🔎 What’s going on?
IKEA, the Swedish retail giant, has launched a new program that will allow its 1,600 suppliers to switch to renewable energy.
🛋 What does this mean?
IKEA set a goal to reach 100% renewable electricity by 2025, with the aim of becoming ‘climate positive’ by 2030. Leading by example, 51% of IKEA’s own operations (stores, offices, warehouses, factories, and other operations) are currently powered by purchasing renewable electricity from the grid and installing solar panels on site. This is usually referred to as scope 1 emissions and scope 2 emissions.
However, two-thirds of IKEA’s emissions come from their supply chain, otherwise known as scope 3 emissions. Three of their biggest direct suppliers are based in Poland, China, and India, accounting for approximately 3% of emissions or 670,000 tonnes CO₂ emissions per year. This new program is critical and will provide direct suppliers with all the local support they need. Support, in this case, looks like helping companies generate renewable energy on-site ⚡️, enabling them to purchase the remaining from the local grid and supporting them with Power Purchase Agreements (PPA).
In December 2019, IKEA also announced a 100 million EUR financing offer for renewable energy generated on-site across electricity, heating, and cooling.
❓ Why should I care?
The lion’s share of emissions for most companies comes from their supply chain. According to the CDP, on average, supply chain emissions are 11.4 times as high as operational (own) emissions. Research from over 8000+ supplier companies suggests that by not addressing this environmental risk, companies face up to US$120 billion in costs in their supply chain within the next 5 years. That is huge! 😮
And guess what? Due to the tight margins within supply chains, it’s inevitable that increased costs will be passed onto buyers (yes, that’s you and I as consumers)! Yup, it doesn’t look good folks. 👀
🚦 Where do we need to be?
IKEA is demonstrating active climate leadership by working with direct suppliers to reduce supply chain emissions.
More leading companies should address these risks now to benefit from lower costs and a better reputation. Essentially it’s just good business for businesses to reduce supply chain emissions so they can remain competitive and be resilient to future market shocks relating to climate.
👤 What can I do about it?
As an individual, how you consume a product after you buy it and when you dispose of it at the end, makes such a huge difference in terms of climate impact. So, read the label of your products carefully and look out for instructions from the manufacturer on how you can reduce your climate impact.
As a business, here are a few things you can start on today:
- Measure your carbon footprint at the company and product level (if applicable). This is the first and most important step. Organisations such as Watershed, Ecochain, Emitwise, Climate Partner, and Carbon Trust can help here.
- Align your company with science and set a Science-Based Target.
- Disclose your results and targets publicly, no matter how good or bad they are!
- Focus company efforts on reducing your operational carbon footprint first (i.e. scope 1 emissions and scope 2 emissions) before moving onto your supply chain (i.e. scope 3 emissions).
- For unavoidable emissions that can’t be reduced in the short term, consider buying high-quality carbon offsets that are verified by a third party such as Pachama, Natural Capital Exchange (NCX), Wren, Earthly, Carbon Credit Capital, Carbon Fund, and ClimateCare. Ensure these projects are certified to avoid, reduce or remove greenhouse gas emissions.
- Consider and plan for carbon removal that enables both short-term and long-term carbon storage.
- Push the boundaries for what’s possible, for example, show leadership by acknowledging and dealing with historical emissions, as well as current and future emissions. That is truly game-changing.
Related: Carbon offset ratings provider Sylvera raises seed funding
Photo credit: Photo by Andreas Gücklhorn on Unsplash