Decades of purpose resulting in high-level innovation
Håkan Nordkvist is Head of Sustainability Innovation at Ingka Group (the largest IKEA franchisee, operating 367 IKEA stores in 30 markets). From building BILLY bookshelves in the 90’s to innovating and building sustainable business opportunities, Håkan is a key figure in purposeful retail around the world. Discover all about his beginnings, his current projects such as the solar panel initiative, developing new circular business models for IKEA and a whole lot more.
What is your role within the IKEA business today?
My current role involves building and innovating new businesses with sustainability as a base. We started with renewable plastic, we then moved into the solar and home energy business, we are exploring the food area with plant-based proteins and urban farming and finally we are innovating to create new business models that solve customer problems in circular ways.
In the home energy area our ambition is to create the world’s biggest clean energy movement and motivate millions and millions of people to, through their own actions, take action on climate change.
What made you decide to do this work and how do your personal values align with IKEA’s values?
One of the things that made me take this job is how IKEA shifted it’s approach to sustainability. It is not about being incrementally less bad, it is in fact about having a positive impact. What does it actually mean to have a positive impact? The thought process you need to go through and the innovation areas you need to enter make it a really interesting journey with an inspiring destination, I am still on that journey and I learn new things every day.
If you are with a company for 25 years there is an alignment between your values and those of the company’s. IKEA’s vision is to create a better everyday life for the many people while focussing on life at home, which, for IKEA, is the most important place in the world. The IKEA ethos is to work for the many and not for the few or the rich.
What are IKEA’s concrete sustainability goals for the next 10 years?
IKEA aims to inspire and enable more than one billion people to live within the limits of one planet. And as the largest IKEA franchisee, we make a big contribution towards this ambition. We have around 800 million in-store visits — plus many more online visits, so we reach a lot of people. We have a big opportunity to use our scale and influence to make healthy and sustainable living affordable and attractive to the many — by offering products services and solutions that make it easier to live more sustainably, and by using our communication and engagement channels to build desire and demand in one planet living.
A circular and climate-positive business
We have set science based targets to support our efforts to become climate positive and becoming a circular business is a key part of how IKEA will achieve this. At the moment, we are working on developing new circular business models, exploring services like renting, repairs and refurbishment to prolong the life of the products, give them a second and third life, and then take them back and reuse the material to create new products. This is one way we can help our customers to live within the limits of one planet.
A fair and equal value chain
With such a big retail business, we have the opportunity to make a positive contribution to communities in many places. Success is growing our business in a way that creates positive change for society, for example, by partnering with social entrepreneurs and other types of social businesses as well as creating new opportunities for people who cannot access the labour market easily. We want to include these people in the value chain. This is something we are doing on a small scale at the moment, but plan to expand upon in the future.
How do you extend the life of a product without losing profit?
Our starting point is always to consider how to make our offer affordable, convenient and sustainable for the many. So, we are exploring how to expand our services to make it easier for customers to get what they need — offering them a great experience and value, while also securing revenue without selling new products. This is how we approach the challenge of prolonging product life. We can also facilitate peer-to-peer sales of our products. The potential is huge: there are so many different types of revenue models we can look into and use to complement our current buy and sell business model.
What are the major challenges IKEA is facing when implementing these goals?
There are many, many challenges! The biggest challenge is usually innovating and changing a big company from within, which is very difficult due to the various structures and complexity. Also, when you have a successful business model that has worked well for many decades, changing mindsets to explore new models is not always easy. But this change can also be seen as an opportunity. Today, I feel we have a big commitment from upper management and it’s more the daily operational challenges that we need to overcome now.
The best way to change a mindset is to perform and show results and then people will follow. Be the change that you want to see by showing the results and proving what is possible.
What are the key changes in people’s values and behaviors that are directing IKEA’s vision?
Our research has proven that approximately 80–90% of IKEA customers want to live a more sustainable life and want to actively contribute to sustainability. Among many things, they want to combat climate change but the problem is that they don’t know how to do so in their everyday life. There is a big gap here in the knowledge of what we can do and what might have an impact. We also know that more people are becoming aware of the impacts of consumption on people and the planet — they are looking for brands they can trust, and that will offer them help to consume more sustainably.
We see this as both a challenge and an opportunity for us. For example with LED light bulbs, the market price was around €18 or €19 six years ago and we set ourselves the challenge to offer LEDs for a much lower, IKEA price — today we offer LED bulbs from around €1. Customers can get great value by switching to LED light bulbs that consume up to 85% less energy and last around 20 times longer than a traditional incandescent bulb. It’s not only about the products we sell but also about the life at home know-how that we can enable customers and co-workers to share with each other, such as preserving and pickling food, or upcycling their things to give them a second life.
What are some of the initiatives that you have been directly involved with?
Ingka Group has a goal to produce renewable energy equal to the energy we use by 2020. Last year, we generated renewable energy from wind turbines and solar panels equivalent to just over 80% of the energy we used in our operations during the year — so we are getting close to the target. But we don’t just want to generate renewable energy ourselves, we want to make this available to our customers so they can save money and reduce their impact on the climate too.
The solar panel initiative
We have built a business around our customers generating their own clean energy by installing solar panels on the roofs of their homes. We began with a couple of tests and then we developed the business and the concept, which is now being rolled out globally. We team up with partners and companies to install the panels locally, while we use IKEA stores and our online store to communicate the offer.
Renewable energy in the home
The IKEA Home Solar business was our first step in creating the biggest clean energy movement. We have now started to extend the business by adding complementary services like energy storage systems and heat pumps, as well as renewable electricity tariffs. We did a test in the UK where we went out to IKEA Family members to see if they were interested in swapping their electricity contracts to a renewable energy tariff. The UK electricity market is usually a very conservative market and people rarely change such contracts. Despite this, in a couple of days we saw huge interest, and the test saw more than 5,000 people switch contracts. On average, we estimated they will save £235 on their home energy bill per year.
What are some examples of great purposeful retail that you have seen?
There are brands like Patagonia who stay true to their sustainability commitment and are building their business starting with sustainability, for me there are no compromises there. Another similar examples is Houdini, a Swedish outdoor brand which is pioneering circular business models and has come far in both their thinking and actions around a fully sustainable business. Houdini are smaller than us and can act faster.
What advice do you have for others working in retail on becoming more purpose-driven?
This relates back to the overall vision and purpose of the company — not just in terms of sustainability but also the reason the company exists. For IKEA, it’s very clear why we exist: to create a better everyday life for the many people and we connect everything we do to that. IKEA is a purpose-driven company and has been for a very long time. It’s easy for me to relate to this and then take actions. I think every company has to go back and question why they exist and how they can use that in being or becoming purposeful for customers. When you have those answers, then you can set up a plan and determine the areas you need to improve in.
What is the IKEA interpretation of purposeful doing?
To sum it up, I’ll use the example of the IKEA Home Solar business. When we developed the business we realized it is for people with a house and a roof that fits an installation of solar panels. To reach our vision of creating a better everyday life for the many people and fulfill our purpose, we also realized this was not enough and that we needed to continue developing the business so we could reach more people including those who might not own a house. We therefore set out to expand our offer to make it possible to include people in many different situations in our clean energy movement. When you are purpose-driven, you have a completely different perspective.
