931 Severe accidents/million hours worked 5.3 5.6 6.2

16 | Ingka Group Annual & Sustainability Summary Report FY18 Our business | Business ethics

Business ethics

Ethical conduct and misconduct Anti-bribery and corruption Raising concerns In Ingka Group, we act based on our strong Corruption is not tolerated in any form. We promote an open culture of trust and respective manager, senior management, culture and values and with our vision to It prevents us from doing good business, honest communication. All co-workers are human resources or worker representatives. create a better everyday life for the many and damages our reputation with co- encouraged, and should feel empowered, Where co-workers do not feel able to raise people as our foundation. Our values guide workers, suppliers, customers and other to raise any work-related concerns they concerns with managers, they can report everything we do. We strive to be honest, stakeholders. Anyone acting on behalf of have. Concerns are normally raised with any concerns of misconduct through our respectful and fair, and expect this of our Ingka Group must not engage in corrupt the co-workers involved. But if this is Trust line. The Trust line is available 24/7 co-workers. This is why our values form an practices, which includes accepting or not appropriate, they are raised with the online and by phone in local languages important part of our recruitment process. offering kickbacks or loans. Anti-bribery across across all of our markets except All of our co-workers and partners and corruption is integrated into our risk for Austria. When an issue is raised, Trust are expected to comply with our Code of management approach, and we line managers evaluate it and report to Conduct – Good Business with Common periodically perform anti- Human Resources or Risk Managers where Sense, the Ingka Group policies on Anti- bribery and corruption appropriate. The Trust line is provided by a Bribery and Corruption, and Human Rights risk assessments. The third party which enables co-workers to raise and Equality. Business ethics is incorporated Risk & Compliance concerns anonymously. In FY18, the Trust into our IWAY Code of Conduct for suppliers, Committee line received 165 reported concerns. Every and for more information see page 62. The oversees this concern was evaluated to ensure that it was Ingka Group is committed to do business topic. handled in an appropriate way. in an honest way and has zero tolerance towards bribery or corruption in any form. All co-workers receive training on our Code of Conduct, which includes elements on anti-bribery and corruption. Additional Data privacy, one of our anti-bribery and corruption training is priorities provided to co-workers in specific functions, Whenever our customers shop with Ingka such as Real Estate. We offer clear guidance Group, we want them to feel certain that on how to manage situations of misconduct their personal data is secure with us and and undertake regular risk assessments, handled correctly. It’s one of our highest both at a regional and national level. If any priorities to be compliant with data policy breaches do occur, we investigate privacy legislation such as GDPR, and to quickly and carefully, using our Rule of safeguard personal data of our customers, Investigation to ensure consistency and co-workers and business partners. We have initiated and implemented multiple accountability. activities to assure that we have the right competences and knowledge in place to protect personal data and we aim for a privacy-by-design culture, where data privacy and security are two of the first aspects to be considered when developing new business and IT solutions. 17 | Ingka Group Annual & Sustainability Summary Report FY18 Our business | Creating a people movement

FAIR AND INCLUSIVE Equality works better

Gender equality is about creating an inclusive culture where both women and men are valued for their unique contributions. Our ambition is to reach gender equality at Ingka Group that goes beyond a 50/50 gender balance in all levels and positions.

ver the past year, addressing great opportunity to share best practices with gender equality and making the other companies and to learn how businesses workplace better for people of and policy makers can work more dynamically EGALITATEA ESTE MAI BUNĂ all genders has been a priority, together on this topic. One concrete output Oparticularly for our IKEA Retail South Eastern from the event was a better understanding PENTRU TOATĂ LUMEA. Europe region. To put focus on how companies of the needs of women in the workplace and IKEA România oferă oportunități egale de can work together to better contribute to society at large. Another outcome was the carieră și dezvoltare bărbaților și femeilor. promoting gender equality in society, IKEA conclusion that we need to cooperate more Retail SEE organised three conferences with other companies to close the gender gap. in three of the capital cities, launched a communication campaign and promoted WE WANT TO BE AN EXAMPLE in these messages on equality in IKEA stores for markets by underlining our gender balance International Women’s Day. goals, but also by how we provide equal growth opportunities and equal pay. To raise UNDER THE UMBRELLA OF “Equality more awareness on the topic, we launched an works better”, we brought together integrated campaign with the aim of reaching “A strong commitment to gender equality from stakeholders from governments, co-workers, customers, the media and civil society and other businesses to representatives from the public and the private all leaders in South Eastern Europe is required to discuss the challenges that are still sector. drive positive change in our society. Studies Violeta present, especially in this region, to Nenita have clearly shown that gender-balanced close the gender gap. Violeta Nenita, THE INTERNATIONAL WOMEN’S DAY teams have superior results, but we need to Store Manager, IKEA Bucharest, explains: campaign was an important way of bringing “Equality contributes to positive change in our these issues into focus, but gender equality continue working much more in partnership business and in society. By celebrating our co- is something that needs to be pushed all year with other businesses and organisations. workers’ differences, we not only encourage round. In some regions and markets, equality This is the only way to create meaningful, long- diversity, but we can also attract a wider range has already come a long way, but in others of talent. It helps us to create a better IKEA.’’ we still need to raise awareness and address lasting change for the many men and women.” the wider issues. Over the past few years, Stefan Vanoverbeke, Retail Manager, IKEA South Eastern Europe WE BELIEVE THAT BY joining forces, we however, we’ve seen great progress and (Croatia, Romania, Serbia, Slovenia and the Ukraine) can achieve more and have greater impact positive change. on society. This gender equality forum was a

18 | Ingka Group Annual & Sustainability Summary Report FY18 Our business | IKEA Retail IKEA Retail 367 IKEA stores in 30 countries 20 Pick-up and Order Points in 11 countries INGKA GROUP RETAIL DIRECTION 31 Store Distribution sites in 18 countries and 37 Customer Distribution sites in 16 countries Creating a new IKEA in 152,100 Co-workers three years

We are on a transformation journey and are changing our business model to become more convenient, affordable and sustainable. This journey is guided by our Retail Direction: 10 jobs in three years. In this direction, we have identified the 10 most important jobs that we need to do within three years to create a new IKEA. It guides our IKEA Retail business and is our response to the IKEA Direction, which is set out by the franchisor.

KEA is an idea of something are being disrupted. For Ingka Group, better – a vision to create a this means many challenges and new better everyday life for the many opportunities. people – in life at home and To be able to meet the needs of our Ibeyond. It’s a movement that stands customers today and tomorrow, we are on the side of the many people with undertaking the biggest transformation big dreams and thin wallets. And, it’s in the IKEA history. We are simplifying a commitment to create a better world what we do and how we do it. We for people and the planet. are examining every aspect of our With a unique business idea, business, from retail experience to how concept, values and vision, IKEA has we are structured as a company. In grown over the years. People the world recent years we have taken good steps over have fallen in love with our offer towards the future, and now it’s time and ideas for making life at home take a bigger next step. better over the past 75 years. But the world is changing, fast. More and The big problems we love more people are moving into the big We are 158,400 problem solvers and cities and living in smaller spaces. The we love problems as that’s part of impact of climate change and resource our entrepreneurial spirit. In our daily scarcity affects us all. Technology work, when things don’t go exactly and digitalisation are changing many as planned, we find a way. But there things for the better. At the same time, are some big problems facing all of traditional businesses, including retail, us – dilemmas that we cannot solve …

19 | Ingka Group Annual & Sustainability Summary Report FY18 Our business | IKEA Retail

cities. Some lack a car or simply don’t 01 02 03 04 05 want one. Our existing stores are Create a strong Create a Create a simple Create and Create a new position leading home furnishing and unique digital offer affordable world of IKEA the core of our business and with the from our purpose movement customer meeting services to make in city centres development of digital innovation and IKEA convenient new physical formats, we see new opportunities opening up. People look for instant gratification, and our focus 06 07 08 09 10 will be to make the store visit more Create the Create a people ­ Create an “always Create a simpler Create a people sustainable and convenient. We will IKEA store and planet on” growth and better IKEA movement and of tomorrow positive IKEA designed for the make our culture also develop our fulfilment network future and values a living reality to bring products to more people’s homes, whenever and wherever they want them – with quality throughout.

How can we become truly people and planet positive? Climate change, unsustainable Our 10 jobs in … on our own. We will act on them consumption and inequality are the key boldly and together turn our most challenges facing society today. For us, three years challenging problems into our biggest being big is both a responsibility and an opportunities. The big problems we opportunity to make a positive impact. love will also help us to prioritise what Our vision, values, competence, reach we do. and financial strength give us an Create a strong position in every city and market. We will opportunity to lead. We want to grow 1leading from our purpose empower more of our co-workers • How can we help many more of the our business, offering services and – let people know what we to be home furnishing experts and many people have an affordable and home furnishing solutions that inspire stand for. engage with more people in unique, better everyday life at home? In many and enable more people to live better Everything we do positions IKEA – personal and digital ways. more places, many more people are everyday lives within the limits of the from how we meet customers to how entering the middle class and have a planet. we connect to the world around us. Create a simple and chance at a better life. Most people In order to reach the many people in 3unique digital customer lack the time and knowledge for Change everything (almost!) the future we will create a positioning meeting – search, find, creating a better home, and here we To undertake one of the biggest movement like never before. choose and buy in minutes. can make a big difference. We will transformations in our history, and to We see untapped potential when it reach many more people with the lead home-furnishing retail into the Create a home furnishing comes to bringing out the uniqueness products and services they want, at future, we will become quicker and 2movement – to make of IKEA in digital ways. We will prices they can afford. leaner. We will develop new capabilities homes better. expand our business digitally and with a growth mind-set that is agile Home furnishing is the essence of transform what we do by developing • How can we be more convenient and and innovative, guided by our culture IKEA, central to our vision and the high-quality customer interfaces serve more of the many where they and humanistic values. Our backbone core of what we do. To create a home that make it simple for customers to are? Everyday life happens at home, is the IKEA brand and unique range, furnishing movement we will develop search, find, choose and buy in just at work, at school and in people’s passionate and performance-driven an even deeper understanding of a few clicks, in all of our markets on social life. But time and money are people, and deep knowledge of people’s lives at home, their needs, whichever device they choose. limited. More people are moving into sustainability and life at home. challenges, aspirations and dreams, …

20 | Ingka Group Annual & Sustainability Summary Report FY18 Our business | IKEA Retail

Our 10 jobs in three years (cont.)

Create and offer affordable colleagues to create meeting places of the in the IKEA ecosystem and society, prerequisites to make investments … 4services to make IKEA future. develop a sustainable business model that create profitable growth as well convenient – delivered to your for home furnishing. We will put as reducing costs. Cost performance home when you want it. Create the IKEA store of sustainability at the core of our offer, will focus on small and big initiatives. The future of home furnishing, and 6tomorrow – making our truly understanding and pre-empting We will build scale and efficiency in almost every other business, is about stores experience centres for changing customer and societal needs. customer fulfilment flows, simplify instant gratification. Our focus will be life at home. We will co-create sustainable living and automate on a global scale, on expanding our fulfilment network to The IKEA stores are magic worlds of solutions and circular services with our accelerate digital delivery and ensure bring products to more people’s homes home furnishing and offer the total IKEA customers. our strong retail foundations. To enable however they choose in a sustainable experience, and they will continue to be investments in creating a new IKEA, we way. By delivering products and services a strong part of our new reality as we Create “always on” growth will use our resources in a responsible to customers whenever they want them transform them into experience centres 8– offering many more great way with a long-term perspective. at a price the many people can afford, we for life at home. We will bring home reasons to visit IKEA. will better meet people’s expectations on furnishing inspiration and knowledge We need to ensure that every one of us Create a people convenience and customer experience. to a whole new level and become the works closely to achieve healthy and 10movement and make best destination for beautiful, smart sustainable growth. To do so we will our culture and values a Create a new world of IKEA and sustainable homes. We will also have an ‘always on’ mind-set for growth living reality – Unleashing the 5in city centres – going into make them key components in our and provide the many people with many potential of our colleagues. the city. fulfilment network as they also can fulfil more reasons to visit IKEA, through Our customers want to meet engaged, Urbanisation is on the rise and people are online orders which enables us to live our stores and digital experiences, competent and service minded co- moving into cities like never before. Value up to customer lead time and quality 365 days a year. We will be more workers at every IKEA touch point. for time is more and more important, and expectations. responsive and provide customers with To make sure that we have the pre- we need to be where the many people more personalised offers, rewards, requisites to meet our customers, we live, work and socialise. With a digital and Create a people and support or solutions, whenever they will develop ourselves and to lead our fulfilment backbone we can find new ways 7planet positive movement have a need for it, in the channels they business into the future by learning to meet more people in the city centres, – enabling people to live a choose. and building new capabilities together. enabling them to conveniently access healthier and more sustainable We grow from within, we welcome our total offer close to where they are. life at home. Create a simpler and new talent who share our values, and We will discover new and unique formats We have started the journey to become 9better IKEA designed for develop the next generation of leaders. that allow people to reach us more easily, people and planet positive. Now we will the future – with less time We will unleash the potential of people, including working with our Ingka Centres go “all-in” and, together with stakeholders planning and more time doing. and go all-in on equality – ensuring that A low-price company must IKEA is a shining example of diversity also be a low-cost company and inclusion. and cost-consciousness is part of who we are. We will work with a holistic cost performance approach to reduce unnecessary costs and build the

21 | Ingka Group Annual & Sustainability Summary Report FY18 Our business | A message from Tolga Öncu

A MESSAGE FROM TOLGA ÖNCU Coming closer to our customers

Every year, we meet millions of people around the world in our retail locations and for 75 years, IKEA has been serving the many with home furnishing knowledge, our unique IKEA range and the IKEA experience in our stores. But we know that customer expectations of us are changing. And to continue to make life better for more people, we are changing too.

he Ingka Group Retail been natural for our customers to go to Direction is a way for us our IKEA stores, walk around and have to take a total look at our something to eat and then pick up their business opportunities, but products from the self-serve area and Talso challenges, and will help us drive home. We know that many people prioritise. We are excited and ready to will continue to do so and we will make identify and create a movement where, that experience even better, but more over the next three years, all of us and more people have the need for 158,400 co-workers are getting ready new types of services to be able to to pull in the same direction. It’s our shop at IKEA. Whether that’s how to culture of togetherness, simplicity and choose their furniture, how to get it giving as well as taking responsibility home, or how to get it assembled, our that drives us to constantly improve customers’ expectations are constantly our way of working. In everything we changing. do, we focus on achieving our vision: to create a better everyday life for the IKEA is changing, too. We don’t many people. want to replace anything, but we are exploring new ways and looking at new Historically, we have made ten- opportunities for customers to interact year plans for IKEA, which later with IKEA. So if we are determined to “Our co-workers are, and always have become five-year plans - and come closer to where the customer is, will be our biggest assets. They are now we’re down to three. With complementing the IKEA experience the ones serving the many people, the pace of change that is happening with new formats and channels, it’s around the world, ten-year plans are clear that our plans also need to be sharing home furnishing knowledge no longer realistic. Until today it has updated. … to improve people’s lives.”

22 | Ingka Group Annual & Sustainability Summary Report FY18 Our business | IKEA Retail

… Creating the IKEA store of business. At the moment, we display tomorrow will be one of the our entire range in store for people to most business critical jobs. We’re see the measurements, and see how going to reinvent our stores so that each piece of furniture would fit in they become more like experience their homes. But we know that 80% centers for life at home than pure of customers begin their journeys with destinations for purchase. Another key IKEA online, enabling them to research development is how we will integrate the many options we offer. This our stores as part of our fulfilment creates a great opportunity for us to and distribution network. So far we interact with customers in even better have been very good at handling ways, spending more time on inspiring incoming logistics to our stores and and providing home furnishing advice. then our customers have managed the outgoing. Going forward, we will Our co-workers are, and always be equally good at managing outgoing will be our biggest assets. They logistics, which is what will make are the ones serving the many people, the difference. In many places, we sharing home furnishing knowledge are already finding ways to utilise to improve people’s lives. They are existing space in a more efficient also the core of the IKEA experience, way. Using our stores as fulfilment whether that’s in the city centre or in units will enable and facilitate faster, our big stores. When you think about more convenient distribution to our your best, most recent experience in customers – however they choose to retail, it’s almost always related to a shop. human being going above and beyond. Also when more and more becomes The plan is to be wherever the digital, the value of the human customer needs us to be. Whether interaction increases. We see the that’s in the form of a city centre desire from our co-workers to offer location, or by offering a great this experience to every customer, experience online, we are becoming whatever it’s in the stores, in a video more accessible and available. We are meeting or on the phone. also making furniture assembly easier through TaskRabbit, the home services We’re not replacing anything, but business we acquired last year, in the we are looking to complement the USA, Canada and the UK, with more existing IKEA experience. The more markets to follow in 2019. we can add, and the more we can offer to our customers, and continue to Digital transformation is also creating a better everyday life for the changing the way we see our many people over the next 75 years. stores and provides us with great opportunities. Online functions will Tolga Öncu complement the store experience, but Retail Operations Manager, Ingka the stores will also drive the online Group

23 | Ingka Group Annual & Sustainability Summary Report FY18 Our business | IKEA Retail

ZERO EMISSIONS DELIVERIES e need to find new ways to the risk of becoming a major polluter in be part of the solution, not our cities and that is not who we are as a the problem,” says Angela company,” Angela says. Drivers for change Hultberg, Sustainable “WMobility leader, Ingka Group. Full speed ahead We want our home delivery service In June 2018, we set ourselves some With demand for home delivery increasing around the world, to meet our customers’ expectations ambitious targets, going all-in to secure air and noise pollution in our cities is a growing concern. At on accessibility and convenience in a 100% zero-emission home deliveries in the same time, we want to make the shopping experience sustainable way. We are already seeing all of our markets by 2025. We also want as convenient as possible for our customers. That’s why we low-emission zones, road tolls for fossil to get a head start and get there even fuel vehicles and diesel bans, as well as faster in major cities like Amsterdam, are committed to zero-emission home deliveries in all our incentive programmes for zero-emission Los Angeles, New York, Paris and markets by 2025. vehicles. So switching to zero-emission Shanghai by 2020. home deliveries is crucial for our And we are already making progress. business. We have deployed electric vehicles in Australia, China, France and India to name a few, and more zero emission “People’s expectations are vehicles are on the way in many changing. We are no longer markets. However, we still have a lot to prepared to wait a week do and it will require strong collaboration or two for the things we to make it happen – both internally and externally. order, and because we are “We can only do this together with ordering online that means our partners,” says Marcus Baumgartner, smaller loads and more Customer Fulfilment Manager, Ingka vehicles on the roads.” Group. “It will require all of us – within our company, transport companies, manufacturers, energy companies and While there are some obstacles on others – to work together to find new the road towards electromobility – solutions. And not just with existing cost, infrastructure and availability of partners, but new partners as well, vehicles among them – Angela says such as new platforms for sharing the technology available today is good vehicles and infrastructure, start-ups enough to start the transformation to a of different kinds, charging experts, more sustainable way of delivering goods. everyone passionate about making “People’s expectations are changing. last-mile delivery better for both people We are no longer prepared to wait a and planet. This is not as simple as week or two for the things we order, replacing a combustion engine truck and because we are ordering online that with an electric truck, we need to find means smaller loads and more vehicles new ways of working, too. Zero-emission on the roads. But if we double or triple deliveries are an essential part of our deliveries, transport emissions will transformation – and I’m excited to be increase accordingly. We are faced with along for the ride!”

24 | Ingka Group Annual & Sustainability Summary Report FY18 Our business | IKEA Retail

IKEA RETAIL UK & IRELAND London calling

To be much more accessible to people living or working in cities, we are taking a different approach than we do with the well-known, more traditional IKEA store. To thrive in these bright and bustling spaces, we need to adapt to meet the needs of the city and the communities within them.

n today’s retail environment, we mean in the totality”, says Jette people want to shop in a number Jørgensen, Expansion Manager, Ingka of different ways and expect Group, “We want to be more accessible brands to offer them services to the many, so we need to be where Ithat reflect the way they live. By people live, work and socialise. Of bringing the IKEA brand into cities we course, having central locations will can be even closer to our customers help us with this, but we will offer even and make our affordable offer even more than that.” more accessible to the many people. One city where these plans are well underway is London, England. A new city approach Going into cities represents a new era Different formats for us. We will open new city formats The UK is one of Ingka Group’s biggest in 30 prioritised cities around the world markets, and London is one of the over the next three years. By building most populated cities in Europe, so insights on market potential, we will it makes sense that this is one of our invest the time and effort to develop a top 30 cities. Previously, we had two deep understanding of life at home in traditional IKEA stores, but these were every individual city. The key driver is located on the outer limits of the city for us to understand how to reach more and we wanted to find a way to be of the many people in an affordable, more accessible to the eight million accessible and sustainable way. people who live there. Cities are living, breathing spaces Now, we have an order and that can change in a single day, so it’s collection point in a large shopping essential for us to develop a deeper mall, and a brand-new store planned understanding. ”When we talk about in Greenwich to be opened in the an increased presence in cities, we’re beginning of February 2019. We not just talking about the city centre, also have a new format that is now …

25 | Ingka Group Annual & Sustainability Summary Report FY18 Our business | IKEA Retail

… open in the very center of London on will then be more relevant in each new Tottenham Court Road – the IKEA city. Planning Studio. “We need to identify the needs of Some purchases and projects each place, as there are so many are more complicated than variables,” Jette concludes. others. When people want a “It could be the people that new kitchen or bedroom, it’s live there, what they want a process that takes time and from home furnishing, or dedication. With our planning whether it’s mainly a business studio, people can book times to business area. It could be with co-workers to talk about Janie somewhere where there’s a their ideas, needs and dreams. Bisset bigger focus on sustainability. This allows us to inspire our We really need to meet the customers, and show them how our people where they are, and integrate in solutions can work for them. the communities around us. That way, “This is a kitchen planning studio, we can become an important part of which means that people can meet people’s everyday lives.” IKEA in the very centre of London, and get the inspiration and assistance “The IKEA Planning Studio they need,” says Janie Bisset, City Development Manager, London, IKEA on Tottenham Court Road Retail UK&IE. “However, you can also is the first step in our purchase the entire range in-store new city approach, as we using our digital services. You can then respond to exciting new choose to have everything delivered home, or to one of our pick-up points.” opportunities, such as the So far, the location at Tottenham growth of city living and Court Road has been a success, and changing consumer needs there are two other planning studios and lifestyles. Our new city scheduled to open in different parts of London. The new IKEA store in centre Planning Studios will Greenwich, which will be the more give customers an easy and traditional IKEA store, will have a convenient way to get the big focus on sustainability. When it’s advice and inspiration they operational, it will be one of our leading sustainable stores. need to browse, plan and order large scale projects, Options and opportunities with specialist one-on- We’ve tried a number of different one support from our co- initiatives so far. The long term goal is to have different proven and scalable workers.” formats that we can choose from, Janie Bisset, City Development based on our knowledge of a city. We Manager, London, IKEA Retail UK&IE

26 | Ingka Group Annual & Sustainability Summary Report FY18 Our business | IKEA Retail

IKEA RETAIL SWEDEN can build on our growth for an even navigating the store and rather than stronger FY19 and years to come. having to follow a single path through, we will make it easier for customers by Evolution at home Building a new store experience in using more of a shop layout, increasing Kållered the customers’ possibility to choose Over 75 years ago, IKEA was born in Älmhult, Sweden. Today, Construction is underway for our what they see. This means our range new IKEA Kållered store, located just and home furnishing expertise can IKEA Retail Sweden operates 20 stores throughout the country outside of Gothenburg, and it will offer better shine through.” which serve millions of customers every year. Sweden is home a new customer experience. The store Convenience and accessibility are of the traditional IKEA concept and almost every Swede has had is being built next to the 46 year-old really at the heart of this project, so the existing one, but with a new, modern store needs to be easy to get to, but we an IKEA store nearby for many decades, but it’s also where we’re design which will allow for more also need to offer the right services to seeing some of our latest innovations. daylight through large glass window make getting furniture home as simple sections, easy access with multiple as possible. To encourage people to entrances and a new food experience. use their cars less, we will have direct n FY18, IKEA Retail Sweden IKEA stores in Sweden offered ‘click Anna Bryngelsson, Store Manager, links to public transport, which can increased its ecommerce sales and collect’ as well as home delivery IKEA Kållered: also contribute to our goals of reducing by 46 percent compared to the within 24 hours. “The idea is to make it more environmental impact. In addition, it previous year. Contributing to In-store sales are stable and convenient and inspiring to visit, will also be a more sustainable store Ithis was a stronger digital experience building on our strengths as we and we will do that by revitalising thanks to a more modern construction with easy checkouts, a new ecommerce transform we want to offer new, the traditional IKEA experience. We in line with BREEAM1 certifications. distribution centre outside of innovative and exciting ways for the will offer new and improved ways of The IKEA Kållered store will also … Stockholm, and the fact that all twenty customers meet us. That way, we 1BREEAM is a world leading sustainability assessment method for master planning projects, infrastructure and buildings. It recognises and reflects the value in higher performing assets 27 | Ingka Group Annual & Sustainability Summary Report FY18 across the built environment lifecycle, from new construction to in-use and refurbishment. Source: https://www.breeam.com Our business | IKEA Retail

… be a fulfilment store, meaning we are Facts IKEA Retail Sweden optimising our traditional IKEA stores to support with last mile delivery. The traditional customer self-serve Total retail Visits to areas will be made smaller, and will sales: IKEA stores: be replaced by a distribution space that in turn will allow for faster and more affordable home deliveries to the Gothenburg region. For customers 1.8 looking to pick up their orders outside billion Euro of opening hours, lockers will be 38million available where they can collect their purchases when it suits them. The ambition is to integrate the new store with a new Ingka Centres Visits online: meeting place, as the current Kållered just over retail area will be rebuilt. For Ingka Centers it is early days in the planning 2.9 stage, but there is a common vision million 98 about this area in cooperation with the Manager at IKEA Kungens Kurva. “Our of the IKEA Samsyn app. This offers IKEA Family million municipality. co-workers are doing a fantastic job of customers in Sweden support in five members (10 percent increase making this unit a success. Customers key areas: troubleshooting, interior compared with last A kitchen success appreciate the design and quality of design help, kitchen follow-up, support year) The kitchen shop in central Stockholm, the kitchens, some have even asked for smart home solutions and language IKEA Kök, started as a test. The plan if we sell a special range and are support. was to have it open for a 6-month surprised when we say that it’s IKEA’s “We need to be where the customer IKEA Food Kitchen, period to see what insights could be regular range. Many customers did needs us. Through IKEA Samsyn we sales gained, and how the customers would not have IKEA on their shopping list can provide support in a completely living room respond to this new way of meeting before we opened this unit. This shows different way, while at the same time IKEA. However, it was so popular that that IKEA Kök, being where it is, has gaining a better understanding of the and storage we decided to keep it open. real value for us and demonstrates our customer and their daily life. Our co- make record listings Our IKEA kitchen specialists are in home furnishing expertise.” workers are also given the opportunity 0.1 and are the best-selling demand and have really contributed to to grow by testing new things,” says billion Euro product categories during the year the success of this format. We show Meeting customers anywhere Rickard Månsson, Business Developer the greatest of our kitchen range and Sometimes, customer service works at IKEA Retail Sweden. related accessories in the street-facing better face-to-face, but it’s not always The ambition is to digitally pair windows, which inspires passers-by and as easy for people to get to one of customers’ needs with co-workers who demonstrates our deep knowledge of our stores to meet a co-worker. To have the right competence to solve this important part of the home. be able to meet them where they their problems. Thanks to this digital “IKEA Kök combines our wide are, we needed a new approach. We solution, we can develop a stronger kitchen range with the service offer, decided to combine the personal relationship with our customers by and the expertise of our competent touch with the digital experience, being able to offer individual help at the co-workers,” says Miriam Swärdh, Store which has resulted in the development right time, in the right place.

28 | Ingka Group Annual & Sustainability Summary Report FY18 Our business | IKEA Retail

DIGITAL SERVICES The task at hand

During 2017, Ingka Group acquired TaskRabbit, an online, on-demand task management network that helps people manage their everyday lives at home by connecting them to trusted Taskers who can help get it done. It’s a business that’s closely aligned with our vision of the future – more convenient, more digital, and more innovative.

askRabbit exists to make life for my day job,” says Brandi Milton, a easier for its users, but it’s Tasker in Houston, Texas, “So if I have also about giving anyone the a lot of spare time in between clients, opportunity to be able to do or a free day, I have my schedule open Tthe work that suits them, whenever on TaskRabbit so I can make some they want. Taskers choose their own extra money.” schedules, and can work around Casey Thomas, a Tasker in New York whatever else they have planned. For City agrees, saying, “I originally started some it can be a full-time job, and tasking to supplement my income, but for others it can be a way of earning it ended up being a really good source money whilst studying. of income for me, especially when the “I’m an independent financial advisor IKEA programme launched, so now I task full-time.” Our work with TaskRabbit allows people in the USA, UK and Canada to not only purchase their furniture TaskRabbit wanted to expand its reach successful launch in Canada, there is a from IKEA, but get it assembled by a so it was the perfect fit. blueprint for quicker, more efficient roll- Tasker through TaskRabbit. We wanted “I think it’s a win all round,” Casey outs, and the future of the partnership to improve our service offering, and adds. “As Taskers can work more, IKEA looks bright. can sell more furniture, and customers We can help generate business for get the convenience. For me personally, TaskRabbit and Taskers, and TaskRabbit I love that I can cross-sell my skills to offers a great service which makes “As Taskers can work IKEA customers, as I also do painting, IKEA more accessible. For the Taskers, more, IKEA can sell more moving and delivery.” it provides a different way of working, furniture, and customers Ingka Group and TaskRabbit will as Brandi says, “I love the freedom and continue to grow together during FY19, autonomy of it all. I can set my hours, get the convenience.” looking at opportunities for expanding work when I want to work, and do the Casey Thomas into more markets. Following a kind of jobs I want to do.”

29 | Ingka Group Annual & Sustainability Summary Report FY18 Our business | IKEA Retail

IKEA RETAIL INDIA Bringing affordable home furnishing to India

In August 2018, we opened our first IKEA store in Hyderabad, India. Spread over 13 acres in the heart of Hyderabad’s tech hub HITEC City, the store is expected to welcome more than seven million visits annually. It employs 982 co-workers, of which 43% are female, in line with our commitment to have 50% female co-workers at all levels and in all areas of our retail operations in India.

e have a long term We expect around seven million commitment to India visitors in the first year. The perception and we plan to open of foreign companies in India is that several stores and they charge high prices, so to make our Wmultiple touch points across the main products both affordable and available cities over the coming years. The to the many people, we have worked next Indian cities to welcome IKEA hard on an affordability strategy in India stores will be Navi Mumbai in 2019, where more than 1 000 articles are followed by Bangalore, Gurgaon and sold for just under 200 rupees (EUR 2). Delhi NCR. Ecommerce will also be In addition to offering services like launched in 2019 and India’s 400 home delivery and kitchen installations, million smartphone users will offer IKEA Retail India also offers furniture huge opportunities for us to meet assembly for as little as EUR 6,00. new customers online and for us to be accessible for many more of the many. Assembly service – an essential The IKEA Hyderabad store spans tool for IKEA in India 40,000 m2 and includes the world’s India is a unique market in many largest IKEA restaurant with space for ways especially when it comes to high 1,000 guests. Hyderabad, a city of ten service expectations. Many Indians million people, is one of the fastest are not yet used to the concept of growing markets in India, and more do-it-yourself (DIY) which is why it’s than 10,000 new homes are expected even more important for us to be able to be built in the vicinity of the store to provide efficient and affordable over the next two to three years. assembly support and services. …

30 | Ingka Group Annual & Sustainability Summary Report FY18 Our business | IKEA Retail

Santosh Sayari, Services “At IKEA Retail India, People and Culture Manager, IKEA Manager, IKEA Hyderabad: we aim to create a Retail India. In a country where not workplace where many women are seen driving vehicles, “IKEA matches my the IKEA Hyderabad store has eight equality thrives and values” women forklift drivers, and another ten – During my interview IKEA we will always strive in its Pune distribution center. “These talked about work-life balance, for a 50/50 gender women are forklift drivers in what is values and culture. I immediately balance at all levels”. traditionally a male-dominated field, by felt that IKEA values holding this role and performing it with such as humbleness, Anna-Carin Månsson, simplicity and leading Country People and Culture competence and ease, they shatter Manager, IKEA Retail India the myth that women should shy away by example, really from roles that are ‘meant’ for men. At matched my own values. IKEA products IKEA Retail India, we aim to create a will improve so many workplace where equality thrives and peoples’ lives in India. we will always strive for a 50/50 gender Multifunctional products for balance at all levels”. small spaces – like my personal Because of a combination of socio- favourite, FRIHETEN sofa – will economical structures, culture and make a big change. It’s been my traditions, empowering women through dream since childhood to have work is easier said than done. Even a beautiful, colourful, luxurious home. Thanks to IKEA I can now … “In Hyderabad, we are training more homes and create a better everyday though half of the university graduates make it all come true. than 150 IKEA co-workers in furniture life”. are female, fewer educated women assembly and installations, which has In addition to the in-house team, participate in the labour market. “The never been done on this scale before. we work with an external partner local legislation prohibited women from Laxmi Pallapothu Dhana, Sales This is very special and unique even to provide IKEA assembly services working night shifts and each state in Manager Market Hall, IKEA in IKEA terms, and our aim was to to customers who book via their India had a different time period during Hyderabad: Max deliver quality to customers from day services platform. For this initiative, which the prohibition applied. In order “IKEA will make Hedberg one,” says Max Hedberg, Competence local carpenters have been trained by to facilitate more female inclusion in Development Specialist (People and IKEA Retail India to assemble IKEA the workplace, we approached the Indian lives easier” Culture), IKEA Retail India. products. local government and complied with – For me, it’s not all about The co-workers in the in-house all conditions stipulated,” says Amita money. It’s about being service business team are a diverse Equality is on the way Thomas, Co-worker Relations Manager, independent and 1 having influence and Disha is a partnership group consisting of men and women Staying true to our commitments IKEA Retail India. IKEA Retail India between the India creating a positive from various backgrounds. They of gender balance in all levels of created a Transportation Rule that Development impact for other Foundation and UNDP, have been recruited from both the leadership, functions, and positions included door-to-door pick-up and women in society. As supported by IKEA 1 Foundation, that Hyderabad society and the DISHA skill by 2020, IKEA Retail India has also drop-off for anyone working between soon as I visited IKEA aims to support one development programme, and the aim employed and trained female forklift 6 PM to 6 AM, one of the conditions for and saw the range, I felt a million underprivileged is that 50% of this team will consist of drivers for its logistics operations. allowing women to work night shifts. connection. It was my chance to women in India learn touch the lives of the many people, marketable skills and women. “The team today is equipped “Our female forklift drivers are “As all our Rules are gender neutral connect with income with the knowledge, skills and overall a great example of how women are this benefit was even extended to male to provide them with solutions opportunities. to make their lives easier. Indian competence to deliver a high result. as capable as men when it comes to colleagues and third party consultants Source: www. people need better solutions in ikeafoundation.org and They are ready to contribute to the taking on different roles within IKEA,” thus consolidating our position of being their homes. www.in.undp.org store build up and to visit customers’ says Anna-Carin Månsson, Country an equal opportunity provider“.

31 | Ingka Group Annual & Sustainability Summary Report FY18 Our business | A message from Barbara Martin Coppola

and needs. By being more digital, we Second, we are redesigning our web will create seamless, personalised interfaces to offer the customer a great, customer journeys, and make IKEA personalised experience. Third, we available in whatever form they want, will enable our stores to be fulfilment whether that’s in the city centre, online centers allowing fast and cost efficient or in the store. We will create unique deliveries through digital architecture IKEA experiences and services online in and solutions. the next three years. Convenience has to be at the core We are modernising the way we of our offer, as this is what the work. We will use data and automation customer expects. In the future, I in smart and responsible ways which think we will also offer more services. will allow our co-workers to spend more We already have initiatives around time on creative and value-adding assembly and delivery, and we will activities. It is about getting accurate, expand our offer to a wider set of high quality, timely and accessible data solutions that will make our customers’ and self-serve digital tools in the hands lives at home that little bit better. of our co-workers anywhere, at any time. We believe this will unlock the We will tap into the rich knowledge real potential in all of our co-workers. of life at home that we have after We will also provide tailored workplace our 75 years and put it in the hands experiences supported by high- of the customers. There is a real A MESSAGE FROM BARBARA MARTIN COPPOLA performing and flexible digital tools wealth of information, so imagine the that support co-workers in their daily magic we can create by using this work. This will enable all of us to better knowledge to meet customers on an Embracing the digital meet our customers. individual basis. We want to create truly relevant, personalised experiences for For our digital transformation the customer when they engage with opportunity to be successful, it will be at the us, however they choose to do that. core of everything we do, and Consumer needs and expectations are changing, which means embedded in every unit. I see many People are at the heart of this Ingka Group needs to change too. We’re developing our opportunities. We are putting a team in digital transformation. Our capabilities to better meet our customers in a digital world. place to support the movement towards customers and co-workers will play digitalisation, as it’s so important that a big part in realising these plans, as we involve the many co-workers in this we co-create the new IKEA together. e are on a journey traditional stores, we are creating an transformation. We will change for the better in the to transform IKEA even better IKEA to serve more of the next three years, and we are all really and reimagine our many people. We’re working on three important excited to take the next step on this future, expanding initiatives. First, there’s a new app, digital journey! Wbeyond our current reality with new We have countless opportunities which is all about giving the customer touchpoints and evolving our existing to realise the potential of IKEA a great mobile experience. We’re at an Barbara Martin Coppola ones. From better digital services and digitally, and everything we do starts exciting phase of exploration and will Digital Manager, Ingka Group new store formats to enhancing our with the customer, and their dreams share more details in the year ahead.

32 | Ingka Group Annual & Sustainability Summary Report FY18 Our business | Ingka Centres

INGKA CENTRES IN CHINA Re-inventing the meeting place idea

As our shopping centres become living, breathing hubs in some of the world’s largest cities, Ingka Centres is finding new ways to engage with our communities.

ngka Centres is on a journey shopping centre has the potential to create new kinds of meeting to be. Whether through building places, where people can gather, parks, hosting festivals or providing socialise and have unique workspace for start-ups, we want Iexperiences. We plan to do this by our meeting places to have a positive changing the perception of what a impact on their local communities. One of the main drivers in our strategy at Ingka Centres is also to make IKEA more accessible for the many. So we work closely with IKEA Retail to identify the best opportunities for making this happen. We will increase our presence in cities, for …

Ingka Centres 45 meeting places 14 markets 480 million visitors/year 7,000 shops 1,600 brands 2,250 co-workers Our business | Ingka Centres

“Public spaces, public access and communication are so important for this project.”

… example, and one way to do this is to build meeting places in city centres and near transport hubs. As our plans to open a new LIVAT meeting place in Shanghai, China, in 2022 become more concrete, a good example emerges of how these strategies are coming together to create a modern, multi-functional meeting place.

The LIVAT Linkong project “In the hub of West Shanghai, Linkong is the perfect location for the development of a new shopping centre,” says Elise Clinet, Project Manager, LIVAT Linkong. “Thanks to a vast transportation network that includes a metro situated just 200 metres from the plot, it has really good accessibility. And, in 2020, there will be about 100,000 office workers within for this project. We’re going to have improved air quality, water quality, This is the first project of its kind for 1LEED: The LEED green building system, walking distance, representing a huge a variety of places to meet, including lighting and noise reduction. Ingka Centres, and its mix of meeting launched in 2003, number of people who can visit easily.” a public plaza, a roof garden and a “We’re working to achieve two places, accessibility and thriving is used world-wide This shopping centre is set to be Scandinavian-styled street.” major certifications: WELL and city location will stand as a strong to rate buildings performance on 1 home to around 300 shops, five office Elise adds: “We’re also looking LEED ,” explains Angel Liu, Country statement of our plans for the future. energy, water and towers and, of course, a new IKEA to implement some exciting tech Sustainability Manager, Ingka Urban concepts like this will, after all, resource saving, waste store. We estimate that around 15,000 solutions, which will include automatic Centres China. “LEED provides the keep us relevant in times where more generation and human health support. jobs will be created in the surroundings bike parking for our visitors. We know framework to encourage a cost- people are moving into cities. WELL: The WELL as a result of the project, too. We also this will be popular, as Shanghai is such saving and sustainable building, and As Ding Hui, Country Manager, Ingka Building Standard, launched in 2014, want to make sure we’re providing a big cycling city.” it’s something we’re very proud to Centres China, says: “This project is the premier more than just functionality. Amy Yu, work towards. WELL is more about is exciting, and it’s also a big sign of standard for buildings, Country Communication Manager, Green space peoples’ health and wellbeing, and the commitment. Because we’ll deliver interior spaces and communities seeking Ingka Centres China explains: “We talk Sustainability is a core part of certification guarantees that all offices more on two fronts: more than an to implement, validate a lot about community strategy, so this project. Using available green will have higher air quality, which is IKEA store, and more than a shopping and measure features that support and that’s why public spaces, public access technology, we’ll provide people visiting really important in a major city like centre. We’ll deliver a meeting place for advance human health and communication are so important or working in LIVAT Linkong with Shanghai.” the people of Shanghai.” and wellness.

34 | Ingka Group Annual & Sustainability Summary Report FY18 Our business | Ingka Centres

INGKA CENTRES IN RUSSIA A MEGA milestone moment for Centres

When our Ingka Centres team in Russia started evolving the MEGA Park concept, the idea was simple: build something that will make life better, both for the people visiting the shopping centre and for the local community. But when these concepts became a reality, it was clear that the MEGA Dybenko centre offered even more. Where else could you find music festivals, summer cinemas and skate parks – and all in one space?

EGA Dybenko is an Ingka to explore how to make life better for people living adjacent to the park and wanted workout zones, but the two most Centres-owned shopping those living here, so we asked ourselves shopping centre, and that number is popular choices were more music festivals centre and park located the question: ‘What does this urban area predicted to rise to 160,000 by 2025. and a summer cinema.” in the south eastern part really need?’. One obvious answer was This is a local community that’s big and Fortunately, this MEGA Park was able Mof the city of St. Petersburg. Home to more green spaces.” getting bigger, so we want to be good to deliver on both, last year hosting more than 180 stores, it’s also a prime On the back of this, the decision was neighbours to them. 77 festivals in total, and together with example of how our shopping centres made to use the land beside the shopping “We also recognise that not everything partners, screening movies in the park are becoming meeting places through centre to create a multi-functional leisure we do can appeal to every single person,” over the entire summer. The skate park our MEGA Park concept. space. So MEGA Dybenko now has continues Vyacheslav, “So instead of proved to be very popular too, with people Natalia Petelina, Meeting Place 90,000 square metres of landscaped trying to do that, we’ve created a variety coming from all over the country to visit. Manager, MEGA Dybenko, provides parkland that’s home to many different of initiatives tailored to smaller groups. It’s the first in Russia to include a bowl some background: “St. Petersburg is the activities. Nothing like it has ever been Now we have children’s play areas, a – like an empty swimming pool designed

most northern big city in Russia, with a done at any of our shopping centres Natalia dog park, a skate park, running clubs for skating – and it was built to match the population of over 5 million. We wanted around the world, so it represents a Petelina and yoga classes. Many of these are features of skate parks in California. milestone moment for Ingka Centres. organised by people in the community, More than 100,000 people visit the or co-created with the tenants of the park at MEGA Dybenko each month, which Social success shopping centre, which is great to see.” has had a positive effect on visitation to The goal of the MEGA Park is not only to Through crowdsourcing initiatives and the shopping centre and its IKEA store. make the area around it more liveable, interactive stands where people voted on Not only are the initiatives good for but also to increase the number of what they wanted from the park, those people, they’re good for our business. In people visiting the shopping centre and working on developing MEGA Dybenko terms of making life better for the many, its attached IKEA store. Vyacheslav were able to give the community a voice Vyacheslav has observed that people take Stepakhin, Community Relations in its creation. “People voted for many pride in everything around the park. “It’s Manager, MEGA Dybenko, shares his different options,” says Vyacheslav. a real community feeling,” he says, “and insights: “Right now we have 80,000 “Some wanted skate parks, others everyone plays a part in looking after it.”

35 | Ingka Group Annual & Sustainability Summary Report FY18 Our business | Ingka Centres

Around the world in five Ingka 1DIGITAL Centres initiatives MALL Wuxi, China The way people shop is changing constantly and Based on WeChat, digitalisation is a key part of that revolution. China’s largest social Around the world, we’re co-creating meeting media platform, Digital places, with the goal of offering more to our Mall works as a loyalty programme. Visitors communities. We want to transform shopping to our shopping centre trips into memorable experiences. in Wuxi can become Family Members, giving them access to special offers, navigation tools and a number of other features. We worked together with tenants to create the best possible offer for this, and as it’s a digital platform, we can really personalise our relationships with customers. We’ve already seen that this creates a sense of belonging and importance, and we have over 100,000 members. We’ll continue to work with our tenants to get to know our customers better, so that Digital Mall will constantly evolve.

36 | Ingka Group Annual & Sustainability Summary Report FY18 Our business | Ingka Centres

HANDS-FREE UNDERLINE SHOPPING SERVICE SPACE MEGA Nizhny Novgorod, Teply Stan MEGA Teply Stan, Moscow, and Ekaterinburg, Russia Russia

Customer satisfaction is essential A 6,000 m2 space dedicated to 4to the ongoing success of Ingka 5fashion and lifestyle, Underline Centres, and the hands-free shopping is a place where online brands can service is a good example of how we’re establish a physical presence. Within using digitalisation to improve customer it we’ve provided places for pop-ups, experience in some of our Russian and areas where people can go to shopping centres. work, drink coffee, practice yoga or Using the MEGA app, our customers no listen to lectures. longer need to take everything they buy With its three main retail zones with them as they shop, instead making of fashion, lifestyle and wellness & purchases in each store and having them beauty, over one million guests have delivered to a chosen pickup point, or visited Underline since it opened, even to their parking spot or bus stop. At giving these digital brands valuable MEGA Nizhniy Novgorod alone, we have physical exposure. 4,000 monthly users of the service.

SOCIAL GARDENS SINERGIUM SPACE Wola Park, Poland LUZ Shopping, Jerez, Spain

This is a co-creation project that Sinergium is a co-working space 2also contributes to becoming more 3created by our shopping centre and sustainable, an important part of the its IKEA store, to stimulate employment Ingka Centre’s Meeting Place strategy. and entrepreneurship in Cádiz. Together This garden is a place where our local we teamed up to take on the goal of ‘Local community can grow and take care of Impact with Global Strength’, against a plants, herbs and vegetables, as well as backdrop of high unemployment levels in share inspiration and ideas with each Cádiz. other. We wanted to help stimulate employment We teamed up with three social and entrepreneurship in the area, so activists in Poland, and this collaboration we organised a competition for young helped provide the best possible space companies and entrepreneurs. Those chosen from a community and environmental were paired-up based on their similarities, to perspective. The 200 m2 social garden is help create synergies that could benefit from used by people of all ages, and there’s a shared knowledge and experience. We now relaxation zone in addition to the space have ten start-ups based here, and hope to reserved for plant life. inspire more in the future.

37 | Ingka Group Annual & Sustainability Summary Report FY18 Our business | Ingka Investments

INGKA INVESTMENTS Investing for our future

In a fast-changing world, we at Ingka Investments continue to explore how investments and acquisitions help our business, while at the same time supporting innovation that makes a positive difference to people and the planet.

e come from a strong supporting the clean energy transition position of liquidity and responsible forest management, at Ingka Group, with we also balance our financial exposure. a traditional financial Energy and wood are very important Wasset management approach. This has resources to us, and our product evolved towards a much more dynamic margins go down if the prices for either business-driven approach, aiming to increase, so our investments provide support core business development and us with some protection. We think of it to secure liquidity for the future. as long-term macro-hedging, as well as Our role at Ingka Investments is to sustainable investments.” ensure the long-term financial strength of Ingka Group through conservative Supporting our IKEA business treasury asset management. In To keep up with market demands addition, through four other investment around convenience and innovation, portfolios, we invest in minority and and as a way to access new majority shareholding in order to technology and business models, we support our retail business, including will continue to invest in fast-moving, digital and customer fulfilment. We also entrepreneurial companies focusing invest in circular economy companies, on retail development, customer renewable energy and forests. We align fulfilment, digitalisation, innovation our investments with our business and circular economy. needs and want to make a positive We believe that acquisitions will help difference in the societies where we us to strengthen the IKEA service offer invest. for our customers. An example of this “Take, for instance, our investments kind of acquisition of TaskRabbit, as in renewable energy and forests,” Krister explains: “This was a way for Ingka Investments says Krister Mattsson, Head of Ingka us to take a quick step into the sharing 441 Wind turbines Investments. “Here we’re not only economy and an on-demand services … 180,000 Hectares of responsibly managed forests Our business | Ingka Investments

… platform. If we had developed a similar Ingka Investments platform, it would probably have taken Investing to enable development of much longer considering our scale and sustainable technologies portfolios size, and we felt this was a better way Founded in 2009, XL is a US-based developer to access new technology and a new and provider of simple and sustainable fleet business model supporting services.” electrification solutions for the commercial vehicle market. The company’s electrification Looking for synergies solutions are cost-effective solutions that Business development Renewable energy Ingka Investments also invests in enable commercial and municipal fleets to 1investments 3 investments companies that we don’t aim to quickly and efficiently reduce transportation The primary aim of this portfolio is to We support our target to produce as much renewable energy as we consume with this integrate into our business. Instead, fuel consumption, lower operating costs, and invest in and acquire companies that will portfolio. We invested in new wind farms as we make minority shareholding measure performance to meet corporate benefit our core IKEA Retail business, usually through adding a competence or a in Europe in FY18 – including in Portugal investments, we look for synergies, sustainability goals. XL’s systems deliver up service that complements our own offer. and Finland – and own and operate 441 which means we can help them with to 25–50% improvement in fuel efficiency, Our acquisition of TaskRabbit is the clearest wind turbines in 13 countries. And in FY18

our financial strength, our home CO2 emissions savings, and 99.9+% fleet signifier of this strategy, as it can offer we produced renewable energy equivalent furnishing and retail knowledge and uptime on major OEM (Original Equipment IKEA customers additional ways to access to 81% of the energy used in our global our network of invested companies. Manufacturer) vehicle platforms1. XL’s flexible and affordable service solutions. operations. At the same time, they can also help solutions are compatible with new Forestry us. It’s essential to gain new insights and existing ranges of commercial investments in consumer and shopping behaviours, fleet vehicles and can be installed by 4 Venture and growth During FY18 we have further invested in and we’re eager and determined certified installers with no impact on capital investments forests. In the IKEA home furnishing supply to cooperate with these fast-paced fleet operations and no driver training or 2 In this portfolio, we make late-stage chain, wood material is, in terms of cost, innovators and entrepreneurs to better infrastructure requirements. Matt venture and growth capital minority the second largest resource after energy. understand this new landscape. 1Source: www.xlfleet.com Stanley shareholding investments in innovative So far we’ve invested in forests in the We view increased digitalisation companies. This allows us to broaden Baltic States, Romania and the USA. As per and sustainability as two major trends our investment landscape and diversify year-end FY18, we own 182,000 hectares “At Ingka Group, we want of forest. that go hand-in-hand. For example, our financial risk and return profile. when more sharing platforms come to to support innovative These investments also help us learn from the world around us, and can Treasury asset management market, they increase the opportunity companies that are developing new guide us on how to invest in a more (Financial markets investments) to extend the life of IKEA products, or 5 technologies, solutions, and business sustainable future. In FY18 we invested Under this portfolio we invest most of our introduce new services that speak to models to help accelerate the transition in the Swedish company Matsmart, the liquidity. We have four sub-portfolios: our common values. Estonian company Click & Grow and the a bond portfolio, an equity portfolio, a “We will make more investments toward sustainable transport. Through UK-based company Homewings. portfolio with non-investment-grade bonds and acquisitions in FY19 and beyond,” the investment in XL, we want to enable and an alternative investments portfolio. concludes Krister, “and in doing so, the company to become a leading we’ll always look for new opportunities provider of electrification that are linked to our core business and that add value for our customers.” solutions for commercial vehicle fleets.” Matt Stanley, Investment Manager Venture and Growth Capital, Ingka Investment

39 | Ingka Group Annual & Sustainability Summary Report FY18 Our business | Ingka Investments

INGKA INVESTMENTS will be in a better position to meet able to increase supply to fit the significantly,” Eric says, the increasing global demand for needs of the customer, whilst also “and that’s more from an recycled plastic products. offering improved end products. environmental perspective. In the Buying into plastic past it was an economic decision, Positive partnership A new recycling concept but now it’s about making a recycling This partnership wasn’t just about “Our plans are to expand our statement around not using the a cash contribution. It was the production of recycled raw resources of our planet; it’s about start of what is set to be a long- materials,” says Eric, “and our new becoming a more sustainable Morssinkhof Rymoplast, a plastics recycling company term working partnership between facility will upgrade plastics to a organisation.” based in the Netherlands, is a family-run business Ingka and Morssinkhof. raw material form, allowing the With the European Strategy that has been operating for over 50 years. In “We are in contact on a weekly customer to use them for a wider for Plastics in a Circular Economy February 2017, Ingka Investments made a minority basis,” says Lukas. “Where we range of products.” in place, it’s likely recycled can and where they appreciate it, The new plant will be able to plastic products will become shareholding investment and took the opportunity we try to support the company sort plastics by colour in a more even more desirable. “The EU to invest in its future. But the resulting partnership in many ways. Whether that’s in accurate and efficient way, solving plastics strategy is promoting benefits more than just our business. strategy discussions, development one of the biggest problems in the better collection of post- plans or financing arrangements, plastics recycling, where consumer plastics, making we’re available to help our investee most of the output has sure they’re recycled hen we start “We looked at several companies out where they need us been black or grey. “The in Europe rather than planning to invest companies, and saw that most.” new plant is a combination elsewhere,” says Eric. in a business, many Morssinkhof is one that’s leading Eric Morssinkhof, Managing of conventional and new “From our perspective aspects contribute in the industry, with operations in Director, Morssinkhof Rymoplast, technologies mutually this will create a greater Wto the decision-making process. several countries in Europe and a adds: “There’s an increasing developed by Morssinkhof availability of plastics to Eric While we need to be confident long track record. They use this demand for the recycled plastics and its equipment Morssinkhof recycle, and also a greater of growth, it’s just as important knowledge to develop in a really that we’ll be producing in the new suppliers,” explains Lukas. need for recycled plastic that the businesses we invest in great way,” says Lukas Visser, plant, so we’re confident in the “The combined set-up of these products in Europe.” operate in a way that contributes Portfolio Manager Recycling, opportunity we have. The fact that technologies is highly innovative, The fact that Morssinkhof to our vision and aligns with our Ingka Investments. “We invested Ingka supports this development and customers will be able to takes these wider factors own core values. with the main goal of growth, underlines the growing awareness buy clear or coloured recycled into consideration makes the Awareness is growing and by the time we signed for using post-consumer recycled plastics.” partnership with Ingka an ideal around single-use plastic the agreement, plans for raw plastic materials.” This innovation will benefit fit, as sustainability is such waste, with many Ingka construction of a new The mutually beneficial customers, but it could mean more an important driver for both Group co-workers sharing plastics recycling plant relationship may be in the than that. If it’s as successful as businesses. these concerns. With that had already been put in relatively early stages, but envisaged, it could be introduced “Plastic recycling is an in mind, Ingka Investments place. The new plant is due it’s already paying off for both elsewhere, as Eric explains: “This essential focus area for us, and explored the opportunity to open in 2019.” partners. For us, it’s about is a new recycling concept, so if it even more so looking into the of investing in a plastics Lukas Visser Morssinkhof already seeing an already-successful works here we can copy and paste future,” confirms Lukas. “We recycling business. This is produces over 250,000 tons company grow and improve, this approach to other regions really trust this company to gain a growing industry, so investing of recycled plastic raw materials whilst also serving a positive around the world.” more market share and continue here makes financial sense, but every year, and this new plant purpose in the environment by to innovate. Their in-house promoting growth in this sector will increase that figure, initially increasing the amount of recycled Forward thinking knowledge is really impressive, also contributes to building a more by around 10%. This improved plastic products available. For “When you look at the last and is something they should be sustainable future. capacity means that Morssinkhof Morssinkhof, it’s about being 15 years, demand has grown proud of.”

40 | Ingka Group Annual & Sustainability Summary Report FY18 Our business | Ingka Investments

INGKA INVESTMENTS Protecting the source of the resource

Wood is one of the most important renewable resources in today’s world. It goes into around two-thirds of IKEA products, so it’s important for us to have a positive influence on its future as a valuable organic material.

ince 2014, Ingka Group has Costel Bucur, Compliance and bought forest land in various Sustainability Manager Forestry parts of the world, and by Portfolio, Ingka Investments, explains: the close of FY18, we owned “With all of our forests, we work Saround 182,000 hectares in total, from day one on sustainable forest made up of areas in Romania, the management and FSC certification – in Baltic States and the USA. This is our opinion, currently the most credible all managed and maintained by 130 scheme that applies on a global scale. co-workers, with our forest in the This requires that we engage with all USA being overseen by an external relevant stakeholders for transparency contractor. and improved management, balancing As we plan to continue to expand economic, social and environmental our portfolio of forests, our priority values and making all three of them is to do so in a responsible way. This thrive.” “There’s no such thing as a short- is why, when managing new forests, We also see that a large part of term vision when you’re talking about we first apply to it our high internal our responsibility towards the land we standards for sustainable forest own – and by extension the planet – is responsible forest management.” management, which include becoming to restore forests and plant more than Andriy Hrytsyuk certified by the Forest Stewardship we harvest. “Quite often we buy land Council (FSC®). that is either heavily harvested, In practise, this means or well-stocked but not well that our forests are inspected managed,” says Andriy annually, and that we need Hrytsyuk, Forestry Portfolio to follow the internationally Manager, Ingka Investments. agreed principles of good, “To remedy this requires a careful and long-term forest Andriy great deal of effort, time and management. Hrytsyuk money, but it also creates …

41 | Ingka Group Annual & Sustainability Summary Report FY18 Our business | Ingka Investments

some are protected, and the water Forward-thinking forestry courses of the forests can contribute As with any other industry, modern to water supplies, so it’s vital these technology is starting to have a positive are kept clean. There are also social influence on forest management. considerations, as we need to ensure Claudia Blagu, Digitalisation Project local communities and bordering Leader, Forestry Portfolio, Ingka businesses are heard when it comes to Investments, has seen how technology planning investments and harvesting can facilitate more effective forest timber. management: “Part of our vision is to “The thing that makes me really proud “We identify the areas important to combine the use of technology with is that we manage our forests as biodiversity prior to any operations,” efficiency and sustainability goals,” Total area owned says Costel. “We carry out an she says. “We started by adopting GIS at the end of FY18: ecosystems, and not as crops or timber assessment to discern the impact (Geographical Information System), production facilities.” of our actions. Depending on the designed to capture, store, analyse, Costel Bucur size and scale, we come up manage and present spatial or 182,000 with measures to minimise geographic data. This helps hectares the impact. The thing that us to map all of our property (circa) makes me really proud is that and collect information in we manage our forests as real-time, and makes it easier … opportunities for a long-term owner ecosystems, and not as crops or to understand the impact of like Ingka Group.” timber production facilities.” Claudia several forest-related decisions. It Blagu “There’s no such thing as a short- These aspects are all part of also helps us create transparency term vision when you’re talking about our way of working and are what towards stakeholders, as we responsible forest management,” contribute to the FSC certification. can present our information in an Trees harvested Andriy continues, “because you have To be successful in sustainable forest understandable way to both the in FY18: to allow for 10-to-20 years to see management, it’s vital to see the authorities and the general public. improvements in the forest – and up certification more as a support for our Digitalisation can really help improve to 140 years to realise the income. way of working, rather than a checklist industry standards.” 700,000 Of course, we harvest the property of tasks. Part of this also means That the industry in general is – that’s how we get a return on the looking for input from all stakeholders improving and adapting to changes investment – but we do it responsibly, – anyone from the people working in that will have a positive impact in taking all social and environmental the forest itself, to its local institutions the future, is good news for Ingka Costel Bucur aspects into account. We also invest and communities. Group. This is because we’re in this significant amounts in management “Having this integrated approach business for the long term. “A lot of Trees planted and regeneration. During FY18, for to management is vital,” adds Costel. the forests we buy have great potential in FY18: example, we harvested around 700,000 “Because we’re providing more than for improvement, and we try to do this trees and planted 3.6 million.” just trustworthy sources of timber. over a longer period,” says Andriy. “We We’re providing other services and tend to invest significantly in forest 3,600,000 An integrated approach products to society: well-regulated improvement, as we want to see the Regeneration is just one part of water courses, the right level of results not just over the next ten years, responsible forest management. biodiversity and good protection of but over the next 100.” The land we own is also home to the agricultural lands bordering our many different species, of which forests.”

42 | Ingka Group Annual & Sustainability Summary Report FY18 People and planet positive | Introduction

PEOPLE AND PLANET POSITIVE

THIS IS INGKA GROUP | OUR BUSINESS | PEOPLE AND PLANET POSITIVE | GROUP FINANCIAL PERFORMANCE AND GOVERNANCE | INDICES

43 | Ingka Group Annual & Sustainability Summary Report FY18 People and planet positive | Healthy and sustainable living

WHY IS THIS IMPORTANT? Listening to customers Healthy and The IKEA vision is to create a better everyday Today the world’s natural resources are life for the many people. Understanding our sustainable living being used at an unsustainable rate, and this customers’ lives through research and home increasingly impacts people, communities, visits is an established part of how we work. ecosystems and our business. Now we want to go even further to get a Our homes and the choices we make in deeper understanding of customers’ everyday our day-to-day lives have a big impact on the needs, dreams and challenges in relation to The Ingka Group ambition is to inspire In FY18, we: planet, and on our health and well-being. sustainable living. and enable one billion people to live • Asked 14,000 people what they think Like most people, our customers want to better lives within the limits of our about climate change to help us inspire enjoy a decent quality of life without negatively Offering products, services and solutions planet. more everyday climate action impacting the environment. But not at the IKEA is making it easier to live more We want to show that living more • Sold products worth EUR 2.1 billion expense of price, quality or convenience. sustainably through affordable and more sustainably makes life better and that it’s that enable customers to save water We know our IKEA customers want us to sustainable home furnishings and products. possible to take simple and affordable and energy and reduce waste play an active role in helping them live more A lot of care goes into making IKEA products steps that make a real difference. • Increased the number of home solar sustainably. They also want us to be more – from selecting and sourcing materials customers by 230% transparent and open to dialogue, as well as that are better for people and the planet, to play our part in tackling global challenges. securing good conditions for the people who We have a great opportunity to use our make them. Many IKEA products also help our scale and influence to make healthy and customers generate clean energy, save energy sustainable living a desirable choice that is and water, reduce waste and grow their own affordable, attractive and accessible. With our food. We’re exploring services to encourage knowledge of life at home, and the hundreds of customers to reuse and recycle products and millions of interactions we have with people in we are working to offer and promote healthier our IKEA stores, Ingka Centres meeting places and more sustainable food options in our and online, we can help to make this possible. restaurants and cafes. This will be good for our business, good for the The products in our stores are supplied by planet and good for the many people. Inter IKEA Group. You can read more about responsible sourcing, home furnishing suppliers, WHAT WE DO product design, product safety and other related topics on the Inter IKEA Group website1. We all want to make life better through our everyday actions. But many people worry that Building desire and demand sustainable choices require extra time, money We aim to inspire and motivate customers and or effort and that individual efforts won’t make co-workers by sharing the benefits of healthy a difference. So, it’s easy to get overwhelmed, and sustainable living through communication feel frustrated and do nothing. and marketing in our IKEA stores, Ingka At IKEA, we want to make healthy and Centres meeting places, and all our sustainable living desirable and empower more communication channels. We enable co-workers people to act by showing how it’s possible and customers, in particular our IKEA Family to make your life better with simple and members, to experience IKEA products and affordable changes. At Ingka Group, we are solutions that support healthy and sustainable focusing on three areas. living through our engagement projects. …

1https://newsroom.inter.ikea.com/

44 | Ingka Group Annual & Sustainability Summary Report FY18 People and planet positive | Healthy and sustainable living

We’ve shared the findings of our research with other businesses, governments and policymakers and we’ll be launching a campaign to celebrate people’s everyday climate actions during 2019.

Offering products for sustainable living There are over 500 products that enable sustainable living in the IKEA home furnishing range, which is developed and supplied by Inter IKEA Group. Whether it’s saving or generating clean energy, cutting water use, reducing waste or living more healthily – these products make it easy, affordable and attractive for customers to make sustainable choices. Across all 30 Ingka Group retail markets, we communicate and engage with our customers to demonstrate how these products can enable them to live more sustainably, and to show how small changes can add up to make a big difference. In FY18, sales of the more than 500 products in the ‘sustainable life at home’ range – including our LED bulbs, induction hobs, water efficient taps and waste sorting bins – grew to EUR 2.1 billion.. These products enable customers to make direct savings on energy and water, reducing waste and improving their energy efficiency. We sold 82.4 million LED bulbs in FY18, compared to 85 million in FY17. This takes … ACTIONS AND RESULTS us to a cumulative total of 294 million bulbs since FY15, meaning we are around 60% of Climate action starts at home the way towards achieving our ambition to In FY18, we surveyed 14,000 people across know if they can make a difference or • Imagine a positive climate friendly future sell 500 million LED bulbs between 2015 and 14 countries to better understand attitudes believe it will be too difficult or expensive. that inspires optimism and action the end of 2020. to climate change and what motivates or Only 3% of people mentioned positive • Identify practical, easy and affordable We trebled the number of IKEA Home prevents people from taking action. solutions to climate change – for many it’s steps they can take in their everyday lives Solar customers in six markets in FY18 We found that 90% of people were willing a problem without a solution. Our research • Feel inspired by innovative climate friendly (compared with FY17), enabling even more to change their behaviour to reduce their identified ways we can enable our customers products people to generate their own renewable climate impact. However, many don’t act to overcome these challenges by helping • Feel a sense of shared purpose by seeing energy. Find out more on page 50. … because they’re not sure what to do, don’t them to: other people get involved

45 | Ingka Group Annual & Sustainability Summary Report FY18 People and planet positive | Healthy and sustainable living

… Engaging and inspiring people through We know that people are more likely to customers and co-workers the chance to opportunities for customers to take part in our stores and campaigns act when they’re motivated by personal try products that enable healthier and more sustainable living activities. All 48 of our We’re using our IKEA stores, and all our experience or a recommendation from a sustainable living. We use their experiences stores in the US hosted an IKEA Family Mega communication channels to promote peer. We increased the number of customers and insights to inspire others and to inform Event focused on sustainable living. sustainable choices to our customers and co- participating in our engagement activities how we develop our offer. We also run IKEA In FY18, our co-worker survey (VOICE) workers. We want to inspire positive action, significantly during FY18 (62,600 customers) FAMILY Mega Events to inspire the 123 results showed that 86% of co-workers demonstrate the many benefits of living compared to FY17 (3,200 customers) due to million members of our free-to-join global are proud of the way IKEA works with more sustainably and share and celebrate improvements in measurement, and greater membership club to explore better living sustainability and 81% of co-workers feel achievements. focus on this topic across our markets. This within one planet limits. For example, in that sustainability is a natural part of their • In Spring 2018, IKEA Retail Switzerland means that since 2014, our sustainable FY18, many IKEA Centres and 144 stores everyday work. … ran a campaign across paid, owned living projects have given over 70,000 ran IKEA FAMILY Mega Events, providing and earned communication channels to encourage people to take climate action in their everyday lives, by sharing tips and ideas for climate friendly living, supported by relevant IKEA products, such as water saving taps, laundry drying racks and In August 2018, IKEA Retail waste sorting bins. Canada ran its 4 Degrees • In March and April 2018, the IKEA store campaign to highlight the and shopping centre in Wuxi, China created impact of climate change. a sustainable community installation to It raised the temperature 4 showcase IKEA products and solutions that degrees in the IKEA Vaughan support more sustainable living, an app- store by turning off the air based game to encourage people to sort conditioning – giving people their waste, as well as some ideas about the chance to experience how this change in temperature what sustainable lifestyles could look like in can make a big difference. the future. Throughout the store it • In Russia and in China, we held workshops featured tips for cutting your for tenants and partners connected to climate footprint and shared a our Ingka Centres meeting places to raise video of people’s reactions to awareness and interest in the business the event on social media to case for sustainability, specifically raise awareness with a wider audience. addressing topics such as energy efficiency and offering more sustainable products to our customers.

46 | Ingka Group Annual & Sustainability Summary Report FY18 People and planet positive | Healthy and sustainable living

… Promoting circular consumption prices. The remainder – more than one third People’s attitudes to their possessions of the food products we offer – were sourced are changing. They have less space by Inter IKEA Group including products sold and more knowledge about the impacts in our IKEA Restaurants, Bistros and Swedish of consumption on the planet. We’re Food Markets. developing new business models that meet During FY18 we developed a sustainability their needs in circular ways, and you can roadmap for our locally purchased food. It read more on page 48. will help us work with suppliers to apply our We’re also trialling different approaches standards in areas such as animal welfare, to help customers repair, reuse and responsible sourcing of palm oil and soy, recycle, and to give products a second sustainable packaging, traceability and food life through reselling. IKEA Retail Japan, safety. We also introduced a new monitoring for example, offers a buy-back service for process to help us track progress. IKEA furniture that’s still in good condition Eating less meat can be good for our but no longer needed. Customers can health. It’s better for the planet too because exchange their unwanted furniture for a meat production is a major source of voucher to spend in store. The furniture greenhouse gas emissions. We’re developing is then refurbished and sold at a reduced new recipes that replace meat with plant- rate to a new customer. Over 3,400 items based proteins, read more on page 49. were sold back to IKEA Retail Japan during We tested small-scale urban farms in FY18. A buy-back scheme specifically for three of our locations in FY18 in Sweden, new parents, which enabled them to buy Switzerland and Spain, producing our baby furniture with a set buy-back price, own salad greens and herbs. These units was launched in June 2018. Many other enable us to grow vegetables indoors in markets, including Australia, Canada, a small space with a low environmental Norway, Sweden and Switzerland tested footprint. There are no emissions from similar buy-back schemes during FY18. transporting the food, we use less water and no pesticides, and less food is wasted as we Healthier and more sustainable food only grow what we need. Because the food IKEA wants to help customers make is used straight away, it is fresher and has sustainable and healthy food choices – a better nutritional content. We’ll be rolling from sustainably sourced ingredients, to urban farms out to more of our locations in more meat-free options and locally grown FY19. produce. We aim to give our customers Ingka Centres also partners with tenants good information and promote the benefits to promote sustainable food to customers of food that tastes great and is better for through events and festivals. In FY18 we the planet too. opened farmers’ markets selling locally In FY18, nearly two thirds of the food sourced food in five shopping centres in sold and served in our IKEA stores was Russia and we plan to expand this in FY19. sourced by Ingka Group, mainly from local suppliers in each country. This allows us to cater for local tastes, reduce food miles and source the freshest produce at affordable

47 | Ingka Group Annual & Sustainability Summary Report FY18 People and planet positive | Healthy and sustainable living

CIRCULAR INNOVATION Listening and learning

ver many years we have learned way to do the right thing like repair or upcycle, so much about what people or pass on to someone else, has huge potential. love about their home life, their aspirations to make it better, as well USING THESE INSIGHTS, WE are developing Oas their frustrations. The more we listen and scalable, commercially viable business models understand, the more we can fulfil our vision, in the areas of how people acquire or access to create a better everyday life for the many. the things they want, how they care for things, So that’s where our journey to develop new and how they pass on the things they no longer circular business models began – by talking to need. people. EXPLORATIONS ARE UNDERWAY IN Belgium, “WE STARTED IN STOCKHOLM, Malmö, Oslo, India, Poland, Sweden, Switzerland and the UK “We started to see Hamburg and Barcelona. We knew success to focus in on specific customer problems we would only come if we really understood can solve, where we will design relevant offers patterns in what people’s needs and designed our offers around and then test them with customers. Our tests we heard, so we them. So with open minds, we just listened will help us decide what to develop further, and visited five more to people talk about how textiles like bed they’re creating a lot of excitement across IKEA. cities to talk about sheets and towels come into the home, what they do with them in everyday life, and then “WE’VE BEEN LISTENING TO people’s real other types of home what happens when they don’t need or life stories and ideating fast to respond to furnishings, and then want them anymore,” explains Lisa what we’ve learned. It’s given me so another five after Henriksson, Business Designer, Ingka much energy. I know the offer we’re Group, who has been on this journey developing will make our customers’ that.” from the very start. lives better, make our business “We started to see patterns in stronger and more relevant, and all what we heard, so we visited five more in ways that make a positive impact on Paulina cities to talk about other types of home the planet. I really feel we will be living Nesteruk furnishings, and then another five after up to our vision!” says Paulina Nesteruk, that.” Information & Communication Manager, IKEA Retail Poland, who has been working on SOON, THE COMMON THEMES were clear. the exploration in Poland. In all the places we visited, we learned that In FY19 we aim to provide new customer people don’t want to waste things. And we offers based on the learning from this could see that offering a good and convenient innovation work.

48 | Ingka Group Annual & Sustainability Summary Report FY18 People and planet positive | Healthy and sustainable living

The new IKEA veggie hot dog In 2015, IKEA launched a veggie ball, as an alternative to the iconic Swedish meatball, developed as part of the global Pølse i brød Vegetarpølse i brød food range by Inter IKEA Group. Now 8,– 5,– customers looking for a quick, tasty bite can enjoy a new twist on another classic: a plant-based veggie hot dog made with kale, red lentils, carrots, ginger, quinoa, © Inter IKEA Systems B.V. 2018 onion, potatoes, and various spices served with mustard, red cabbage and roasted onion. As well as being delicious, IKEA Retail Norway encouraged it has a carbon footprint seven times customers to make the healthier smaller than the original hot dog. Some and planet-friendly choice with 1 million veggie dogs were sold in Ingka an even lower price. Group markets across Europe and the US during August and September 2018, the first two months since its launch. Soon, this new addition to our menu will be available in all 30 Ingka Group markets.

PLANT-BASED PROTEINS and food production account for at the next step, offering customers a least 25% of global greenhouse gas vegetarian herb lasagne and pesto rosso emissions, with livestock rearing alone based on yellow peas and oats, which are Meat-free movement contributing 14%1. And diets high in a great source of protein and fibre. meat and dairy have also been linked Plant-based dishes are becoming a We are contributing to the IKEA efforts to make it easier to obesity, heart disease and colon regular fixture on local Swedish menus, cancer2. As the world’s population with new dishes being added and for people to choose new meat-free options by offering grows, we need to find new ways to special promotions to highlight them to nutritious and delicious local dishes made from plant-based meet the demand for food that is better customers, such as discounts for IKEA proteins at a low price. for people and the planet. Family members. Our IKEA stores in Finland, Germany, Soon, all our IKEA stores will follow the Netherlands, Poland, Portugal, their lead, and chefs in our customer Healthier (and tastier) options everyone to love them. And because Sweden and Switzerland have already restaurants will be able to draw inspiration “Our first priority is to make the plant- millions of IKEA customers around the tested dishes made with plant-based from a recipe bank that includes taco based options tasty,” says Catarina world enjoy the food in our restaurants, proteins in co-worker restaurants. And green, chili sin carne, Japanese teriyaki, Englund, Sustainability Innovation and we can play a part in more people now IKEA Retail Sweden has taken Bolognese and Thai curry. Development Leader, Ingka Group, part experiencing delicious, satisfying, healthy of the team working to put more meat and affordable planet-friendly food.” 1 Source: IPCC (2014) Exit based on global emissions from 2010. Details about the sources included in alternatives on the menu in our IKEA these estimates can be found in the Contribution of Working Group III to the Fifth Assessment Report of stores. Food for thought the Intergovernmental Panel on Climate Change. 2 RISE Research Institutes of Sweden, the future 9+ billion – Literature review survey, August 2015 . “The plant-based options we provide This innovation is about more than Food, Nutrition, Physical Activity, and the Prevention of Cancer. World Cancer Research Fund and aren’t just for vegetarians – we want expanding our menu offer. Agriculture American Institute for Cancer Research, 1-517, 2007.

49 | Ingka Group Annual & Sustainability Summary Report FY18 People and planet positive | Healthy and sustainable living

HOME SOLAR Solar to customers in six markets, and by 2025, we aim to make it available Our solar calculator across all 30 Ingka Group markets. makes it simple for our Clean energy for all The number of Home Solar customers to work out customers trebled in FY18 alone, and EUR which option is right Beyond our own operations, we are helping to Alejandro says that this success comes for them and gives as a result of bringing a new level of them a rough estimate accelerate the much-needed transition to clean transparency and simplicity to the of how much they can save. energy by making it possible for many more people market. 400 to harness the power of the sun and take positive “We have kept things simple, so you The average IKEA Home Solar customer saves don’t have to be an engineer to work action for the planet and their wallets. around EUR 400 a year out which package is right for you. by consuming their own What makes our system stand out is electricity generated by Golden opportunity With global energy demand set to keep how easy it is to buy, install and use. their solar panels instead “From the moment we get up to on rising, we have to take action now to We select the best partners to do that of buying it, selling their the moment we go to sleep we use change the way we produce, distribute for you, so you get the fairest price excess electricity back to electricity without even thinking about and use energy. and guarantees, and we do our best to the grid, and through other it. But when you stop to consider that We are on the way to generating make the installation process as quick incentives. most of that energy comes from fossil as much clean energy as we consume, and easy as possible.” fuels and the effect that it is having on read more on page 54. And through In FY18, we expanded the clean United Kingdom our planet and health, one of the most IKEA Home Solar, we are now helping energy offer by adding services impactful things we can all do is switch many more people to do the same in like battery storage, which allows UK homeowner sees sunny side to clean energy,” says Alejandro Castro their homes. homeowners to use more of the of battery storage Pérez, IKEA Home Solar & Energy electricity generated by the solar Service Business Leader, Ingka Group. Simply does it panels. By storing their excess power Darren Widdowson is next year, to store and delighted with his home use even more of his own Electricity and heat production In 2015 we launched IKEA Home Solar rather than exporting it to the grid, our solar system, particularly electricity. After having contributes a quarter of greenhouse with the aim of making it easy for customers can save even more money his new battery. This his IKEA Home Solar 1 gas emissions globally , which has a people to turn their rooftops into micro on their energy bills. means that he is now system installed, his bill significant impact on climate change. power stations. Today, we offer Home We are also testing combined “off-grid” – even overnight was so low his energy systems for solar panels and heat – during the spring and provider didn’t believe pumps in Switzerland, and making it summer months. Darren the readings and sent out possible for people in the UK who don’t can use the web portal someone to check he had for his smart meter to got them right. His electric have home solar to switch to a 100% see what his system is car now charges entirely renewable electricity tariff with the Big producing and whether from solar and working in Clean Switch. it’s being used in house the home office uses no In the future, we hope to broaden or going to the battery. electricity from this offer so that as many people as He is now thinking of the grid possible can join the clean energy adding another battery either. movement, with a little help from IKEA. Darren Widdowson is a freelance business systems 1 Source: United States Environmental Protection consultant who lives in Agency Northamptonshire.

50 | Ingka Group Annual & Sustainability Summary Report FY18 People and planet positive | Circular and climate positive

Circular and WHY IS THIS IMPORTANT? WHAT WE DO climate positive Since the industrial revolution, humankind At Ingka Group we’re focusing on: has warmed the planet by an additional 1°C and current use of resources requires the Cutting greenhouse gas emissions equivalent of around 1.7 Earths1. At risk are We’ve set challenging science-based targets changes in weather patterns, more frequent to reduce our greenhouse gas emissions CLIMATE CHANGE IS NO longer a Solar offer, read more on page 50. We extreme weather events, food and water in absolute terms. This means we’re doing distant threat, but a visible reality. also strive for zero waste in our own crises and dramatically rising sea levels. our part in the global effort to keep earth’s This is a critical moment to take operations and develop services that The risks, and potential costs, to our temperature increase to maximum 2°C over climate action. According to the latest support circular resource flows and more business are significant – our operations preindustrial levels, and aiming for 1.5°C. Intergovernmental Panel on Climate sustainable consumption. could be affected by extreme weather, by • Investing in renewable energy Change (IPCC) report published in During FY18, while we continued to resources becoming scarce, and by damage We’re growing the amount of renewable 2018, we have just 12 years to limit make progress towards our goals, we to the ecosystems we rely on. The changing electricity in the grid by generating wind catastrophic climate change. The did not make as much progress as we climate is disrupting the communities where and solar power, and our aim is to be solutions already exist, but to limit had hoped in all areas - we still have we operate and impacting our co-workers powered by 100% renewable electricity. the effects of climate change we need a lot to do and we must redouble our and customers. We also aim to have 100% renewable drastic changes to how we live and how efforts to achieve our ambitions. We The long-term prosperity of communities heating and cooling technologies in all our society consumes resources. know that taking climate action and depends on our common efforts to tackle buildings. Our commitment to renewable IKEA has an ambition to become working towards zero waste makes good climate change, for example, by generating energy means we can grow our business climate positive, reducing more business sense – and our research tells and using more renewable energy and while significantly reducing our greenhouse greenhouse gas emissions than the us it’s what our customers expect from contributing to a circular society. With gas emissions and eliminating the use of IKEA value chain emits. For us in Ingka us too. global greenhouse gas emissions needing fossil fuels, read more on page 54. Group this means generating renewable to peak by 2020 and be reduced to near • Improving energy efficiency energy, consuming and purchasing In FY18, we: zero by 2050, and with pressure on natural We design new buildings and retrofit renewable electricity while increasing • Generated renewable energy resources increasing, we must work together existing ones with the features needed energy efficiency and working to halve equivalent to 81% of the energy used and act fast. to be energy efficient and use as few emissions from customer and co-worker in our operations It will take all parts of society to build resources as possible. This reduces our travel. We go beyond our own operations • Repacked 8.7 million IKEA products to the low-carbon economy. Ingka Group is impact on the planet and cuts our costs. by inspiring and enabling people to be re-sold instead of going to waste determined to be part of the solution, to lead • Tackling emissions from travel and live in a more climate friendly way, • Saved 437,500 kg of food from being by example and inspire others. Addressing deliveries for example, through the IKEA Home wasted in IKEA restaurants climate change offers huge opportunities, Halving emissions from customer and including job creation, innovation, economic co-worker travel by 2030 is an important growth and lower energy dependency. step towards achieving our science- based targets. We’re also aiming for zero emission home deliveries, supporting the use of electric vehicles and rolling out our city strategy, making our stores more accessible by public transport, read more on page 56. …

1 Source: Earth Overshoot Day: www.overshootday.org

51 | Ingka Group Annual & Sustainability Summary Report FY18 People and planet positive | Circular and climate positive

… Striving for zero waste and circular • Inter IKEA Group, the worldwide IKEA make progress in decoupling our emissions co-workers operating more shifts, and at our resource flows franchisor and responsible for the IKEA from business growth, meaning growing our offices due to changes in company structure We believe all resources are too valuable to range and supply chain, has committed business without growing emissions. Our and reporting procedures since FY16, as be wasted. By adopting a circular economy to reduce the greenhouse gas emissions retail business grew by around 8.5% in FY18, well as expansion in Russia where we have approach we can help conserve precious from the IKEA value chain3 by at least compared with FY16. significantly higher energy usage and carbon resources, generate less waste, and reduce 15% in absolute terms by 2030, compared In FY18 our total carbon efficiency emissions per m2 of GBA (gross building costs. Using fewer resources helps us to to 2016. Accounting for expected growth improved by 6.5% against our FY16 baseline. area). cut emissions and is essential to making in this period, this translates to a 70% This was due to Ingka Centres locations in In this report, energy consumption progress towards the IKEA climate positive reduced climate footprint on average per Europe switching to renewable electricity, figures include IKEA stores (and other sales ambition. We are striving for zero waste in IKEA product. To read more, go to the and energy efficiency improvements at points) operated by Ingka Group, as our our operations and looking for new ways to Inter IKEA Group website4. our buildings in Russia. However, carbon distribution centres, Ingka Centres meeting reduce, reuse and recycle, read more on efficiency (compared to FY16 baselines) places (common areas and shared services), page 57. We believe that it is possible to tackle decreased at our distribution centres due to and offices. climate change if everyone gets involved ACTIONS AND RESULTS and takes action. We are members of two initiatives led by The Climate Group that CUTTING GREENHOUSE GAS EMISSIONS bring together businesses committed to In FY18, Ingka Group set ambitious science renewable energy (RE100) and electric based targets. This will help us to play our vehicles (EV100). We are also working with role in reducing greenhouse gas emissions in the World Business Council for Sustainable absolute terms and contributing to limiting Development, We Mean Business coalition, global temperature increase to well below Solar Power Europe and other organisations 2°C, aiming towards 1.5°C, by the end of the to accelerate climate action. In FY18, we century. were involved in key events including Climate Week NYC and COP23. We also advocated for Our targets for 2030 approved by the collective action on climate change through Science Based Targets Initiative include: the UN Talanoa Dialogue. • Reduce the greenhouse gas emissions from across all Ingka Group operations by How are we performing? 80% in absolute terms, compared to 2016. In FY18 our scope 1 and 2 greenhouse gas This covers our direct and indirect energy- emissions increased by 2.8% in absolute related emissions (scope 1 and 2), read terms compared to our FY16 baseline. It’s more on page 53. challenging to reduce emissions in absolute • Reduce greenhouse gas emissions from terms and we are continuing to focus on Ingka Group customer and co-worker improving energy efficiency, generating and travel and customer deliveries by 50% in buying renewable electricity and retrofitting relative terms2, compared to 2016 (scope our buildings with renewable heating and 3), read more on page 56. cooling technologies. We are starting to

2 By 2030 we aim to halve emissions relative to the number of co-workers and number of visitors to our stores, compared to the FY16 baseline. 3 The scope includes the footprints of materials, food ingredients, product transport (excluding customer deliveries), the production at suppliers, and the use of products in people’s homes. 4 https://newsroom.inter.ikea.com/

52 | Ingka Group Annual & Sustainability Summary Report FY18 People and planet positive | Circular and climate positive

Ingka Group carbon footprint (tonnes CO2e) Scope 3 (indirect) Ingka Group emissions at each stage of our value chain (tonnes CO2e)

FY16 FY17 FY18 Percentage Percentage FY16 FY17 FY18 change of total compared emissions 1. Purchased good and services 11,669,035 11,921,564 12,318,991 to FY16 in FY18 2. Capital goods 140,940 162,623 140,940 Scope 1 127,033 134,464 142,098 11.9% 0.6 % 3. Fuel-and-energy-related activities (not 238,214 237,0 97 305,213 Scope 2 492,617 488,761 495,006 0.5% 2.0 % included in Scope 1 or 2)

Scope 3 22,676,691 23,523,641 23,958,027 5.7 % 97.4 % 4. Upstream transportation and distribution 944,086 879,376 957, 356

Total 23,296,341 24,146,865 24,595,131 5.6 % n/a 5. Waste generated in operations 42,235 49,007 49,610

6. Business travel 42,910 39,265 39,001

Scope 1 and 2 energy-related emissions from buildings (tonnes CO2e) 7. Employee commuting 111,915 120,583 123,703

FY16 FY17 FY18 8. Upstream leased assets7 N/A N/A N/A

IKEA Retail 291,440 292,186 315,051 9. Downstream transportation and 3,563,086 3,615,095 3,754,328 distribution8 IKEA Distribution Centres 28,025 37,74 6 43,146 10. Processing of sold products N/A N/A N/A Ingka Centres locations (Shopping Centres)5 296,923 281,292 267,067 11. Use of sold products 4,982,167 5,506,868 5,259,304 Offices 8,272 9,197 10,962 12. End of life treatment of sold products 786,233 803,707 8 47,873 Other units6 1,519 2,804 878 13. Downstream leased assets 155,869 188,456 161,707

14. Franchises N/A N/A N/A Carbon efficiency (% improvement against FY16 baseline) 15. Investments N/A N/A N/A Kg CO e per m2 GBA (gross 2 FY16 Kg/m2 FY17 Kg/m2 FY18 Kg/m2 Improvement % building area) Total 22,676,691 23,523,641 23,958,027 IKEA Retail 27.7 26.9 26.3 5.0

IKEA Distribution centres 7.1 9.4 10.3 -45 Ingka Group location/market based emissions from consumed electricity in FY189 Ingka Centres locations 65.1 60.7 56.7 13.0 (Shopping Centres) FY17 FY18

Offices 32.7 37.3 44.5 -36.0 Consumed electricity (MWh) 2,089,644 2,112,256

Total 32.3 31.5 30.2 6.5 Location based emissions (tonnes CO2e) 800,677 813,160

Market based emissions (tonnes CO2e) 453,326 456,051

Footprint reduction from using electricity from renewable sources (%) -43.4 -43.9

5 Scope 1 and 2 emissions relate to energy used in landlord common parts and shared services. Scope 3 down-stream 7 Categories in the GHG protocol Scope 3 inventory marked N/A are not relevant for our operations. leased assets relate to landlord-obtained energy sub-metered and used in rented tenant areas. Emissions from 8 Includes customer travel to and from our stores, and home deliveries. refrigerant gases (Scope 1) at Ingka Centres locations are included in FY17 and FY18. 9 In FY18 we are applying IEA 2018 emissions factors from Sustain for carbon emissions calculations. In previous years 6 Other units refers to off-site energy investments such as wind farms. we used Defra 2015 emissions factors.

53 | Ingka Group Annual & Sustainability Summary Report FY18 People and planet positive | Circular and climate positive

INVESTING IN RENEWABLE ENERGY Renewable heating and cooling Renewable energy generation by type Renewable electricity generation With 367 IKEA stores in 30 countries and 45 We believe that the future of energy is Ingka Centres locations in 14 countries, it FY16 FY17 FY18 renewable. In FY18, we generated renewable takes a lot of energy to keep our co-workers Electricity from wind (GWh) 1,789 2,264 2,559 energy equivalent to 81%10 of the energy we and customers cool in summer and warm in used across our operations, and by 2020 we winter. Electricity from solar PV (GWh) 124 124 155 aim to reach 100%11. In FY18, we generated We’re investing in renewable technology Heat from renewable sources (biomass heat, 12 34 44 44 2,714 GWh of renewable electricity from for heating and cooling such as ground solar water heating, geothermal) (GWh) wind and solar PV (photovoltaic), enough to and air source heat pumps and biogas and Total renewable energy generation (GWh) 1,947 2,432 2,758 meet the annual needs of around 529 IKEA biomass boilers. We’re aiming for 100% stores. We now have 900,000 solar modules renewable heating and cooling, and all on our sites and we own and operate 441 building projects that are approved from wind turbines in 13 countries. 2020 onwards will include renewable heating and cooling systems, read more on page 59. Renewable electricity consumption Renewable energy investments in wind power, owned and operated by Ingka Group Almost three quarters of the solar electricity Equivalent to we generate on our Ingka Group sites is No of Electricity Electricity Capacity the electri- used in our buildings, and just over a quarter Country Turbines generated in generated in (MW) in FY18 city needs of in FY18 FY17 (GWh) FY18 (GWh) is sold to the grid. In some markets where households we own and operate wind farms, we use the France 43 83.05 117 151 41,794 renewable electricity credits for our own operations. In markets where we cannot Germany 23 45.05 50 61 16,726 use credits from our own generation, we Sweden 46 131.7 378 307 84,781 purchase credits from others, helping to Denmark 1 0.85 1 1 311 further increase demand for renewable UK 7 12.25 22 22 5,988 electricity. Ireland 4 8.0 22 23 6,320 We also purchase renewable electricity from energy suppliers for many of our sites. Poland 80 179.85 456 438 121,086 Nearly 80% of our buildings worldwide Canada 75 134 278 432 119,346 run entirely on renewable electricity. This USA 104 263 889 809 223,409 reduces our greenhouse gas emissions from Finland 13 42.4 0 107 29,512 electricity consumption by nearly 360,000 Belgium 1 2 0 3 937 tonnes CO2e, and is equal to a 44% reduction compared with the average carbon footprint Lithuania 19 45 51 136 37,6 69 of electricity available from the grid. Portugal 25 50 n/a 69 19,017 Total 441 997 2,264 2,559 706,896

10 If sub-metered tenant consumption was not included, generated renewable energy would be equivalent to 93.5% of consumption. 11 Our renewable energy generation target includes landlord-obtained energy which is purchased by Ingka Centres locations and passed through to tenants for use in their rented areas. 12 Wind and solar PV.

54 | Ingka Group Annual & Sustainability Summary Report FY18 People and planet positive | Circular and climate positive

Solar Wind

EUR EUR 320m 1.7bn investment commitment since 2009 invested since 2009 900,000 441 solar modules installed across wind turbines across 21 countries 13 countries including two on-site turbines in Belgium and Denmark 157 MWp 997 MWp total capacity total capacity

In FY18 In FY18 18 MWp 1 additional capacity installed in new wind farm acquisition in 8 countries Portugal 155 GWh 2,559 GWh of renewable electricity generated of renewable electricity generated

55 | Ingka Group Annual & Sustainability Summary Report FY18 People and planet positive | Circular and climate positive

Total energy usage and share of renewable energy for FY18 Improvement in energy efficiency (Energy use per 2m GBA) (%)

Share of renewable FY16 FY17 FY18 Total energy Renewable energy used14 as % consumption (MWh) energy13 (MWh) IKEA Retail (baseline FY10) 19.5 17.2 19.4 of total usage IKEA Distribution centres (baseline FY10) 7.9 0.9 -4.2 IKEA Retail 1,891,656 1,246,878 65.9 Ingka Centres locations (Shopping centres17 IKEA Distribution n/a 4.4 6.6 248,022 139,310 56.2 baseline FY16) centres Ingka Centres locations 15 1,311,489 214,611 16.4 (Shopping centres) TACKLING EMISSIONS FROM TRAVEL We have more than 100 low-emission Offices16 53,669 27,721 51.7 AND DELIVERIES transport projects on the go around the Total 3,386,653 1,628,520 48.1 Customer and co-worker travel to and from world. New projects in FY18 included: our stores and other buildings and home • IKEA Retail Germany trialled new trailers deliveries account for around 16% of our that customers can pull by bike or by hand IMPROVING ENERGY EFFICIENCY energy monitoring systems to feedback on indirect (Scope 3) carbon emissions. to take products home from 12 stores. We’re improving energy efficiency across energy use They loved it – 93% of customers that our IKEA stores, distribution centres, pick- • Heating and cooling: energy recovery Low carbon travel for customers and used it were happy. up points and Ingka Centres locations. from heating, cooling and ventilation and co-workers • IKEA Retail UK ran a sustainable travel Our energy efficiency within IKEA Retail reducing drafts Today, most customers and co-workers campaign to inspire co-workers to try new operations improved by 19.4% in FY18 • Smart lighting: LED lights and greater reach our IKEA stores and Ingka Centres green friendly travel options to get to and compared to the FY10 baseline. We also use of daylight. Since FY12, we’ve installed locations by car. We want to make low- from work at our Nottingham store. made progress in Ingka Centres locations LED or other energy efficient lighting at carbon transport easier. Our goal is to halve in FY18 compared to FY16 baselines. In 265 IKEA stores, Ingka Centres locations relative emissions18 from co-workers and At work, we can also make sustainable IKEA Distribution Centres, energy efficiency and other facilities. customers travelling to our IKEA stores, choices by avoiding unnecessary business dropped due to more shifts and higher • Equipment: using the most energy Ingka Centres locations and other sites by travel and holding virtual meetings. In FY18 intensity work patterns at our sites. efficient equipment we can for heating, 2030. we launched an internal ‘travel responsibly’ To improve energy performance and cooling, water and in kitchens. We promote sustainable transport and campaign which resulted in 3% fewer trips support our facility management teams partner with others to inspire people to take than in FY17 – this is a significant decrease as to identify the best solutions, in FY18 We showcase energy efficiency technologies low-carbon journeys such as by bike, bus, trips usually increase by around 15% a year we introduced an ‘energy staircase’ that in our leading sustainable stores, such as car sharing, running and public transport. due to more co-workers joining Ingka Group prioritises options to save energy in new IKEA Kaarst, Germany, which opened in Where we locate our IKEA stores has a big and expansion into new markets or cities. and existing buildings. The solutions used to October 2017 and IKEA Greenwich in the UK impact on people’s transport choices. Our Co-workers used many more virtual meetings improve energy efficiency in all our buildings which will open in 2019. plan to open more IKEA stores in cities and instead, with over 73,000 web meetings a include: to try new formats like pop-ups and ‘pick-up month, an increase of 54% since FY17. • Smart energy management: automated and order points’ will enable more low- building management systems to make carbon travel, see page 24. We encourage Towards zero emission home deliveries sure technologies like fans, pumps and customers to visit with their electric cars and Our goal is to make 100% of customer chillers operate efficiently and real-time in FY18, 75% of our stores and 50% of our deliveries and transport for services zero Ingka Centres locations had electric vehicle emission by 2025. To meet our goal, we’re charging points. working with our delivery partners to switch … 13 Purchased certified renewable electricity and district heating, and renewable energy generated and used on-site. 14 Purchased certified renewable electricity and district heating, and renewable energy generated and used on-site. 17 In FY15 we had significant changes in our shopping centres portfolio so the baseline was reset TO FY16. 15 Excluding submetered tenant consumption. 18 By 2030 we aim to halve emissions relative to the number of Ingka Group co-workers and number of visitors to IKEA 16 Includes a small amount of energy used at our windfarms. stores operated by Ingka Group, and Ingka Centres locations, compared to the FY16 baseline.

56 | Ingka Group Annual & Sustainability Summary Report FY18 People and planet positive | Circular and climate positive

… to electric vehicles (EVs) and other zero- 63%, up from 52% in FY17. The winning Waste disposal rates in FY18 (% per business unit) emission solutions, and we’re investing in teams were rewarded with a trip to IKEA Incinerated Incinerated commercial EV charging infrastructure to Kaarst in Germany, to be inspired and learn Sent to land- Recycled for energy without energy fill facilitate this transition. We want to be at the from best practice at our newest sustainable recovery recovery forefront of electrification and in September store. IKEA Retail 73.2 13.0 13.3 0.5 2017 we became a founding member of Despite our efforts, reported waste EV100 – a global initiative committed to generated grew by 12% in FY18, compared IKEA Distribution centres 79.2 11.7 9.1 0.0 Ingka Centres locations accelerating the conversion to 100% electric to FY17. We’re analysing the data so we can 20.4 3.0 76.3 0.3 vehicles, read more on page 24. identify how we can better manage waste to (Shopping Centres) reverse this trend. During FY17 we changed Offices 36.0 11.0 53.0 0.0 STRIVING FOR ZERO WASTE AND USING our waste reporting system so that we can Total (average) 66.7 11.5 21.4 0.4 RESOURCES IN A CIRCULAR WAY analyse waste trends in more detail each In our operations we minimise waste as month and improve our results. We started much as possible and turn unavoidable waste to benchmark stores on a bimonthly basis Waste produced (tonnes) and % recycled or incinerated for energy recovery into resources. A waste hierarchy guides to help us learn faster and find new ways to our approach to prevent, reduce, reuse and manage waste year-round. FY16 FY17 FY18 recycle waste. Some of the non-recyclable However, the change of system has IKEA Retail 432,835 (91.6%) 462,564 (91.4%) 504,274 (86.2%) waste is incinerated with energy recovery identified some data quality challenges in IKEA Distribution 50,594 (95.4%) 55,641 (97.7%) 69,626 (90.9%) where possible, and sending waste to landfill particular in IKEA Retail and Distribution centres is always the last resort. Centres where we identified gaps in several Ingka Centres locations 65,739 (17.8%) 71,902 (21.5%) 89,829 (23.4%) Creating a circular economy requires countries’ waste disposal methods data19. As (Shopping Centres) change on a large scale so we work with a precaution, we reported this waste as “sent Offices 165 (69.8%) 151 (69.7%) n/a20 and engage policy-makers, NGOs and other to landfill”. Together with limited availability Total (average) 549,334 (83.1) 590,258 (83.4) 663,965 (78.2%) businesses to build momentum. In FY18, we of recycling infrastructure at our sites in contributed to the Renewable Materials for Russia and China, this accounts for higher a Low-Carbon and Circular Future Report by reported waste to landfill in FY18. We’re Waste generation % of total by unit the Circular Economy 100 (CE100) project focusing on improving the quality of reported led by the Ellen MacArthur Foundation. data and regularly checking the quality of We also contributed to circular economy data for all business units in FY19. thinking through our work with organisations including the Ellen MacArthur Foundation Preventing product, food and plastic CE100 and the Circular Economy 8 (CE8) – a waste Retail: 75.9% group of companies committed to a circular In FY18 we at Ingka Group focused on Distribution centres: 10.5% economy. minimising waste in three areas: products, Shopping centres: 13.5% food and plastic. Offices: <0.1% Recycling and reusing waste Some of our products are returned by We are working to improve our recycling customers or get damaged in transit before processes and partner with waste they reach the IKEA store, but that doesn’t management suppliers to find new recycling mean they have to be wasted. solutions at our stores. Our dedicated ‘Recovery’ teams in each of In FY18 IKEA stores across IKEA Retail our IKEA stores repair and re-pack damaged 19 For example, data from the IKEA Strasbourg store has been excluded from the FY18 reported figures due to Russia competed to increase recycling, products to go back on the shelf. In FY18 we inconsistencies. 20 Challenges with waste reporting in our offices during have meant we cannot report data for FY18. We are growing their collective recycling rate to repacked 8.7 million IKEA products, … improving how we manage waste reporting to ensure accurate data for FY19.

57 | Ingka Group Annual & Sustainability Summary Report FY18 People and planet positive | Circular and climate positive

… a million more than last year – enabling us 1,900 tonnes of carbon emissions. Water use by unit (m3) to sell more products that would otherwise We’re also concerned about the impact FY16 FY17 FY18 be wasted. We also sell refurbished products of single-use plastic items like straws, cups, IKEA Retail 5,178,449 5,346,839 6,009,125 with a big discount in our ‘As-Is’ area in plates and cutlery used to serve food and IKEA Distribution stores. In FY18 we gave 35 million products drinks. In June 2018, we committed to phase 196,922 264,567 380,132 centres a new home with a customer through As-Is out single-use plastic from customer and Ingka Centres locations – that’s two million more products saved co-worker restaurants, cafes and bistros at 3,467,597 3,577,280 3,812,010 (Shopping centres) from being wasted than in FY17. During the our IKEA stores by 2020. During FY18, we year, more than 200 stores benefitted from a started mapping items that will be phased Other units 275,843 42,109 69,029 better system for co-workers and customers out. Inter IKEA Group, the developer and Total 9,118,811 9,230,796 10,270,296 to find spare parts more easily and quickly, supplier of the IKEA range we sell, is also enabling them to repair products. phasing out single-use plastic from the We’re targeting food waste at our IKEA IKEA home furnishing range by 2020 and is Ingka Group suppliers are located in water- • exploring circular procurement models to Restaurants, Cafés and Bistros. Our aim is working to find more sustainable options. For scarce areas. improve resource efficiency to halve our food waste by the end of August more information visit the Inter IKEA Group In FY18 we continued our efforts to • increasing the share of renewable, 20201. We’re weighing every bit of food that website2. use harvested, reused or recycled water recyclable or recycled materials in our non- is thrown away in our kitchens. This helps wherever possible, prioritising our sites home furnishing items such as co-worker us understand when food is wasted and Managing water resources in current and future water-stressed uniforms, office equipment and cleaning why – so we can make improvements, like We aim to use water efficiently and inspire areas, using best available techniques services cooking the right amount of food. It’s helped our co-workers to use water responsibly too. and technologies. Water use increased in • working with suppliers to ensure to change co-worker behaviour and we saved This is particularly important as one-third of absolute and relative terms, due to adding compliance with our supplier code of 437,500 kg of food in FY18, saving nearly our IKEA stores and distribution centres and new buildings, including expansion in conduct, IWAY, see page 62. countries with higher water consumption, • developing a sustainable approach for food, better data reporting as well as external including standards on animal welfare, see factors such as higher temperatures in the page 47. northern hemisphere. In FY18, we continued to use our scale as BEING A RESPONSIBLE BUYER a purchaser to secure more sustainable We purchase home furnishing products sources for non-home furnishing items and from our franchisor, Inter IKEA Group, materials. For example, we made progress to sell to customers. In addition, we buy with buying more sustainable materials goods and services from thousands of for wood and paper-based items (such as suppliers to support our operations – from office supplies), we began work to phase out the contractors that build and maintain our single-use plastic in our IKEA restaurants, stores to providers of last mile delivery and we sourced more renewable energy in services and the racks we use to display our Ingka Group operations. our products. We aim to create a common For more information on responsible approach to procurement, applying the same sourcing related to IKEA home furnishing high standards to everything we source. This products, visit the Inter IKEA Group includes: website.

1 Stores have joined the food waste reduction programme at different times so baselines vary. 2 https://newsroom.inter.ikea.com/

58 | Ingka Group Annual & Sustainability Summary Report FY18 People and planet positive | Circular and climate positive

RENEWABLE HEATING AND COOLING ne way we can reduce our “Based on geographical location, direct greenhouse gas local legislation or other restrictions, emissions and local pollution we might need to look for different Eliminating is in the way we heat and cool solutions. This can be because the Oour buildings, so we have committed technology isn’t available in some emissions to replace fossil fuel technologies with markets, so we need to import it, or 100% renewable technologies in all our it can be because lower local fossil buildings, including our IKEA stores, fuel prices make the initial investment It is a critical time for climate action – global distribution centres and warehouses, seem more expensive,” says Richard temperatures are rising, and it’s essential for us all our Ingka Centres locations and all Lundgren, Technical Manager, Group to work together to dramatically reduce emissions Ingka Group offices by 2030. All new Property Facility Management, Ingka that cause climate change. buildings approved after 2020 will also Group, “so we held workshops with our need to use 100% renewable heating co-workers around the world to find the and cooling technologies. best way forward in each region.” Karol Gobczynski, Climate & Energy The dedicated and engaged Leader, Ingka Group, believes we co-workers participating in these The all have a role to play in making this workshops created roadmaps for Helsinki transition away from fossil fuels. “Every implementation in each of our 30 solution one of us can contribute towards the markets. The plans, when finished, In March 2018, IKEA ambition to become climate will cover everything from the type of we retrofitted a positive. Switching to renewable heating systems we will need to install, to the ground source heat and cooling across our hundreds challenges we’re likely to face on the pump that will heat of buildings across 30 Ingka Group way. and cool the IKEA Helsinki store using markets is one of the ways we can show 100% renewable our commitment to tackling climate A safe bet energy. This highly change.” Retrofitting this technology to all efficient technology buildings that don’t have it at the can convert a The road ahead moment will require investment and 2°C temperature Two types of heat pumps – ground training, but we’ve already seen that difference between source and air source – will play the with new technologies we can reduce above ground and main role in the elimination of fossil operational costs and avoid the risks below into 20°C of heating, using a fuels-based energy consumption related to stricter emissions regulations system of pumps from our buildings. Nearly one fifth and carbon pricing. This will benefit the and compressors. of our stores are using ground source business and the planet. Karol explains, It’s projected to heat pumps and almost a third are “Considering lifecycle costs helps save us EUR 95,000 using air source heat pumps. These take overall cost reduction into account, each year on our systems are already at least partially not only the initial investment. energy bills. covering our stores’ heating and cooling “Renewable heating and cooling These same solutions are already needs without direct greenhouse gas technologies can be used in the home being used in some emissions, so we know it’s a solution too, so we are trialling a few initiatives of our IKEA buildings that works. The next step is to scale-up to show how renewable heating and across northern implementation across all Ingka Group cooling systems can benefit the many and central Europe, buildings. in a more direct way.” Canada and China.

59 | Ingka Group Annual & Sustainability Summary Report FY18 People and planet positive | Circular and climate positive

Solar panels Wind Farm Almost all electricity generated by Our wind turbines in Portugal generate our solar panels is consumed directly more renewable electricity than we in stores, cutting electricity costs by consume in our IKEA stores and Ingka 25% each year with no greenhouse Centres meeting places. gas emissions. We have 11,300 panels installed on IKEA stores in Portugal.

Lightbulb + Ingka Group in Portugal skylight In all five IKEA retail stores in – towards people and planet positive EV Chargers Portugal, we installed even more IKEA stores in Portugal provide 16 efficient LED bulbs which use In Portugal, we are making a strong contribution towards charging points which can power 25% less electricity than the the IKEA ambition to be climate positive. Through a 32 electric vehicles at once, helping previous LED bulbs. Lower costs, co-workers and customers travel to lower energy consumption, and number of different initiatives, we’re saving energy and us in a more sustainable way. better for the planet. water, generating renewable energy and supporting zero We’ve also installed skylights emissions travel. and smoke hatches which can be used to cool our stores overnight. This halves the energy used for store ventilation at night.

Renewable heating Water tap and cooling By installing water taps with efficient Air source heat pumps provide nozzles and sensors in our IKEA renewable heating and cooling to stores, we estimate that we have our IKEA stores, which reduces local reduced water consumption by 60% pollution and means we are less compared to previous taps. And this dependent on fossil fuels. also means we are saving on energy needed to heat it up.

60 | Ingka Group Annual & Sustainability Summary Report FY18 People and planet positive | Fair and inclusive

Fair and inclusive WHY IS THIS IMPORTANT these regularly in line with emerging risks FOR INGKA? and expectations. Our approach starts with our co-workers. Every year large numbers of people move We are committed to providing decent, out of poverty but at the same time, many meaningful and engaging employment for WE ARE COMMITTED IN Ingka skills, and we’re creating income parts of the world are seeing increasing every co-worker. Everyone at Ingka Group Group to being an inclusive business. opportunities for vulnerable people inequality. We recognise the challenges should be treated fairly and we expect our This means to grow our business by by integrating social entrepreneurs people are facing such as unemployment and co-workers to always uphold our company providing opportunities for the many in our supply chain. And we’re co- lack of affordable housing, where access to values. Read more about our approach to and contributing to positive change in creating sustainable, child-friendly and rights and opportunities are far from equal. co-workers, see page 13, and our approach the communities where we are present. connected neighbourhoods and cities by We are present in many communities. to business ethics, see page 17. Our ambition for 2030 is to improve working with relevant partners to tackle When those communities thrive, we thrive We have tens of thousands of suppliers the well-being of millions of people by societal challenges. too. Guided by our values, we have always providing products and services from becoming a truly inclusive and people- sought to create lasting positive change in construction, security and cleaning to centred company and employer. In this In FY18, we: communities. We not only believe it’s the delivery drivers, product assemblers, way, Ingka Group can actively contribute • Continued partnerships with 58 social right thing to do, we also know it strengthens and food for our customer and co-worker to the wider IKEA ambition to play its entrepreneurs and social businesses our business. restaurants. We expect our suppliers to part in creating a fairer and more equal across 14 countries Fair and inclusive growth leads to treat their co-workers fairly and to adopt society. • Supported refugees in 11 countries motivated co-workers, vibrant and innovative standards consistent with our own. We We’re focusing on providing and to improve their skills through work meeting places and resilient and empowered never tolerate child labour or any form of supporting decent and meaningful experience at our IKEA stores or communities. It is our mission to ensure we modern slavery. We support decent and employment for our co-workers and locations put people at the heart of the development meaningful work for everyone in our supply people in our supply chain. We’re • Invested EUR 11.6 million in of our business. chain, including vulnerable groups like young helping people far away from the labour community engagement projects Read more on our commitment to gender workers and migrant workers. market to improve their employment across IKEA Retail and Ingka Centres equality and diversity in the workplace on Social and environmental requirements page 14. for IKEA Retail suppliers are set out in IWAY – the IKEA supplier code of conduct. We WHAT WE DO partner with suppliers to help them meet our standards, but if we find they won’t improve Respecting human rights over time, we will stop working with them. No matter where we operate in the world, IWAY also applies to the home furnishing we will respect human rights. We have a suppliers who supply products to Inter IKEA responsibility to uphold the rights of all Group. … people impacted by our business: our co- workers, customers, workers in our supply chain, and the communities around us. We are committed to implementing the UN Guiding Principles on Business and Human Rights as the basis for our responsibility to respect human rights. We address human rights in many of our strategies, policies and processes including the Ingka Group Policy on Human Rights and Equality, and update

61 | Ingka Group Annual & Sustainability Summary Report FY18 People and planet positive | Fair and inclusive

… Respecting and supporting children’s with disabilities, young people and women rights far away from the labour market. Everything we do as a business and as individuals can impact children’s lives. That’s ACTIONS AND RESULTS why we work continuously to integrate the Children’s Rights and Business Principles (the SUPPORTING DECENT WORK IN OUR Principles) into our daily work. The Principles SUPPLY CHAIN were launched jointly by Save the Children, The IKEA Way on Purchasing Products, the UN Global Compact and UNICEF in 2012. Materials and Services – IWAY – is the They offer a comprehensive approach to look IKEA supplier code of conduct. It sets out at every part of our business from a child minimum requirements on environmental, rights perspective. For us, the Principles social and working conditions and is updated mean: regularly. It’s based on the Universal • supporting decent work for young workers, Declaration of Human Rights, the United parents and caregivers, while eliminating Nations Convention on the Rights of the child labour from our Ingka Group supply Child, eight core conventions defined in the chain ILO Fundamental Principles of Rights at • ensuring our IKEA stores and Ingka Work, and the Ten Principles of the UN Global Centres meeting places are playful and Compact. safe spaces for children – for example by IWAY also applies to the IKEA home providing Småland crèches at our stores furnishing product supply chain that is and kid’s centres, playgrounds and activity operated by Inter IKEA Group. For more areas at our meeting places information about the IKEA home furnishing • offering products for children that are safe, supply chain, visit the Inter IKEA Group and marketing these appropriately website1. • contributing to a healthy environment for At Ingka Group, the size and complexity children to live in, both now and in the of our supply chain means we take a future through our climate initiatives risk-based approach to embedding IWAY, • reinforcing community and government using internal and external data to assess efforts to respect children’s rights. risks relating to countries of operation and supplier type. New suppliers are evaluated Contributing to thriving communities against IWAY and given a risk rating, which is We aim to have a positive impact on the regularly updated. Sustainability specialists auditors to check IWAY compliance at some If we find that suppliers are not meeting communities where we work, raising our in our procurement team build relationships high risk suppliers. our standards, we agree an action plan to voice on important issues and contributing with suppliers and offer training to help them In FY18, we completed 314 audits with correct this. A breach of our IWAY Musts has to thriving and inclusive local economies. understand and apply IWAY. direct suppliers. All audits involved our to be fixed within 14 days, and all remaining We partner with community organisations For the highest risk suppliers, we conduct internal IWAY audit team and in some cases non-compliance issues within 90 days. to find solutions to tackle social and IWAY audits to check compliance with our we completed joint audits together with third IWAY Musts are reported to senior Category environmental challenges. We’re creating standards. We expanded our internal IWAY party auditors. We found 38 major non- Management teams and if needed, ultimately income opportunities for vulnerable people audit team during FY18 and now have compliances, referred to as IWAY Musts, at to Ingka Group Sustainability Committee. We by working with social enterprises, and 40 trained specialist IWAY auditors. Our 31 suppliers. These were mostly related to phase out suppliers and sub-suppliers who we’re investing in skills and providing work internal audit team is independent from our working hours, especially for delivery drivers won’t implement their corrective action plan. … experience for refugees, migrants, people procurement team and we use third party in Russia and China.

1 https://newsroom.inter.ikea.com/ 62 | Ingka Group Annual & Sustainability Summary Report FY18 People and planet positive | Fair and inclusive

… Fairer lives for young and migrant with Unilever, the Lego Foundation and workers National Geographic to help create more We never accept child labour and we opportunities for children to develop and investigate and follow up on any suspected learn through play, read more on page 67. case, prioritising the best interests and safety of the child. Our belief is that CONTRIBUTING TO THRIVING young people who are legally able to work COMMUNITIES should have access to decent employment Our meeting places, the IKEA range, life at opportunities. They should not do hazardous home knowledge, sustainability expertise work, night work or overtime. The IKEA Way and our role as an IKEA retailer mean we can on Preventing Child Labour and Supporting play an important role in the communities Young Workers makes our position clear to where we are present. We want to co-create all suppliers. In FY18, we identified no cases local strategies in all locations to address of child labour in the Ingka Group supply communities’ needs where we can maximise chain. positive impact. We take the risks of modern slavery very seriously. We have safeguards to reduce the Building skills for employment risk of modern slavery in our supply chain We want to make a difference by helping including people being forced or bonded into people who lack the skills or experience, or labour, having their passports taken away, or face other barriers that make it hard to find becoming trapped by large recruitment fees. or maintain employment, to develop their This is a particular risk for migrant workers skills and find work in the retail industry. who are seeking work away from home. We’re focusing on young people, people In FY18 we introduced new Guidelines on with disabilities, people over 50 years old, Responsible Recruitment for our suppliers migrants, refugees and women who have and service providers to reduce modern been out of the workplace. slavery risks. These have been translated In FY18 we ran projects in 15 countries, into six languages. We also launched training often in partnership with local NGOs and materials, a video and guidance for co- public bodies, providing skills development workers in our procurement, sustainability, and work experience placements. Our goal is auditing and construction teams to highlight to have skills for employment programmes modern slavery risks and help them engage in all 30 Ingka Group markets by 2025 to with suppliers on this issue. support our recruitment needs, building partnerships in local communities to tackle MAKING PLAYTIME POSSIBLE unemployment, especially for people We believe that every child needs space experiencing poverty and inequalities, read and support to grow, learn and develop more on page 66. to their full potential and we work with NGOs, other businesses and the IKEA Partnering with social entrepreneurs Foundation to enable more children to We see great potential in connecting benefit from play. In FY18 we ran our ‘Let’s our regular procurement activities in Play for Change’ campaign in our IKEA retail Ingka Group with our ambition to be an business and founded the Real Play Coalition active partner in our local communities. …

63 | Ingka Group Annual & Sustainability Summary Report FY18 People and planet positive | Fair and inclusive

Raising awareness about domestic violence in Italy

IKEA Retail Italy launched the ‘No Room For Violence’ campaign to raise awareness of domestic violence as one in three women have experienced domestic violence in Italy. In partnership with a local NGO, Telefono Donna, we launched a campaign with in-store activities and on social media to highlight the issue and give women who’ve experienced abuse information on getting support. Six months after the end of the campaign, Telefono Donna saw a 20% increase in the number of domestic abuse reports it received.

… That’s why we’re partnering with social prioritising three areas: services, local food with NGOs and local organisations. For and economic independence, as well as entrepreneurs and social businesses. and upcycling textile collections. We’ve built example, in FY18: practical support to improve their homes They offer products and services we need partnerships with 58 social entrepreneurs • IKEA Retail Korea partnered with the and children’s study rooms. Read more on in our retail operations and to enhance and social businesses in 14 countries so far. Korea Foundation for Women to launch our commitment to gender equality and our offer to our customers. Working with Read more about how we are working with the ‘Mom-Up project’ to support single diversity in the workplace on page 14. social entrepreneurs and social businesses social enterprises, read more on page 65. mothers to live a healthy and happy life. • Ingka Centres meeting places in Russia in this way enables us to expand our There’s a strong social stigma of being partnered with 47 schools to upgrade positive social and economic impact. We’re Supporting communities an unwed mother in South Korea and their learning facilities for children with working with social entrepreneurs that We want to co-create sustainable, child- many single mothers have cut off ties disabilities and hold disability awareness focus on supporting women and others friendly and connected neighborhoods and from their families and struggle to secure training and parasport lessons. In total who might be facing inequality or poverty cities. Our IKEA stores, and distribution a place to live. In FY18 we supported 35,000 children and teachers took part. in our local communities, such as young centres and Ingka Centres locations are more than 30 mothers, giving them people or people with disabilities. We’re tackling local societal challenges by working advice to build their self-confidence

64 | Ingka Group Annual & Sustainability Summary Report FY18 People and planet positive | Fair and inclusive

SOCIAL ENTREPRENEURS Designed to create jobs

From beautiful, upcycled textiles, local food and sewing services, social entrepreneurs and social businesses provide us with products and services that enhance our offer while creating meaningful opportunities to those who need them most.

t the Ellas lo Bordan textile home textiles and clothes for mending, workshop in Madrid, single taking back products at the end of life for mothers who have arrived in repair, reselling or recycling, and services Spain as migrants, often having for our store operations, like cleaning. Abeen victims of violence, are learning to These businesses meet our standards for sew and earn a sustainable income. As well working conditions and production quality, as working on a collection of cushion covers while creating a wider social impact. for sale in selected IKEA stores, they are also creating a better future for themselves WE HAVE BEEN PARTNERING with the and their families. Concordia Bakery in Romania since 2017. “The best way out of poverty and It offers vocational training to youth living social exclusion is to have a job, but that in vulnerable situations to help them into isn’t always easy, particularly for women, the workforce. They bake local pastries for who often face additional barriers,” says our customer and co-worker restaurants at Mercedes Gutierrez, Global Communities the IKEA Baneasa store. So far, all those Engagement Leader, Ingka Group. employed by Concordia Bakery, including “Partnerships like this are a way for us those not working directly to supply our to contribute to a more inclusive society. store, have found a job after completing By working with organisations that use the programme, and 80% go on to have a business techniques to tackle social career in baking. problems, we can provide employment for “Through initiatives like these we are vulnerable people in our local communities. making the local community around our They are creating more than income stores a better place to live and work, while opportunities, but sustainable livelihoods at the same time creating something a little that help people gain respect and different for our customers,” Mercedes says. independence.” As our business grows and we work to meet changing customer needs, we believe IN FY18, 14 INGKA Group markets had working with social entrepreneurs will offer partnerships with 58 social entrepreneurs us new entrepreneurial skills and innovative and social businesses. Examples of solutions. This will help us transform our initiatives include in-store sewing services, business and tackle the local communities’ where IKEA customers can bring in their challenges at the same time.

65 | Ingka Group Annual & Sustainability Summary Report FY18 People and planet positive | Fair and inclusive

SKILLS FOR EMPLOYMENT WELCOMING REFUGEES IS NOT charity. For us, it is a chance to have a positive impact on individual lives and Empowering refugees local communities, while also benefiting from more diverse skillsets in our to fulfil their potential workplaces. In FY18, 11 countries sma arrived in Norway from ran refugee inclusion programmes, Afghanistan in 2016, and in compared with eight in FY17. Millions of people around the world are displaced by violence, 2018, she became one of the Mercedes Gutierrez, Global economic and environmental crises and social persecution. newest recruits to the IKEA Communities Engagement Leader, When they arrive in a new place, they can find it challenging to AFuruset store in Oslo. Ingka Group, says the initial investment integrate into their host community, but they often bring lots of “This project has changed my is worth it for the long-term gain. life 100%. I could not imagine at all “Of course it is the right thing to talent, skills and experience with them. Businesses like ours can that I would get a job within the first do. But we don’t underestimate the play an important role in supporting them to build a new life, and year of arriving in Norway, but I now value this brings to our business and contribute to the community and local economy. have a part-time job and I make my the communities around our stores. own money. At the same time, I have Refugees bring new skills, diversity, colleagues and friends at work that and a different point of view. This I can talk to and keep practising my challenges us to evolve and ultimately Norwegian,” she says. helps us grow. Our local communities Our skills for employment thrive too because when refugees have programmes give refugees like Asma the right opportunities, they can help to the chance to gain work experience and stimulate the local economy.” develop their language skills. The aim is to prepare them for future employment either with us or another company. It “Refugees bring new also enables them to actively contribute to their new communities. skills, diversity, and a different point of view. THE IKEA FURUSET STORE is offering This challenges us to new arrivals an eight-month work evolve and ultimately placement and the opportunity to pick up Norwegian faster through a helps us grow.” language course. After the progamme, participants are provided with a reference and are encouraged to apply for open positions at Ingka. In FY18, 14 participants completed their training, half passed their language tests and five were recruited as new co- workers at the Furuset store. In FY19, IKEA Slependen store kicked off the programme with four new participants.

66 | Ingka Group Annual & Sustainability Summary Report FY18 People and planet positive | Fair and inclusive

CHILDREN’S RIGHTS Playing with time

Every child has a right to play. But as our lives and cities get busier, finding the time for fun is more of a challenge. That’s why we’re working on enabling people to embrace play in their everyday lives.

lay shapes who we are and is a powerful learning tool. It is vital makes us stronger, more to children’s development, helping creative and more active. them develop skills such as emotional That’s why we have made intelligence, creativity and problem Pit our goal to become experts in it. solving – all the key skills employers We want to raise awareness of the look for. So, it is in all of our interests importance of play and inspire people to help create more time and space for to play more. We do this through our play.” Let’s Play for Change campaign that we Let’s Play for Change comes to run through our IKEA Retail business life across IKEA every November and and by contributing to the Real Play December when we fill our stores with Coalition. lots of opportunities to spark fun. This “This is about supporting our local includes a drawing competition, when communities and growing with them,” we invite creative kids from all over explains Maria Binnelid, Campaign the world to draw the soft toy of their Project Manager, Ingka Group, leading dreams. The six most unique drawings the Let’s Play for Change campaign. are turned into real soft toys – the “Our cities are becoming ’play deserts’, SAGOSKATT collection – sold during with more space for offices and shops next year’s play campaign. The full and fewer for play. But play is a basic purchase price of each of these soft need, and should not be a luxury only a toys is donated to local organisations few can enjoy. and initiatives that support every child’s “Of course, there are long-term right to play and develop. During the benefits to taking action, not only competition in 2017, we received around for children, but for businesses and 87,000 soft toy competition drawings society as a whole,” says Maria. “Play from children aged 0–12 years. …

67 | Ingka Group Annual & Sustainability Summary Report FY18 People and planet positive | Fair and inclusive

… Song Shuang, a co-worker at the schools in Dazhou Sichuan Province and “Play is vital for all of us, and every child has IKEA Shenyang store, helped to bring Tianshui Gansu Province with more than the right to play and develop. Just looking at the Let’s Play for Change campaign 2,300 students, many of whom are “left the happy faces of these children shows how activities to students at Sichuan behind” children whose parents live and important play is, and the impact we can create Dazhou Minyue Zhongxin School. work in cities away from their children. “Play is vital for all of us, and every when reaching out to our local communities” child has the right to play and develop. Tackling the play gap Just looking at the happy faces of these From our research, we know that there children shows how important play is, are many barriers preventing people and the impact we can create when from enjoying more play in everyday life. Together with Unilever, the LEGO movement that prioritises the reaching out to our local communities,” For example, stress and responsibilities Foundation and National Geographic, importance of play as something that says Song Shuang. at work as well as rigid daily routines we launched the Real Play Coalition both allows children to be children, and IKEA Retail China donated EUR stop of us from playing more. Across at the World Economic Forum Annual sparks the fire for a child’s development 64,200 to the Onederland Project, many countries and cultures, play is Meeting in January 2018. We will and learning. which is run by a local NGO, One seen as an activity for children, not a use our combined insights, reach In FY19, we will continue to Foundation, with the aim of supporting mind-set that can bring joy to everyday and influence to impact the cultural advocate for the importance of play and children’s development through play activities for all of us. And people often perception and importance of play support research on the value of play. and physical education. The money was see play as a luxury – a “nice to have” among parents, practitioners and In November 2018 we organised the used to build playgrounds and support moment when all other serious activities decision-makers in society. first Global Month of Play together with sports teachers’ training in five rural have been taken care of. We want to contribute to a our Real Play Coalition partners.

68 | Ingka Group Annual & Sustainability Summary Report FY18 People and planet positive | About our sustainability reporting

About our sustainability reporting

Scope This year we publish the “Ingka Group reporting is MWh. Carbon emissions from Annual and Sustainability Report” – for our own operations and Scope 3 IKEA home the first time, a combined report of our furnishing suppliers1 are typically calculated performance and achievements across our based on real measured energy and fuel business, including sustainability, during the usage, while models and estimations are financial year 2018 (FY18) from 1 September used to assess value chain impacts. 2017 to 31 August 2018, unless otherwise We calculate our energy and carbon stated. footprint in accordance with the GHG Each year, Inter IKEA Group will report Protocol Corporate Standard using the progress against the IKEA sustainability operational control consolidation approach, strategy from across the IKEA value chain and it is externally assured, see page 71. and franchise system. Inter IKEA Group However, the data may be affected by sets the overall strategic direction for the uncertainties in scientific knowledge or in IKEA business and includes the companies the contextual data used in calculations, that develop and supply the IKEA product especially for Scope 3. We use emission and food ranges, manufacturing, and Inter factors from publicly available sources Fourth Assessment Report (AR4) over a 100- Ingka Group sales only, not those of other IKEA Systems B.V. – the worldwide IKEA like DEFRA (2017) and IEA (2018)2, and year period. IKEA franchisees. franchisor. The IKEA sustainability report for from local electricity and heat suppliers. Carbon emissions data is calculated to • Scope 3 emissions have been categorised FY18 will be published in spring 2019. Factors from publically available databases reflect the transfer of IKEA range, supply in accordance with the GHG Protocol In 2018 we updated the Ingka Group are integrated in our reporting solution and production activities to Inter IKEA Scope 3 categories. Our calculation models sustainability strategy, which sets our (SUSTAIN). Regular updates of these Group on 31 August 2016. This ensures that have been updated to reflect the Ingka sustainability ambition, focus areas and databases is included in the services reporting only covers Ingka Group. This Group business context and our external goals up to 2030. This will guide Ingka provided by our software vendor. In some includes the following changes: commitments. Group’s contribution to the IKEA ambition to cases, data is estimated, which is indicated • Emissions reported for offices excludes become people and planet positive. in the text. Scope 2 emissions are calculated offices now belonging to Inter IKEA Group. We aim to ensure all information and in accordance with the GHG Protocol Scope • Emissions related to IKEA Industry and data is relevant, transparent, consistent, Environmental data 2 Guidance, applying both the market and IKEA Components has been removed accurate and complete, and that it provides Our reporting and data collection processes location based approaches. Our baseline for from Scope 1 and 2 and are part of our an objective picture of Ingka Group’s involve many internal and external GHG footprint disclosure is FY16. scope 3 reporting. Reported FY16 scope operations. Data for IKEA stores not stakeholders. The majority of data is The following greenhouse gases are 3 emissions, such as business travel owned by the Ingka Group, but by other collected from primary sources and entered included in our reported carbon footprint: and employee commuting have been franchisees, is not covered within the scope

into reporting systems. Energy-related carbon dioxide (CO2), methane (CH4), Nitrous adjusted based on actual Ingka Group staff of this report. Any other exclusions are

information is usually obtained from real- oxide (N2O), Hydrofluorocarbons (HCFs) numbers. stated in the report. time meters at each site, from invoices or and Perfluorocarbons (PFCs) and Sulphur • Reported FY16 scope related to Use of sold

from service providers. hexafluoride (SF6). The GWPs used in the products and End of life treatment of sold 1This data is provided by Inter IKEA Group 2 The primary unit used in energy calculation of CO2e are based on the IPCC products have been adjusted to reflect Location based emissions factors for electricity usage.

69 | Ingka Group Annual & Sustainability Summary Report FY18 People and planet positive | Sustainability governance

Sustainability governance uses the Sustainable Development Goals the Ingka Group Sustainability Committee (SDG) as a guiding framework, see page 82 and the Ingka Group Risk & Compliance and management for our SDG Index. It builds on the progress Committee and the Ingka Group Risk we have made to date, our own in-depth Register is updated to reflect the latest knowledge of our customers and sustainable assessment. All risks have an owner in the living, and consultation with our key relevant business area who is responsible stakeholders. Our stakeholders – including for leading efforts to mitigate the risk and to co-workers, customers, NGOs and partners, provide regular feedback on developments THE INGKA GROUP SUSTAINABILITY the Supervisory Board of Ingka Holding B.V. governments, and peers – challenge us to be during the year. Strategy sets a common, bold sustainability The IKEA Strategic Sustainability our best and we learn a lot from them. We Local IKEA Retail organisations also ambition for the Ingka Group (IKEA Retail, Council is a governance body that includes are a member of the UN Global Compact, run assessments of operational risks, and Ingka Centres and Ingka Investments) and representatives from Inter IKEA Group see page 81 for our UN GC index. We work we are continually working to secure that empowers people across the group to lead entities, as well as franchisees, including together with the World Economic Forum, sustainability risks are fully integrated into and contribute. It is fully aligned with the Ingka Group. The council focus on strategic World Business Council for Sustainable this work, so that we can complement the IKEA Sustainability Strategy made available decisions affecting the wider franchise Development (WBCSD) and the Ellen top down risk assessment with bottom- by Inter IKEA Group in 2018, which covers system for the people and planet agenda. MacArthur Foundation (CE100), and join up risk assessment. This will improve our the IKEA trademark users and value chain, with peers in coalitions such as the Real Play understanding of how sustainability risks and sets the overall sustainability frame Deciding what matters Coalition, We Mean Business, RE100, EV100 vary and how to manage them in each for the IKEA trademark users and value Our sustainability strategy is a response to and CE8, to achieve our shared ambitions. country where we are present. chain, including all retail franchisees. The the global megatrends facing society and As part of the strategy update, we involved focus areas and goals set in the IKEA our stakeholders in completing a materiality Retail section of Ingka Group Sustainability assessment to identify the issues most Strategy contribute to the sustainability critical to our business. ambitions set by the IKEA Franchisor. Our Chief Sustainability Officer, Sustainability risk management Pia Heidenmark Cook, oversees our To remain a successful and growing performance against the sustainability business, we must work to understand commitments of our sustainability strategy. and address the sustainability risks to our Members of the Sustainability business. Management Team are well represented The Ingka Group Sustainability in key decision making bodies of the Ingka Management Team runs a risk exercise Group. every year, using internal data as well as On 1 September, 2018 a new third party reports from organisations such Sustainability Committee was established as the World Economic Forum and the World as part of the new group governance for Resources Institute. The identified risks are Ingka Group. The Sustainability Committee assessed based on likelihood and impact. secures Ingka Group’s commitments in These risks are reported to the areas of sustainability and defines and follows up on the overarching priorities, principles and frameworks for sustainability within Ingka Group. Progress towards our goals is reported to

70 | Ingka Group Annual & Sustainability Summary Report FY18 People and planet positive | Assurance statement

Assurance report of the independent auditor

supplemental reporting criteria as explained the characteristics of the company and themes on page 69 of the Ingka Group Annual & and issues relevant for the Carbon emissions Sustainability Summary Report FY18. reporting. Management is also responsible for such • Evaluating the appropriateness of the reporting internal control as management determines criteria used, their consistent application and To: the Supervisory Board and shareholders of in accordance with the Verordening inzake de is necessary to enable the preparation of the related disclosures in the Carbon emissions Ingka Holding B.V. and its controlled entities onafhankelijkheid van accountants bij assurance- Carbon emissions reporting that is free from reporting. This evaluation includes the opdrachten (ViO, Code of Ethics for Professional material misstatement, whether due to fraud or evaluation of the reasonableness of estimates Our conclusion Accountants, a regulation with respect to errors. made by management. We have performed a limited assurance independence) and other relevant independence • Obtaining an understanding of the reporting engagement on the Carbon emissions reporting regulations in the Netherlands. This includes that Our responsibilities for the assurance processes for the Carbon emissions reporting, of Ingka Holding B.V. and its controlled entities we do not perform any activities that could result engagement on the Carbon emissions including obtaining a general understanding (hereinafter “Ingka Holding B.V.”) for the year in a conflict of interest with our independent reporting of internal control relevant to our assurance ended 31 August 2018. assurance engagement. Furthermore, we have Our responsibility is to plan and perform the engagement. Based on our procedures performed nothing complied with the “Verordening gedrags- en limited assurance engagement in a manner that • Identifying areas of the Carbon emissions has come to our attention that causes us to beroepsregels accountants (VGBA, Dutch Code allows us to obtain sufficient and appropriate reporting with a higher risk of misleading believe that the Carbon emissions reporting of Ethics)”. assurance evidence for our conclusion. information or material misstatements, is not prepared, in all material respects, in We believe that the assurance evidence we The procedures performed in a limited whether due to fraud or errors. Designing accordance with the Greenhouse Gas Protocol have obtained is sufficient and appropriate to assurance engagement are aimed to determine and performing further assurance procedures (published by the World Resources Institute provide a basis for our conclusion. the plausibility of information and vary in nature aimed at determining the plausibility of the (WRI) and the World Business Council for and timing from, and are less in extent, than for Carbon emissions reporting responsive to Sustainable Development (WBCSD)) and the Limitations to our assurance a reasonable assurance engagement. The level this risk analysis. These further procedures applied supplemental reporting criteria as engagement of assurance obtained in a limited assurance consisted amongst others of: explained on page 69 of the Ingka Group Annual Quantification of carbon emissions is subject engagement is therefore substantially less • Performing analytical reviews of the data and & Sustainability Summary Report FY18. to inherent uncertainty due to the use of than the assurance obtained in a reasonable trend explanations. The Carbon emissions reporting comprises variables such as emissions factors that are assurance engagement. • Obtaining assurance information that the the scope 1, 2 and 3 emissions inventory used in mathematical models to calculate carbon We apply the ‘Nadere voorschriften sustainability information reconciles with on pages 51-60 in the Circular and Climate emissions, and the inability of those models to kwaliteitssystemen’ (Regulations for Quality underlying records of the company. Positive section of the Ingka Group Annual & precisely characterize under all circumstances management systems) and accordingly maintain • Reviewing, on a limited test basis, relevant Sustainability Summary Report FY18 and the the relationship between various inputs and a comprehensive system of quality control internal and external documentation. explanatory notes on page 69 (hereafter: Carbon the resultant emissions because of incomplete including documented policies and procedures • Site visits to assess the completeness emissions reporting). scientific knowledge on this topic. regarding compliance with ethical requirements, of emissions sources, review the data Our assurance engagement is restricted professional standards and other applicable legal collection methods, source data and relevant Basis for our conclusion to the Carbon emissions reporting. We have and regulatory requirements. assumptions applicable to the sites by We have performed our limited assurance not performed assurance procedures on any We have exercised professional judgement interviewing relevant staff responsible for engagement on the Carbon emissions reporting other information in the Ingka Group Annual & and have maintained professional skepticism providing the data for consolidation in the in accordance with Dutch law, including Dutch Sustainability Summary Report FY18 in light of throughout our limited assurance engagement, Carbon emissions reporting. Standard 3410 “Assurance Engagements this engagement. in accordance with the Dutch Standard 3410, on Greenhouse Gas Statements”. Our ethical requirements and independence Amsterdam, 1 February 2019 responsibilities under this standard are further Responsibilities of management requirements. Ernst & Young Accountants LLP described in the section Our responsibilities Management is responsible for the preparation The procedures of our limited assurance for the assurance engagement on the Carbon of the Carbon emissions reporting in accordance engagement consisted amongst others of: Signed by emissions reporting. with criteria of the Greenhouse Gas Protocol • Performing an analysis of the external R.T.H. Wortelboer We are independent of Ingka Holding B.V. (published by the WRI/WBCSD) and the applied environment and obtaining an understanding of

71 | Ingka Group Annual & Sustainability Summary Report FY18 Group financial performance and governance | Introduction

GROUP FINANCIAL PERFORMANCE AND GOVERNANCE

THIS IS INGKA GROUP | OUR BUSINESS | PEOPLE AND PLANET POSITIVE | GROUP FINANCIAL PERFORMANCE AND GOVERNANCE | INDICES

72 | Ingka Group Annual & Sustainability Summary Report FY18 Group financial performance and governance | A Message from Juvencio Maeztu

A MESSAGE FROM JUVENCIO MAEZTU By transforming our own operations we will The role of the CFO has changed. use resources with the utmost efficiency, When people ask what my job is, I enabling customers to care for and pass on say it’s everything, almost. I have Strengthening our IKEA products in more circular ways. We to be everywhere, both upstream and will play our part in creating a better life for downstream - contributing to strategy position for the future the people and communities touched by our for the long term and anticipating the business. This is the role we want to play in demands we will face in the future, as well To be affordable, accessible and sustainable in a changing society and it makes our business stronger. as in the traditional CFO role in enabling us to learn from our results. This means retail industry, we need to make bigger, bolder decisions. We want to strengthen our position for listening and being humble enough to Our core values, beliefs and principles will stay the same, the future, building on our 75 years of understand the complexity, but strong but the way we do business is evolving. IKEA experience and knowledge in life enough to take the responsibility to lead. at home. During the year, we’ve increased our efforts and investments to start We’re against the norm, and we want e are on a mission to create connected consumers, we’re transforming our transforming our business. While this has to keep standing out. We’ll build on a better everyday life for business. And we’re developing capabilities to had an impact and lowered our results, it’s our unique offer, by continually learning the many people – with thin meet changing expectations in a digital world. been a conscious decision for us to start this about life at home and putting people at wallets, big dreams and big three-year process to be better equipped the centre of our business. We do this Wneeds for their lives at home. Central to this Ingka is a truly purpose-driven company. for the future. Together with our shopping through the home visits we do and our is to provide beautiful and functional home This is what I learned during my time as CEO of centres business, Ingka Centres, we are own research into how everyday living furnishings that are affordable, accessible IKEA Retail in India. It taught me why we need creating new meeting places and exploring is changing. We are taking the insights and more sustainable. To reach today’s to do things, not just what we need to do. For new formats in cities. Now more than ever, we gain from our Life At Home report, example, by not compromising affordability, by is the time to be bold, to embrace all the Climate Action Starts At Home report and being inclusive rather than targeting the few, opportunities together with our co-workers understanding more about the importance by promoting diversity rather than accepting and to realise the IKEA vision by creating a of play in all our lives into the physical the status quo and by connecting with new world of Ingka. experience of our IKEA stores and in our communities and creating positive impact on digital space too. the people and the planet. We take a long-term financial perspective, and we’re now investing We all want to make a difference. For us to be truly affordable for the many, like never before. We’re optimistic That’s what I’m most proud of – the we need to challenge our business model about the future and the role we can play way we take decisions based on what and how we choose to lead. By taking a deep through Ingka Investments. Our financial we believe in and not only on what the interest in people’s lives at home coupled strength enables us to invest in our future excel sheets show us. The three things I with strong determination and competent purposefully, over the long term. enjoy most about working in our company co-workers, we were able to offer up to 1,000 are our vision, the many incredible products below INR 200 in India. If we can Transparency and accountability have colleagues working together and the be successful there, we can be successful never been so important, especially for many opportunities we have to make a anywhere. the big decisions we’re taking right now. difference. We’re all trusted to do the things we believe Our commitment to becoming people and will be best for the future of Ingka Group, Juvencio Maeztu planet positive is more relevant than ever and we need to put compliance and good Deputy CEO and Chief Financial Officer, before. We want to enable millions of people governance at the forefront of the choices Ingka Group to live more sustainable and healthier lives. we make.

73 | Ingka Group Annual & Sustainability Summary Report FY18 Group financial performance and governance | Financial performance FY18

FY18 FINANCIAL PERFORMANCE IKEA Retail In a rapidly changing retail landscape, centres in Novoselie (St. Petersburg area) IKEA Retail sales grew by 4.7% adjusted and Adygea. In China, we have acquired Our Financial Year FY18 for currency impact (1.9% in Euro), with land rights for three new shopping centres online sales showing strong growth with an in the cities of Changsha, Shanghai and In FY18, Ingka Group total revenue grew increase of 45%. Sales grew in 29 out of 30 Xian. Further­more, we are working together markets, with China remaining one of the with IKEA Retail on a number of projects to by 2.1% and amounted to EUR 37.1 billion. fastest growing countries. The five largest increase accessibility of IKEA in city centres. Adjusted for currency impact, retail sales markets, based on sales volume, were increased by 4.7 percent. Germany, USA, France, United Kingdom and Ingka Investments China. Ingka Investments invests, develops and In FY18, we opened 12 new stores. manages financial assets to support the Customer visits to our stores increased by growth of our IKEA Retail business and to 3% to 838 million, and visits to IKEA.com safeguard the future financial strength of uring FY18 we took some to EUR 0.6 billion which equals an effective increased by 12% to 2.4 billion. In addition, Ingka Group. It consists of five investment significant steps to accelerate tax rate of 30.0% (24.9% in FY17). Other we opened the first IKEA store in India. portfolios: Renewable Energy, Resource our transformation to become taxes and duties, such as property taxes and We continued to roll out our ecommerce Independence, Venture & Growth Capital, more affordable, convenient and customs duties amounted to EUR 0.5 billion platforms and grew our fulfilment network Business Development and Treasury Assets. Dsustainable. We increased our investments (EUR 0.4 billion in FY17). The net profit for through 14 new distribution units in order Within the Renewable Energy port­folio into new and existing the year FY18 was EUR 1.5 billion (EUR 2.5 to shorten lead and delivery times to our we own and operate 30 windfarms in 11 IKEA stores and fulfilment units, and we billion in FY17). customers. countries, and in FY18 new windfarms were opened new store formats in city centres In FY18 we paid a dividend to our owner acquired in Finland and Portugal. As part to make IKEA even more accessible. To Stichting Ingka Foundation of EUR 0.5 billion Ingka Centres of a long-term macro hedging strategy, meet the rapid growing demands for online out of the result from FY17. Total assets In FY18 the rental income from Ingka Ingka Group owns and manages 180.000 shopping, we continued to develop our amounted to EUR 52.4 billion and we further Centres amounted to EUR 0.9 billion and hectares of sustainable forest land within ecommerce platform to better meet our increased our solvency to EUR 40.8 billion our centres in China showed the strongest the Resource Independence portfolio, and customers with faster and better digital (78%) of equity at year-end. growth, supported by increasing visitation during the year major forest acquisitions shopping experien­ces. In total, Ingka Group invested EUR 2.8 and tenant sales. Ingka Centres welcomed were made in Latvia and the USA. As part of In FY18 we made some initial structural billion in stores, distribution and customer 475 million visits to our shopping centres, the Business Development portfolio, Ingka changes to our operations and over the fulfilment networks, shopping centres, an increase of 3%. During the year, we Group acquired TaskRabbit in order to offer coming three years we continue to transform renewable energy and forestry. successfully opened new European shop- customers flexible and affordable home our business. The business transformation Looking ahead, we continue to take ping centres in Algarve, Lublin and Zagreb. services such as furniture assembly. and the investment related to this will impact a financially responsible and long- In Russia we are developing new shopping our cost structure and bottom-line result. In term perspective on our growth and FY18, gross profit decreased by 1.3% points transformation, and our liquidity in excess to 33.3% of total revenue, and operating of EUR 21 billion gives us a solid foundation The ultimate parent company of Ingka Group is based in the Netherlands and therefore reports expenses increased by 1.0% points to 27.3% to invest in our future. We remain confident its financial results in Euro (€). This means that all figures in local currencies from the countries of total revenue. Operating result was EUR that we are well positioned to transform in which we operate are translated into Euro and then accumulated. Since currencies fluctuate, 2.3 billion (EUR 3.0 billion in FY17). our business, adjust to these new market companies will always face currency effects when doing these translations. In order to show the Financial results were also impacted by conditions and take advantage of the underlying trend when adjusting for this effect, Ingka Group also communicates the currency- lower results from Ingka Group’s securities opportunities that are presented over the adjusted development. For FY18, the currency-adjusted sales growth for retail was 4.7%, while portfolio and the sale of sub­­sidiaries. next three years. the straight conversion into Euros shows a sales increase of 1.9%. Corporate taxes incurred in FY18 amounted

74 | Ingka Group Annual & Sustainability Summary Report FY18 Group financial performance and governance | Financial performance FY18

Taxes

We are strongly committed to managing our operations in a responsible way and to making a positive contribution to the societies in which we operate.

WE WANT TO CREATE long-term value OVER THE LAST FIVE years (FY14– through growth, customer experience FY18), corporate income tax and other and positive impact on people and the taxes amounted to approximately EUR planet. The tax we pay is an important 7,263 million. In addition, we collected part of our wider economic and social sub­stantial tax amounts on behalf of impact. govern­ments, such as VAT and employee Ingka Group pays taxes in accordance taxes. with laws and regulations, wherever we Over the years, we have had are present as retailer or in any other strong development and created tens role. of thousands of jobs, directly in our In FY18, corporate income tax stores and warehouses, and indirectly amounted to EUR 634 million globally, with our external suppliers, which in which equals an effective corporate tax turn generates taxable income. We rate of 30.0% (24.9% in FY17). In FY18, continuously invest throughout our our total tax bill including other taxes business, in stores, shopping centres, and duties, such as property taxes, distribution centres, and lower prices to environmental taxes and customs duties our customers. amounted to approximately EUR 1,081 million.

FY18 – TOP RETAIL SELLING COUNTRIES FY18 – RETAIL SALES PER REGION

71% 15% EFFECTIVE CORPORATE TAX RATE (ETR) FY14-FY18 13%

30.0%

24.9% 8% 21.6% 19.3% 18.9% 6% 6% EUR 7.3 18% 11% BILLION in corporate income tax and other taxes Germany USA France UK China Europe America Asia FY14 FY15 FY16 FY17 FY18 over the last 5 years

75 | Ingka Group Annual & Sustainability Summary Report FY18 Group financial performance and governance | Financial performance FY18

CONSOLIDATED INCOME STATEMENT CONSOLIDATED BALANCE SHEET AUGUST 31 1 September – 31 August (in millions of Euros) Assets (in millions of Euros)

2018 2017 2018 2017

Revenue 37,050 36,295 Property, plant and equipment 23,565 23,172

Other fixed assets 2,970 2,488 Cost of sales and services 24,695 23,730 Total fixed assets 26,535 25,660 Gross profit 12,355 12,565 Inventory 2,027 1,924 Operating expenses 10,104 9,534 Receivables 2,544 2,327 Operating income 2,251 3,031 Cash and securities 21,244 23,029

Total financial income and expense -138 283 Total current assets 25,815 27,280

Income before minority interest and taxes 2,113 3,314 Total assets 52,350 52,940

Tax 634 825 FY18 – TOTAL ASSETS – EUR 52,350 MILLION Income before minoriy interests 1,479 2,489

Minority interests 11 16

Net income 1,468 2,473 45% 6% 4% 5% 40%

The included abbreviated financial information is derived from the consolidated financial statements of Ingka Holding B.V. This information is prepared in accordance with Part 9 of Book 2 of the Dutch Civil Code. An unqualified auditor’s report dated 19 November 2018 was issued on these financial statements. Ingka Holding’s Annual Report for financial year 2018, is available through the Dutch Chamber of Commerce. The Property, plant Other fixed assets Inventory Receivables Cash and Ingka Group total revenue includes sales of goods, rental income and service income. and equipment securities

76 | Ingka Group Annual & Sustainability Summary Report FY18 Group financial performance and governance | Financial performance FY18

CONSOLIDATED BALANCE SHEET AUGUST 31 Equity & liabilities (in millions of Euros)

2018 2017

Group Equity 40,822 39,943

Non-current liabilities 774 1,010

Provisions 1,810 1,767

Total non-current liabilities 2,584 2,777

Short term liabilities 2,727 3,891

Other payables 6,217 6,329

Total current liabilities 8,944 10,220

Total equity and liabilities 52,350 52,940

FY18 – TOTAL ASSETS – EUR 52,350 MILLION

78% 2% 3% 5% 12%

Group Equity Non-current Provisions Short term Other payables liabilities liabilities

77 | Ingka Group Annual & Sustainability Summary Report FY18 Group financial performance and governance | Ingka Group governance

We operate IKEA stores and other sales Ownership structure channels under franchise agreements Ingka Group (Ingka Holding B.V. Ingka Holding B.V. is one of 11 franchisees, operating IKEA and its controlled entities) has an Stichting IKEA stores under franchise agreements with Inter IKEA Systems B.V., ownership structure that ensures Foundation the owner of the IKEA concept and worldwide IKEA franchisor. independence and a long-term Charity Inter IKEA Systems B.V. is based in the Netherlands and part of approach. Ingka Group is owned Stichting Ingka the Inter IKEA Group. Inter IKEA Group and Ingka Group have by a Dutch foundation, Stichting Foundation the same founder, a common history and heritage, but are two Ingka Foundation, with a charitable Owner of Ingka Group separate groups of companies with different management and purpose which is achieved by making Stichting IMAS Foundation Management of own Financial different owners. funds available to Stichting IKEA Assets All IKEA franchisees pay a 3% franchise fee to Inter IKEA Foundation. As its owner, Stichting Systems B.V. The franchise fee gives us, as an IKEA retailer, the Ingka Foundation can reinvest funds right to operate stores and other sales channels under the IKEA into Ingka Group. concept and IKEA brand. It grants access to systems, methods and proven solutions as well as staff trainings, manuals and Ingka Holding updates of the IKEA concept such as stores layout, fittings and display concept. Ingka Holding B.V. is the parent company of the Ingka Group, located in Leiden, the Netherlands. Ingka Group operates three businesses in one; IKEA Retail, Ingka Centres and Ingka Investments. IKEA Retail is the core business, where we operate IKEA stores and other sales channels in 30 countries. Ingka Centres operates shopping centres under different trademarks, always anchored by an IKEA store. Ingka Investments makes purposeful investments to support Ingka Group’s long-term growth, to secure its financial strength and to support its sustainability goals.

Ingka Group Governance

Supervisory Audit Remuneration Board Committee Committee

Management Finance Investment Strategic People Risk & Sustainability Board Committee Committee Development Committee Compliance Committee Committee Committee Group Functions

Ingka Centres IKEA Retail Ingka Investments

The Ingka Group Governance and decision making structure defines the organisation and the primary decision-making bodies of the Ingka Group (Ingka Holding B.V. and its controlled entities).

78 | Ingka Group Annual & Sustainability Summary Report FY18 Ingka Group Ingka Group Supervisory Board Management Board The Supervisory Board of Ingka Holding The Management Board is entrusted B.V. is responsible for supervising, with the management of the Ingka monitoring and advising the work of SUPERVISORY Group and by that it has responsibility BOARD OF the Management Board. Based on the over the general conduct of the INGKA recommendations from Management HOLDING B.V. business of the Group. Board, Supervisory Board approves, The Ingka Group Management Board amongst others, the strategic plan, has two members; Jesper Brodin the main directions and budget of the (Chief Executive Officer & President) Ingka Group. and Juvencio Maeztu (Deputy Chief During FY18, Göran Lindahl resigned Executive Officer and Chief Financial from the Ingka Holding B.V. Officer). Kurt-Jörgen Olsson (General Supervisory Board, with effect as of 21 Counsel) is permanent invitee and November 2017. Corporate Secretary.

As per 31 August 2018, the Supervisory Board of Ingka Holding B.V. consists of Ingka Group (from top left to bottom right); Strategic Leadership Lars-Johan Jarnheimer (Chairman), Stina Bergfors, Luisa Delgado, Tore Some leaders take part in the strategic Bertilsson, Ian Worling, Jonas leadership of Ingka Group in areas such Kamprad, Mark Newton-Jones and Lone as strategies, business transformation, Fønss Schrøder. leadership and performance. Management Board has delegated the day-to-day business to the respective core business managers.

From left to right; Tolga Öncu (Retail Operations), Gerard Groener (Ingka Centres), Krister Mattsson (Ingka Investments).

Also part of the strategic leadership are (from left to right); Barbara Martin Coppola (Group Digital), Davide Urani (Group Strategy, Development & Innovation), Olivia Ross Wilson (Group Communication), Ulrika Biesèrt (Group People & Culture), Doris Lan (CEO Assistant).

79 | Ingka Group Annual & Sustainability Summary Report FY18 INDICES | Introduction

INDICES

THIS IS INGKA GROUP | OUR BUSINESS | PEOPLE AND PLANET POSITIVE | GROUP FINANCIAL PERFORMANCE AND GOVERNANCE | INDICES

80 | Ingka Group Annual & Sustainability Summary Report FY18 INDICES | UN Global Compact Index

The UN Global Compact Index

We are a signatory to the United Nations Global Compact, a set of ten principles in the areas of human rights, labour, environment and anticorruption. The UN Global Compact reference table (below) shows our progress regarding the ten principles.

UNITED NATIONS GLOBAL COMPACT (UNGC) PRINCIPLES LOCATION IN FY18 REPORT UNITED NATIONS GLOBAL COMPACT (UNGC) PRINCIPLES LOCATION IN FY18 REPORT

HUMAN RIGHTS ENVIRONMENT

Principle 1 Businesses should support and respect the protec- Respecting human rights, Principle 7 Businesses should support a precautionary app- Circular and climate positive, tion of internationally proclaimed hu-man rights; page 61 roach to environmental challenges; page 51 and Principle 8 undertake initiatives to promote greater environme- Healthy and sustainable living, Principle 2 make sure that they are not complicit in human Respecting human rights, ntal responsibility; and page 44 rights abuses. page 61 Circular and climate positive, Supporting decent work in our page 51 supply chain, page 62 Principle 9 encourage the development and diffusion of en- Healthy and sustainable living, LABOUR vironmentally friendly technologies. page 44 Circular and climate positive, Principle 3 Businesses should uphold the freedom of associ- Engaged IKEA people with page 51 ation and the effective recognition of the right to customers at heart, page 15 collective bargaining; ANTI-CORRUPTION Principle 4 the elimination of all forms of forced and compulso- Respecting human rights, ry labour; page 61 Principle 10 Businesses should work against corruption in all its Business ethics, page 17 forms, including extortion and brib-ery. Supporting decent work in our supply chain, page 62 Principle 5 the effective abolition of child labour; and Respecting and supporting children’s rights, page 62

Fairer lives for young and mig- rant workers, page 63 Principle 6 the elimination of discrimination in respect of People choose IKEA for what employment and occupation. we stand for, page 13

Equality works better, page 18

81 | Ingka Group Annual & Sustainability Summary Report FY18 INDICES | Sustainable Development Goals

Our contribution to the Sustainable Development Goals

We support the United Nations Sustainable Development Goals (SDGs) in their ambition to achieve a better world for all. As a global business, we have a role to play in contributing to achieving the SDGs. Find out how we contribute to each goal in the table below.

SUSTAINABLE DEVELOPMENT GOALS HOW INGKA GROUP CONTRIBUTES SUSTAINABLE DEVELOPMENT GOALS HOW INGKA GROUP CONTRIBUTES

End poverty in all its forms Aiming to become an inclusive and people-centred Achieve gender equality and Working to ensure gender equality across IKEA Group, everywhere company and employer, page 61 empower all women and girls page 14 and 17

Contributing to thriving communities, page 63 Partnering with social enterprises that employ people – mostly women – and empower them to develop Partnering with social enterprises to support those sustainable incomes, page 65 facing poverty and other barriers, page 65 Ensure availability and Managing water resources, page 58 Supporting refugees to develop skills for employment, sustainable management of page 66 water and sanitation for all Inspiring and enabling customers to save water at home, page 45 End hunger, achieve food Offering products and solutions that enable customers security and improved to cut food waste, page 45 Ensure access to affordable, Investing in renewable energy, page 54 nutrition and promote reliable, sustainable and Offering healthier and more sustainable food for sustainable agriculture modern energy for al Making residential solar affordable and accessible for customers and co-workers, page 47 the many people, page 50 Investigating foods for the future, including plant-based proteins, page 49 Promote sustained, inclusive Creating a people movement, page 13 and sustainable economic Minimising food waste in our operations, page 57 growth, full and productive Improving standards in our supply chain through IWAY, employment and decent the IKEA supplier code of conduct, page 62 Ensure healthy lives and Offering products for more healthy and sustainable work for all promote well-being for all at living, page 45 Supporting refugees to develop skills for employment, all ages page 66 Inspiring and enabling healthy and sustainable living, page 46 Partnering with social enterprises to create opportunities for people experiencing poverty and Health and wellbeing in the workplace, page 16 other barriers, page 65 … Ensure inclusive and Standing up for equality and inclusion, page 13 and 18 equitable quality education and promote lifelong learning Supporting children’s right to play, page 67 opportunities for all Offering our co-workers opportunities for training and development opportunities, page 13

82 | Ingka Group Annual & Sustainability Summary Report FY18 INDICES | Sustainable Development Goals

… SUSTAINABLE DEVELOPMENT GOALS HOW INGKA GROUP CONTRIBUTES SUSTAINABLE DEVELOPMENT GOALS HOW INGKA GROUP CONTRIBUTES

Build resilient infrastructure, Investing in renewable electricity generation, page 54 Take urgent action to combat Contributing to the IKEA ambition to become circular promote inclusive and climate change and its and climate positive, page 51 sustainable industrialisation Investing in renewable heating and cooling in our impacts and foster innovation buildings, page 59 Inspiring and enabling more people to live better lives within the limits of the planet, page 44 Working towards zero emissions home deliveries, page 24 Conserve and sustainably Working to phase out single-use plastic from our IKEA use the oceans, seas and Restaurants, Cafes and Bistros, page 58 Investigating foods for the future, including plant-based marine resources for proteins, page 49 sustainable development Tackling emissions from travel and deliveries, page 56 Protect, restore and promote Responsible sourcing of goods and services that help to sustainable use of terrestrial run our business, page 58 Reduce inequality within and Promoting a fair and inclusive society and respecting ecosystems, sustainably among countries human rights, page 61 manage forests, combat Investing in responsibly managed forests, page 41 desertification, halt and Respecting and supporting children’s rights, page 62 Operating our buildings responsibly and efficiently, reverse land degradation and pages 54-56, 59 and 60 Supporting fairer lives for young and migrant workers, halt biodiversity loss page 63 Promote peaceful and Respecting human rights, page 61 Make cities and human Striving for zero waste and using resources in a circular inclusive societies for settlements inclusive, safe, way, page 57 sustainable development, Aiming to become an inclusive and people-centred resilient and sustainable provide access to justice company and employer, page 61 Inspiring and enabling customers to live more for all and build effective, Contributing to thriving communities, page 63 sustainably, through IKEA products, page 45-46 accountable and inclusive institutions at all levels Making residential solar affordable and accessible for Partnering with social enterprises to support those the many people, pages 50 facing poverty and other barriers, page 65

Promoting circular consumption, page 47-48 Supporting refugees to develop skills for employment, page 66 Contributing to thriving communities, page 63 Ensuring an ethical approach to the way we do Working towards zero emissions home deliveries, page business, through our Code of Conduct, page 17 24 Strengthen the means Partnering with others to extend our impact beyond Tackling emissions from travel and deliveries, page 56 of implementation and our own business, and taking a stand on the issues we revitalise the global believe in, pages 14, 52, 57 and 63 Ensure sustainable Offering products that enable sustainable living, and partnership for sustainable consumption and production inspiring co-workers and customers to live more development patterns sustainably, page 45

Striving for zero waste and using resources in a circular way, page 57

Responsible sourcing of goods and services that help to run our business, page 58

Promoting circular consumption, page 47-48

83 | Ingka Group Annual & Sustainability Summary Report FY18 © Ingka Holding B.V. 2019. Some images by courtesy of Inter IKEA Systems B.V.