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The IKEA Way (IWAY) is a code of conduct for IKEA's suppliers that outlines a range of sustainability issues that suppliers are asked to adhere to. Suppliers must agree to certain KPIs as part of the IWAY code. To monitor suppliers, IKEA regularly carries out an on-site audit of its suppliers. This involves talking to employees and inspecting documents and records IKEA has also implemented awards for IKEA have also implemented awards and KPIs for its suppliers.

SCI Information

Activity types Capacity building and implementation support, Mandatory supplier requirements, Audits
Organisation leading the initiative IKEA
Region from which the initiative is led Europe, Sweden
Supplier's location Global

In 2011 IKEA had 1,026 suppliers in 53 countries. The greatest number are based in China (22%) and Poland (18%). However in terms of purchasing 63% of spend goes to Europe, and 33% to Asia, Russia and Australia combined.

Supply chain sectors targeted Aluminium, Ceramics, Food and tobacco, Glass, Iron and steel, Non-ferrous metals, Non-metallic minerals, non-specified, Paper pulp and printing, Textile and leather, Wood and wood products, Petrochemicals, Plastics

Forestry (timber), metals, textiles, glass, plastics, general manufacturing.

Program or partnership linkages WWF, Global Social Compliance Programme

IKEA has worked with the Worldwide Fund for Nature (WWF) since 2007 on its Developing Climate Positive Opportunities for Suppliers project, which aims at achieving significant reductions in energy consumption (via energy efficiency initiatives) with IKEA's suppliers. The goal is to remove barriers what barriers to further energy efficiency among suppliers and promote a low carbon IKEA supply chain.

IKEA is a member of the Global Social Compliance Programme (GSCP) [*1], an industry-initiated programme working towards a sustainable approach for the improvement of working and environmental conditions in global supply chains. GSCP provides a platform for companies to build consensus on best practices and to work in partnership with suppliers on the continuous improvement of working and environmental conditions through training and capacity building activities.

Policy linkages None

No legislative or governmental requirements for buyers or suppliers to undertake this action, or links to government programs.

Objective Buyer objectives:

IKEA is responding to rising public concern over the need for sustainability, and the need to demonstrate environmental leadership and responsibility. The company wants to foster long term relationships with suppliers who demonstrably share their values.



Supplier's drivers:
Suppliers are motivated by the mandatory nature of the IKEA's mandatory IWAY Code of Conduct for suppliers. Non-compliance with the Code could result in the termination of delivery contracts to IKEA.
Date

IKEA began it's 'Climate Positive Opportunities for Suppliers' project  in 2007. The IKEA IWAY Code of Conduct was introduced in 2000. IKEA began its Supplier Energy Efficiency Project with WWF in 2008.

Initiative Summary

Description of the scheme

 

IWAY code of conduct

In 2000, IKEA issued a code of conduct to suppliers known as IWAY (the IKEA Way of Purchasing Home Furnishing Products). IKEA's goal is that all IKEA home furnishing suppliers should comply with all the requirements of this code by the end of 2012 [*2]. New suppliers must comply with the IWAY start-up requirements (no forced labour and no child labour) before being allowed to supply to IKEA, while being given a maximum implementation time of 12 months from the first delivery date for all other IWAY requirements. IWAY includes the following supplier requirement: "Energy Reduction - The IKEA supplier shall measure and record energy consumption for all buildings and processes. Targets for reductions shall be set annually."

 

Audits

Auditing staff (not certified) from local and regional IKEA Trading Service Offices  around the world are often on-site at suppliers’ factories to support and motivate suppliers to implement and maintain IWAY requirements. IKEA believes their active presence contributes to suppliers’ development.  Visits can be both announced and unannounced. Over the last few years, the number of unannounced audits has increased substantially. Each supplier is audited at least every second year, and more frequently in some countries based on a risk assessment. IKEA auditors help suppliers with action plans when there is non-compliance, and they conduct followup visits to review progress.

IKEA auditors are trained on how to conduct audits, the consequences of non-compliance, and how to follow up, etc.  Non-compliance with the IWAY start-up requirements leads to immediate stop of deliveries, while suppliers have up to 90 days to implement corrective actions in case of non-compliance with other requirements. Once non-compliance with start-up requirements is resolved, suppliers are still on probation for six months with intensified monitoring.

IKEA also undertakes a limited number of audits at the sub-supplier level, and hopes to increase these in the future.

The IKEA Compliance and Monitoring group (CMG) is responsible for ensuring that the same audit judgement level and follow-up procedures are used worldwide. This is done through calibration of audit methodologies so that they are consistent across regions, as well as training and compliance audits to verify results. In 2009 business was terminated with ten suppliers due to failure to comply with IWAY standards, even though the suppliers met all other expectations on cost and quality. [*4]

 

Supplier Development Programme

As well as auditing, IKEA has launched a supplier development programme, which works to improve supplier's performance across a range of sustainability criteria (including energy efficiency).  All 1,074 IKEA home furnishing suppliers from around the world have been classified based on capacity, performance and longterm potential, including sustainability aspects. Initially, around 200 suppliers with the highest priority classification are eligible to be part of a Supplier Development Programme (SDP).

During the SDP analysis phase, IKEA identifies a limited number of suppliers with particular potential to improve performance in a specific area, and offers support for a certain period of time. Support can be provided within six main categories:  sustainability, purchasing (including raw materials), logistics, manufacturing, quality and product development. SDP Sustainability focuses on two sub-categories: energy and water. This support includes assistance in identifying energy efficiency opportunities in home furnishing suppliers, and raising awareness with suppliers of the benefits of energy efficiency. The scheme had a specific target to increase energy efficiency in home furnishing suppliers by 30%.

 

Climate Positive Opportunities for Suppliers - WWF partnership

Since 2007, IKEA has been working with WWF since on the 'Climate Positive Opportunities for Suppliers' programme [6].  As part of this, an innovation 'invitation' was set up to find new solutions to identify low carbon technologies that can make the suppliers more successful in their business. As a result of this, more than 30 companies proposed innovative solutions to improve manufacturing processes such as the drying process for wet textiles or injection moulding in plastics. IKEA is now evaluating proposals to find opportunities for collaboration with suppliers. Suppliers have also gathered in Warsaw and Prague on special events to learn about and discuss low carbon solutions. As part of this initiative consultants have prepared reports for Poland and China on finding common scalable solutions to barriers obstructing energy efficiency improvements in supplier installations. This project ran until the end of 2011.

 

Supplier Energy Efficiency Project - WWF partnership

In addition to its work with WWF, IKEA established a 'Supplier Energy Efficiency Project (SEEP) in 2008 in partnerships with WWF, among six energy intensive materials including glass. The key goals of SEEP are to reduce greenhouse gas (GHG) emissions and increase competitiveness through energy efficiency improvements [*3]. IKEA has selected ten suppliers in China and Poland as part of a pilot project to improve energy efficiency. The suppliers must work with IKEA and WWF to identify energy efficiency opportunities, thereby allowing on-site audits.

 

Initiatives with wood and cotton suppliers

  • For wood, IKEA has defined a 4-level requirements system for its suppliers. Level 1 is mandatory, and level 4 corresponds to certified wood products (according the Forestry Stewardship Council FSC label). IKEA monitors and publishes the percentage of its suppliers complying with Level 2 (94% in FY07) and Level 4 (6% in FY07) [*5]. IKEA conducts seminars and training sessions in Russia and China together with representatives from forestry companies and authorities such as customs. 
  • IKEA also encourages suppliers to participate in the WWF initiative Global Forest & Trade Network (GFTN) to strengthen their commitment to eliminate illegal logging and promoting responsible forestry. In China, IKEA works with the Rainforest Alliance Trees Programme, WWF China and the Chinese Academy of Forestry, in addition to the Forest Stewardship Council (FSC), to improve the standards of forest management and availability of certified wood.
  • Better Cotton Initiative: IKEA cooperates with WWF and other local partners to influence mainstream farmers to grow cotton in a more sustainable way – mainly in India and Pakistan but also in China and Turkey. It started as Farmer Field Schools with 20 weeks of training for 450 farmers in 2005. IKEA supports projects that reach an estimated 100,000 farmers. This project is known as the Better Cotton Initiative.
 
 
Requirements on or activities undertaken by the target group

All existing or potential suppliers must comply with IKEA's Code of Conduct (IWAY), and must allow IKEA auditors to conduct on-site inspections, whether announced or unannounced.
IKEA and WWF, as part of the Supplier Energy Efficiency Project, have selected ten suppliers in China and Poland as part of a pilot project to improve energy efficiency. The suppliers must work with IKEA and WWF to identify energy efficiency opportunities, thereby allowing on-site audits.

Verification/certification

Third-party auditors verify the audits done by trained IKEA auditors (both the audit results and the processes used). These third-party auditors also conduct their own audits on behalf of IKEA with IKEA suppliers.

Tools and resources (includes use of external platforms for capturing suppliers' data)
  • IKEA and WWF - together with selected suppliers in Poland, Sweden and China - are creating a casebook of good examples for how suppliers can save energy and money and become less reliant on fossil fuels for manufacturing, heating and cooling.
  • IKEA's Supplier Energy Efficiency Project in China offers an energy efficiency monitoring template, best practice guidelines and a competence pool (internal/external) in order to ensure that the benefits of skills and expertise are utilised effectively in support of energy efficiency measures.
  • Suppliers are issued with a clear set of guidelines as part of the IKEA IWAY Code of Conduct [*2] Suppliers must also communicate the contents of this Code to sub-contractors, and ensure sub-contractors implement the measures it contains.

Impacts, Costs & Benefits

Costs

Information not available

GHG Impact
  • By 2009 74% of suppliers had been IWAY compliant, and 1,150 audits had been conducted by both KEA's own staff and independent auditors.
  • Efforts to increase energy efficiency by 30% in home furnishing suppliers as part of the supplier development programme resulted in 40% savings.
  • One of IKEA's suppliers, a glassware company in China, upgraded its furnaces and switched the fuel source from coal to natural gas as a participant in an IKEA and WWF-led carbon reduction project. The company its greenhouse gas emissions by 35% (~7,000tCO2e) between 2009 and 2010. The reductions were achieved a the gas increased the temperature stability and improved the approval rate of non-rejects.[*3]
  • As a result of the Better Cotton Initiative established by IKEA and WWF, the share of more sustainable cotton in the IKEA range increased significantly in 2011 – up to 50,000 tonnes, representing 23.8 percent of IKEA's total cotton use, compared to 13.4 percent in 2010. 
  • One textile supplier in Bangladesh has piloted the IKEA Supplier Development Program (SDP) for energy in 2011. The supplier identified and implemented a number of efficiency measures that reduced energy consumption by 29 percent and cut CO2 emissions by 25 percent. The annual savings represent 1.1 million euro, and 15,600 tonnes of CO2. [7]
Benefits

IKEA's partnership with WWF has found opportunities for IKEA suppliers to significantly reduce their energy consumption. It has even identified opportunities for some suppliers to become net producers of renewable energy. A number of non-energy benefits may also be realised, as was the case in the example of Hongwei Glassware company [*3], such as improved employee workload and improved employee health.

Footnotes & References