Assignment
Student
Student number
A1: Individual Assignment
Jonathan Steyn
40197414
Location
Course
Professor
Hult International Business School – Dubai Campus
Global Operations - OPS-5926 - DEM2B (Hajjar)
Dr. Leeann Stewart
Date:
Title:
15 September 2024
Sustainability within our Supply Chains
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6.
Introduction
Importance of sustainability
Strategies
Challenges
Recommendations and roadmap
Conclusion
Word count: 2,022 (Excluding above and references)
Introduction
The concept of sustainability within our global supply chains is the manner of bringing
together social responsibility and environmentally friendly practices into all aspects of our
global supply chains, from the sourcing of raw materials to production within our factories, to
how we transport the finished goods from the factories to the distribution points or retailer
and finally to the consumer. These can include not only produced items, but also our
inventories and services delivered to a customer. Where possible we can even have a
reverse supply effect where the manufacturers are able to re-purchase products to repurpose products which have been exhausted for further use.
Overall sustainable supply chains aim to minimize the impacts on the environment and the
larger community while at the same time being economically viable. For our case study, we
will be looking into the practices of IKEA.
If you have not yet heard of IKEA, they are one of the largest and most recognizable
furniture retailers in the world, known for their affordable flat packed modern designs. The
company has just turned 80 years old, it operates as a franchisor and has over 400
franchised stores in more than 50 countries with an annual revenue of 29.1 million Euro.
IKEA is also a global leader in sustainable supply chain management with its People
"People & Planet Positive" strategy.
Importance of sustainability
As our global population continues to grow, currently placed at over 8 billion people and
projected to be 9.7 billion by the year 2050, and our demand for resources to consume
grows significantly, this leaves a massive impact on earth, and we are facing a global
environmental crisis. According to the United Nations, the 3 main interlinked problems which
humanity currently faces are climate change, pollution and loss of biodiversity. The UN has
named it the Triple Planetary Crises.
Climate change is the largest problem out of the three, as temperatures shift to higher levels
altering the eco system which supports all life on the planet.
Air pollution is the second largest causing the most premature deaths while biodiversity loss,
critical for maintaining the balance of ecosystems is the third largest threat our planet faces.
Currently the global supply change contributes 60% to carbon emissions which in turn trap
the heat from the sun within our atmosphere and heat up our earth, without world warming
faster than any point in history.
It is therefore imperative for us to shift the way we consume to sustainable models, such as
circular economies, regenerative and reverse supply chains to lessen our impact on the
globe.
Shifting to these sustainable models not only is essential for handling the environmental
crisis, but also creates long terms value for businesses. These benefits are:
1. Reduced environmental impact
If businesses can use sustainable materials and renewable energies, they can then
reduce the amount of waste produced and their lower carbon footprint. Sustainable
materials or materials which have been sourced responsibly, help conserve our
planet’s resources and minimize any environmental damage. Additionally, using
renewable energy such as solar and wind power reduces greenhouse gasses and
emissions, unlike fossil fuels.
2. Cost efficiency
Changing our operations to a more sustainable approach often results in savings,
these are usually from the use of renewable energy sources, such as wind or solar,
and could also be lower material costs in the form or using recycled products or by
re-using items which have gone through the manufacturing process.
3. Brand reputation
Our modern-day customers are more aware of the impact that our buying patterns
have on the environment and are looking for ethical business practices. Therefore,
having sustainable operations in today’s business world is not only becoming a
requirement but can also enhance the brands or business reputation and can be
used to build a stronger relationship with their customers.
Strategies
Here are some of the strategies which IKEA have implemented, followed by some further
recommendations which could be employed.
1. Renewable Energy - IKEA are investing in renewable energy to achieve climate
positive operations by 2030, they have invested in solar panels at their locations and
plan to be on 100% renewable energy by as early as 2025. Additionally, they have
invested in wind & solar farms to offset their carbon footprint and be carbon positive
by 2030.
2. Modular design – IKEA’s focus on modular design and flat packing not only reduces
both storage and transportation costs for the business but also assist in transporting
its product around the world more efficiently, avoiding wasted space and therefore
reduces the amount of carbon emissions.
3. Sustainable extension – IKEA not only runs energy efficient lighting in all their
locations, but also offers energy efficient products to its customers, therefore
reducing both IKEA’s and the customers’ energy bills, and saving on energy. This
coupled with clean energy reduces the dependency on fossil fuels and reduces the
carbon footprint of IKEA.
4. Circular economy commitment – IKEA has earned a strong reputation for its
commitment to renewable energy and a circular economy. This increases both their
brand loyalty and attractiveness to new environmentally conscious customers.
5. Ellen MacArthur Foundation – IKEA have partnered with the Ellen MacArthur
Foundation which is a charity committed to creating a circular economy, eliminating
waste, circulating materials and regenerating nature for the betterment of the
environment and its people.
Further recommendations which could be utilized by IKEA or any other business wishing to
work towards sustainable practices.
6. Biodegradable packaging – While IKEA have created a flatpack solution for their
products, further advances could be made by 100% biodegradable packaging,
alternatively they could use recycled packaging. Both of these options would reduce
plastic waste and the associated emissions. This can be applied to all types of
businesses.
7. Extending product lifespan – IKEA and other businesses could introduce product
refurbishment centers, where old furniture items can be renewed, and create a
culture of refurbishment instead of discarding our old products.
8. Supply chain transparency – Larger companies may be able to create a system
where the supply chain environmental impact is tracked at each stage of fulfilment,
from the raw material acquirement to delivery to its customers. This transparency
would resonate with customers, further solidifying their relationship with the business
or brand.
Challenges
Here are some of the challenges we expect to encounter when trying to shift over to some of
the above strategies.
1. Higher initial costs – Moving over to wind or solar power usually requires a significant
initial capital investment, such as setting up wind or solar farms. The benefit is clean
renewable energy and lower operational costs, but large initial outlay. For example, in
an article by the Union of concerned scientists (Barriers to Renewable Energy
Technologies, 2014) the estimated cost of setup in residential can go from $2,000 to
$3,700 per kilowatt and the average house requiring 10KW according to Energysage
(Aggarwal & Walker, 2024), a leading solar installation firm. Despite declining costs
of the renewable technologies, the capital costs for initiating these practices are still a
barrier for entry, especially for small to mid-sized companies.
2. Resistance to change – While those who are engaged in the topic of climate change,
sustainability and circular economies are concerned around improving their
businesses contribution towards these topics, internally there is likely to be
resistance from various stakeholders as the are faced with cost cutting exercises and
traditional proven low costs methods. The short-term profitability view overshadows
the long-term sustainable approach and often requires a culture change within the
business. This usually is a challenge, and overcoming this requires a combination of
leadership commitment and communication to align sustainability goals with the
company’s vision. This resistance to change is explained further seen in the articles
from BSG (The Challenges of a Sustainability Transformation, 2022) and McKinsey &
Company report called Short termism and the threat from climate change (Paulson,
2015).
3. Supplier co-ordination – In order to achieve a sustainable supply chain, companies
are required to align themselves with suppliers who meet their sustainability goals.
Not all suppliers may share the same commitment, which could create delays or
inconsistencies leading to poor efficiency. The need to work together to co-ordinate
sourcing of regenerative materials, responsibly produced goods and services, and
optimize the logistics around the product deliveries. To achieve this a high level of
integration and information sharing is necessary. Block chain technology while still
being created is a method of transferring data while protecting other information, as
mentioned in this article from Frontiers that discuss the benefits of this technology in
supply chain management (Transitioning to Sustainable Energy, 2023)
Roadmap & Recommendations
For my business or any other to take the initial steps towards introducing sustainable
practices, I have created the below structures approach (recommendations). This phased
approach will allow us to integrate sustainable practices into the operations of the
organization.
Phase 1 - Sustainability Audit & Goal Setting
Firstly, we should assess the current sustainability impact of the business by
conducting a thorough audit of the company’s environmental impact. This includes
waste management and social practices.
Once we have assessed our business, we can set up some SMART goals (Specific,
Measurable, Achievable, Realistic and Time bound) towards our sustainable
objectives for the business.
Timeframe – 3 Months
Outcomes - Clear starting point, defined sustainability goals
Phase 2 - Leadership Engagement & Stakeholder Involvement
Aligning our stakeholders is an incredibly important step, we can gather buy in from
senior leadership, to ensure the sustainability goals are prioritized. Once the
leadership team are aligned, we can communicate and engage with key stakeholders
such as suppliers and customers and gain commitments across the supply chain.
Timeframe – 2 Months
Outcomes - Company-wide buy-in, stakeholder alignment
Phase 3 – Policy Development & Resource Allocation
Once these stakeholders are aligned, we would need to formalize our sustainability
policy and ensure that suppliers are meeting our sustainability goals. These should
include waste reduction, responsible sourcing of materials, as well as energy and
operational efficiency within their businesses.
Timeframe – 2 Months
Outcomes - Company-wide buy-in, stakeholder alignment
Phase 4 - Operational Integration
We would then focus our attention on our own operations and see how we can
integrate sustainable practices into our everyday operations. Some examples of this
would include moving to renewable energy, optimizing our asset usage, reductions of
waste and moving towards circular economy principles.
Timeframe – 6 Months
Outcomes - Integration of sustainable practices
Phase 5 - Employee Training & Internal Communication
Training and education of the staff within the business is critical to ensure
companywide alignment and acceptance.
Timeframe – 2 Months
Outcomes - Educated and engaged workforce.
Phase 6 - Continuous Monitoring, Feedback, and Adjustments
Once all is in place, we should monitor our progress towards the selected KPI’s,
make the necessary improvements and adjustments.
Timeframe – Monthly Ongoing
Outcomes - Data-driven improvements in sustainability
Phase 7 - Reporting and Communication
Finally, let our results be known publicly, by periodically reporting the efforts back to
stakeholders, customers, suppliers and leadership teams.
Timeframe – Yearly
Outcomes - Transparent communication of progress
Conclusion
In closing, integrating sustainability into our supply chains is essential to solve the global
environment crisis. Businesses such as IKEA and many others are showing that this can be
done, by optimizing the use of their resources and operations, investing in renewable
energies, committing themselves to sustainable goals and transparently reporting them.
When businesses prioritize environmental sustainability, they reduce their environmental
impact through energy saving, waste reductions and ethical sourcing. In turn, this leads to a
reduced carbon footprint, the conservation of resources and enhanced operational
performance.
Additionally, aligning both our sustainability and business goals offers many other benefits
such as cost savings by reducing energy consumption and reduced waste. It strengthens our
customer loyalty as our customers prefer to engage with environmentally friendly brands.
The companies reputation is enhanced, attracting more customers and other potential
investors or stakeholders, and as the world becomes more focused on this topic, companies
are taking pro-active steps to future proof themselves against evolving regulations.
By following the roadmap above to implement sustainable practices, businesses can gain
both environmental benefits and competitive advantages, setting themselves up for long
term success while also contributing to cleaner planet and happier society.
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