Ikea and Sustainability

1. Introduction

Nowadays as a lot of environmental organizations are talking about greenhouse effects, global warming and environmental problems. It is very important to start thinking how possible to change everyday life and become more environmental friendly. The essay analysis the theory of sustainable supply chain and as well equates practical consistency with the case of sustainable policy of global company IKEA, as well called one of the biggest sustainable company in the world.

The Figure 1 below shows Global GHG emissions by sector. Source: IPCC Assessment Report 4 (2007). The biggest impact for green house effect gives economic development and industrialization emphasising energy supply, industry, forestry and transport. One very good example of global company would be example of IKEA which activity takes all main aspects of environmental impact and is very active in agitating and leading policy of sustainability at the same time when getting financial profit.

(Woodland Trust, 2012)

2. Theoretical background

Its is very important for every company to have the best logistics and supply chain decisions what helps to optimize the cost and to get the biggest profit.

Logistics and supply chain is highly related; just logistics has wider meaning than supply chain. Logistics concentrates on planning, implementation and control of efficiency, effective flow and storage of goods, services and all related information from the point of origin to the point the idea to the consumption. However supply chain defines the raw materials and information flow and transformation to the end user and back to supply chain - utilization. The best way how to improve business logistics/supply chain is based on tree aspects: cost reduction, capital reduction and service improvement. (Ballou, 2004)

The understanding of importance of value-chain for companies is crucial. The Figure 2 shows the links between the core and support processes in a firm and firm's external customer and supplier.

Figure 2. Value-Chain Linkages showing work and information flows

The best decision of which supplier to choose is the main stones in supply chain. Selections of best supplier (local or not, lowest price, flexibility for supply on time etc.) and conducting certificates (raw materials should be safe for people and environment to use, safety of raw material extraction, labour force protection ect. ) are two the most important activities of sourcing suppliers. Nowadays firms are more and more considered about sustainability of suppliers. Firms give high demands for suppliers to be environmentally conscious when designing and manufacturing the products, claims such as green, biodegradable, natural, and recycled materials. (Lee Krajewski, Larry Ritzman, Manoj Malhotra, 2007)

The following but not less important decision creating sustainable supply chain is transportation decision. Transport plays a big role for environment as well because of the congestion and exhausted fumes.

To improve the transportation decision of supply chain there are following steps:

* Revision and improvement of product design and bill of raw materials (packaging, reuse and end-of-life disposal, products density and physical characteristics etc.)

* Revision of sourcing decisions (migrating to developing countries, global sourcing decision increases transportation costs and emission)

* Revision of transport options (choice of different transport modes, innovative and improved design of vehicles and vessels, fuel efficiency decisions)

* Improvement of transportation utilisation (better vehicle routing and scheduling, better loading and more efficient capacity use)

* Usage of postponement strategies (local assemblage, customisation or configuration of generic products ) (Christopher, 2011)

Sustainability is very important conception of business approach for twenty first century innovative and competitive company. The definition of sustainability originates from United Nations Brundtland Commision (1987), which is:" sustainability - meeting the needs of the present without compromising the ability of future generations to meet their own needs." (Christopher, 2011)

Sustainability conception usually is divided in to three areas, also called the triple-bottom-line: economic (e.g. effect on people's livelihood and financial security; profitability on the business), social (e.g. poverty reduction; improvement of working and living conditions, etc) and environmental (e.g. pollution; climate change; the depletion of scarce, etc.) components. Organizations should make decisions which include triple-bottom-line with the aim how to make the best financial, economic, social and environmental benefit, especially with prediction for the close and far future. Should be involved all players of supply chain as suppliers, stakeholders, workers etc. (ADRIEN PRESLEY, LAURA MEADE and JOSEPH SARKIS, 2007)

There is the strategy of reverse logistics seeking sustainability in the company, which could be described as process of bringing products back at the end-of-life as well as for recall and repair. The impetus of reverse logistics is creation of closed-loop supply chain what increases level of reuse and recycling. To maintain proper function of sustainable supply chain it is necessary to design products with the end-of-life in mind. Reverse logistics provides opportunity for companies to reduce costs and carbon footprint. To ensure efficient operation of reverse logistics, the quality and the mass of production cannot have significant loss. (Sassi, 2008)

There is 3Rs tendency of sustainable supply chain management - reduce, reuse and recycle, this helps to prevent environmental impact by using less raw materials and reducing waste. (Christopher, 2011)

However there are some difficulties to lead sustainable policy globally because of the lack of internationally accepted reporting standards on what, when and where to report. Important developments for the issue of sustainability were the foundation of the World Business Council for Sustainable Development (1997), the foundation of the GRI (Global Reporting Initiative, 2000) and the development of standards for environmental management systems, such as the ISO and EMAS standards (Organisation for Economic Co-operation and Development; OECD, 2001). However, the lack of internationally accepted reporting standards on what, when and where to report makes it difficult to assess sustainability. (P.W. Gerbens-Leenes , H.C. Moll, A.J.M. Schoot Uiterkamp, 2003)