Management Accounting

Can you identify any social and environmental costs that are supplier related? Discuss them. If you cannot find these on the reports then suggest some possible costs.

The Environmental Protection Agency (1996) defines environmental costs as have a direct financial impact on a company (internal costs or private costs), and also can encompass the costs to individuals, society and the environment where the company is not accountable (external costs or societal costs) (Refer to Appendix 1). The type of costs stated in the environmental accounting system determines the scope of the system (Alam n.d).

As stated in Ikea Group Sustainability Report (2012), the company has higher sales and investments in sustainability. Aside from having a good financial position, Ikea has strategies like renewable energy investing in wind power in total of 126 wind turbines, 250 solar panels at 75 stores and warehouses around the world, and biomass production equivalent to 34% of Ikea group energy use in the year 2012. Ikea managed to improve the direct supply from suppliers to the stores of 55% leading to lower transport damages, lower costs, ensures availability and reduced carbon footprint. Ikea has IWAY policy or supplier code of conduct on purchasing products, materials and services through suppliers, which helps reduce the environmental costs and social costs that will incur to the company. Thousands of IKEA and independent audits are carried out every year to check suppliers to meet high standards. IWAY also includes a code on preventing child labor, making a big difference to the people's lives and environment, which recorded 165,000 environmental and social improvements. In addition to suppliers conduct, IKEA banned PVC, lead in mirrors, reduced formaldehyde from lacquers and glues, not using optical brighteners in IKEA textiles, phased out incandescent bulbs in favor of more energy efficient fluorescents and changed to LEDs given in lower prices (Ikea 2013).

According to the Ikea Group Strategy Report for 2020, ensuring sustainability has a vision by the end of 2015, 95% suppliers will view the company Ikea that takes environmental and social responsibility. By the end of 2015, all home furnishing materials plus packaging will be either recyclable, renewable or recycled materials and more sustainable with documented environmental improvements to cover product functionality and resource use according to the sustainability product scorecard (Ikea 2013). Ikea to roll out "Suppliers Go Renewable" programme, setting share of renewable energy in the supply chain and reduce 20% carbon emissions from suppliers by 2015 (Ikea 2013).

However, Ikea gathering data for its GHG inventory

IKEA is a global home furnishings retailer with more than 160 stores in over 33 countries. When gathering data for its GHG inventory, IKEA included scope 3 emissions from its customers' trips to and from its stores because it perceived this activity as important to its business and expected these emissions to be large relative to its scope 1 and scope 2 emissions. IKEA's GHG inventory did confirm that this activity was a large source of emissions, accounting for 56 percent of its total emissions. IKEA's entire scope 3 emissions including customer travel accounted for 82 percent of its total emissions (see table). IKEA