Do the Benefits Outweigh the Cost? Adidas and Ikea Think So
Most people are not aware of the dire state of our environment. Did you know that 8.3 billion metric tons of used plastic still exists, and that less than 10% of this amount has been recycled? Most of our plastic products end up in the sea; if this trend continues plastic will outweigh fish in just 30 years.
In my last blog post, we discussed how companies like Danone and Chobani have implemented impact-focused initiatives and operational practices that place impact at the core of their businesses. Today, we will look at companies such as Adidas and Ikea who are delivering impact by focusing on the environmental impact of their products.
Made to Be Remade
In 2015, Adidas, the world's second-largest sportswear manufacturer, with sales of nearly $24.4 billion, began a collaboration with the environmental organization Parley for the Oceans. The partnership aimed to intercept the plastic collected on beaches and coastal communities for reuse. The collected plastic, mostly bottles, were shipped to a supplier in Taiwan to create thread from the waste, to then be used in the Adidas x Parley line of products. Each pair of shoes would contain plastic from 11 bottles.
A year after the collaboration was announced, Adidas succeeded in creating the first performance products with recycled ocean plastics, and by 2018, the Adidas x Parley line had made 6 million pairs of environmentally friendly shoes. Although this project represents a fraction of the 450 million pairs of shoes the company makes every year, Adidas also announced that they were committed to using only 100 percent recycled polyester by 2024. Of course, even products made from recycled plastic can eventually end up in landfills and the oceans. This is why Adidas went a step further and challenged itself to make products only from materials that can be completely reused.
In 2019, after six years of hard work, the company announced a new running shoe called Loop, which was “made to be remade.” Unlike other sneakers, the entire Loop shoe is made of a single material called thermoplastic polyurethane (TPU), and the various pieces are fused with heat rather than glue. Even its shoelaces and soles are recyclable—they can be put into a grinder and transformed into pellets, creating raw material for another pair of shoes.
The Parley range and the Loop shoes were developed as part of what the company calls Futurecraft—experimental designs, which the company openly admits, are minimum viable products that Adidas can generally only produce in limited numbers. The company can scale these products quickly, however: Global Creative Director Paul Gaudio estimates that they could sell tens of millions of Loop shoes within three to five years. The Loop shoes' circularity process is still being hammered out—one idea is to sell the shoes with a shipping box and return label. When the consumer is finished with them, they can send them back for a new pair, perhaps using a subscription model, since one recycled pair of Loop sneakers currently provides 10 percent of the materials for a new pair.
People debate whether companies like Adidas that focus on a single impact dimension, such as environmental impact, can deliver a significant positive impact, as it is possible for such companies to be simultaneously creating negative impact through other areas of their business. For this reason, it is fundamental that companies aim to generate as great a net positive impact as possible across all their activities. IKEA is one company that tries to do this.
Living Within the Limits of the Planet
In 2018, IKEA, which uses 1 percent of the world’s lumber supply, had 422 stores in more than 50 global markets and generated nearly $43.3 billion per year. The retailer's global position and ability to make an impact was not lost on company executives. “Through our size and reach, we have the opportunity to inspire and enable more than one billion people to live better lives within the limits of the planet,” said Torbjörn Lööf, the Inter IKEA Group CEO, which owns the IKEA brand.
IKEA's sustainability strategy, known as "People and Planet Positive," was launched in 2012. Starting in 2018, the company updated this strategy to align with the SDGs and focus on three areas: healthy and sustainable living, circular and climate-positive, and creating a fair and equal society, starting with those in its value chain. IKEA’s goals included phasing out virgin fossil-based plastic from its products by 2020 and using only renewable or recyclable materials by 2030. The company is making good progress towards these targets. By 2018, 60 percent of its products were made from renewable materials, 10 percent from recycled materials, and all of its cotton and 85 percent of its wood were derived from sustainable sources.
While IKEA is known worldwide for affordable furniture, the other side of this reputation is that its products are disposable rather than long-lasting, ending up in landfills soon after purchase. Every year, in the US alone, people throw away an estimated 9.7 million tons of furniture that ends up in landfills, which is equivalent to the weight of over 7 million small cars.
To combat this, IKEA committed to attaining 100 percent circularity in its operations by 2030. This means that all their products will be designed to be repurposed, repaired, reused, resold and recycled. Knowing this would affect consumer behavior, this is why, in a radical departure from its traditional business model, the company began piloting furniture leasing in Switzerland in 2019, stating that it could blaze a trail for scalable subscription services. After a furniture lease was over, consumers might choose something else, and IKEA would be able to refurbish the returned goods and prolong the lifecycle of its products.
Initiatives like these are advancing IKEA toward its goal of decreasing its overall carbon footprint by 15 percent. Achieving this ambitious goal would require reducing the carbon footprint of each of its products by 70 percent by 2030. The company also has plans to introduce spare parts, thereby allowing consumers to prolong the life of discontinued products. In some countries, IKEA has also started recycling programs for large items such as mattresses.
IKEA is also helping its customers lead more sustainable lives through its product design—for example, they have designed couches that can be more easily separated into recycled parts, curtains that help clean the air, and low-energy and water-saving appliances. Walk into an IKEA showroom today, and you will see many products made from recycled materials, such as baskets made from recycled PET bottles, rugs made from scraps of linen and spray bottles made from the protective film used to cover furniture.
Impact is also beginning to affect the company's logistics operations. IKEA aims to fully decarbonize its delivery fleet, starting in Amsterdam, Los Angeles, New York, Paris and Shanghai. As Jesper Brodin puts it, “Climate change is no longer just a threat—it's a reality.” Retailers of products designed for mass consumption will not survive unless they have a business model that works in harmony with our planet's resources.
Measuring Environmental Impact
How do you really quantify and compare the impact companies like IKEA are creating? How can you tell when IKEA, Adidas, Danone or Chobani reaches the point of doing more good than harm to society and the environment? This is where Impact Weighted Accounts come in and why standardized impact measurement is so important. Standardized measurement will enable us to arrive at a company's net impact or its social and environmental bottom line, making it possible for impact to take its rightful place alongside profit. Join me next time when we discuss this topic further. In the meantime, if you would like to learn more, pick up a copy of my book IMPACT: Reshaping Capitalism to Drive Real Change.