Greener Supply Chains: IKEA, Schneider Electric & npower

Green supply chains are revolutionising the logistics and distribution sectors by integrating environmentally sustainable practices into every phase of the supply chain.

This approach focuses on minimising environmental impact through the efficient use of resources, reduction of waste and adoption of renewable energy sources.

A report by DP World, in collaboration with studioID, highlights the financial benefits of this shift. According to the report, 82% of respondents indicate that embracing sustainability has enhanced their organisation's financial performance.

This correlation between sustainability and profitability highlights the growing recognition that environmentally conscious practices are not only beneficial for the planet but also for businesses' bottom lines.

As companies increasingly prioritise green supply chains, notable organisations such as IKEA, Schneider Electric and npower are leading the way by integrating sustainable practices. 

Integrating sustainability principles into supply chain management has become "a strategic necessity", according to Jarrod McAdoo, Director of Sustainable Procurement Solutions at Ivalua, a global leader in spend management.

He notes: "Organisations must address the environmental, social and economic impacts within the supply chain – monitoring the entire process of delivering a product or service from supplier to customer." 

Circularity: the key to greener supply chains

A crucial component of this approach is circularity, which focuses on reusing and regenerating materials and products to enhance efficiency and minimise environmental impact. 

With increasing pressure to adopt greener practices, Jarrod stresses that "organisations can’t afford to let circularity initiatives slip," and must ensure that circularity remains a central focus to achieve long-term environmental and economic benefits. 

Schneider Electric, recently named the world's most sustainable company by TIME and the second most sustainable in our Sustainability Top 250, is just one company focusing on circularity to ensure its operations are greener. 

“To make the biggest environmental impact, supply chain leaders must consider a holistic approach to sustainability," says Jin Piao, SVP Global Supply Chain Safety, Environment, Real Estate & Sustainability at Schneider Electric.

"According to the World Economic Forum, built environment – or commonly referred to as residential and commercial infrastructure – is responsible for 39% of energy-related CO2 emissions and 33% of material consumption and waste generation.

"Therefore, the entire product lifecycle is also a priority for us. With automated technology, businesses can minimise waste, extend the lifecycle of products and improve circularity. Recently recognised as one of three global Circularity Lighthouses in the built environment, our products are made up of  32% green materials, with the ambition to reach 50% by 2025.

"In addition, 22% of our product families have a circularity option.  One example is how our MasterPact MTZ circuit breakers are given a second life.

"Refurbished at the MasterTech plant in France, these circuit breakers are collected from customers at the end of life, disassembled, diagnosed, upgraded and tested before being put back on the market." 

"The IKEA Way"

IKEA has also embraced circularity by offering furniture take-back schemes and designing products for easy disassembly and recycling. 

IWAY, or "The IKEA Way," is IKEA's comprehensive approach to responsible sourcing of products, services, materials and components within its global supply chain.

It sets strict standards and expectations regarding environmental, social, working condition and animal welfare for all its suppliers and service providers. This framework not only helps mitigate environmental damage but also unlocks significant cost savings, enhances company reputations and ensures regulatory compliance.

The framework is based on internationally recognised standards and principles, such as the UN Guiding Principles on Business and Human Rights, the UN Sustainable Development Goals and IKEA's own values and legal compliance requirements.

The framework encourages continuous improvement among suppliers through a staircase model that categorises requirements into Must, Basic, Advanced and Excellent levels. Suppliers must meet the minimum requirements but are encouraged to exceed them, promoting ongoing development and sustainability.

IWAY's latest iteration, introduced in 2020 as IWAY 6, incorporates new topics such as biodiversity, conservation of natural resources and enhanced focus on worker competence development.

This version shifts from merely conducting audits to providing more support to suppliers, aiming for the best possible outcomes now and in the future. The goal is to create a stronger positive impact on people and the planet throughout the entire IKEA supply chain, extending to sub-suppliers and raw material sources.

The IWAY framework addresses the entire supply chain, with dedicated sections tailored to different types of suppliers, including those providing housing, animal-based products, digital platform services, forest materials and transport.

This comprehensive approach ensures that each aspect of the supply chain meets IKEA's standards for sustainability.

"The climate crisis is one of the biggest challenges facing humanity and as a business we are driving action in our business and beyond to contribute to limit global temperature rise to 1.5°C," asserts Jesper Brodin CEO of Ingka Group. 

"Even if we have come far on our journey, we all need to do more and the latest climate science is telling that we need to move with impact and speed.

"Together we can create a positive change in society by accelerating climate action and working together with partners, governments, the private sector and our customers."

Driving sustainability through tech adoption

Creating a sustainable supply chain can be a complex task for organisations, particularly smaller enterprises that may lack the knowledge or resources to implement more sustainable initiatives, technological adoption can provide a well-rounded solution, driving efficiency as well as ESG goals. 

"A lack of visibility into immediate suppliers and sub-tier suppliers (where many environmental, social and governmental (ESG) compliance issues exist), can hinder organisations’ efforts to address environmental and ethical issues," adds Jarrod. 

"A proactive approach is vital when securing sustainable supply chains, with an emphasis on continuous improvement. Only by adopting a smarter approach to procurement can organisations benefit from greater visibility into their supplier base, work to identify high-emitting suppliers and take steps to collaborate on improvement plans.

"To make procurement smarter, organisations must embrace technology that gives 360-degree visibility into supply chains, as well as data analytics and collaboration capabilities.

"IKEA is now using digital procurement platforms to centralise data related to suppliers, materials and sustainability metrics to enable easy access and analysis of relevant information."

IKEA uses technology to improve supply chain transparency and efficiency through its digital platforms, which track the sustainability performance of suppliers and facilitate the management of take-back and recycling schemes.

The IWAY Digital Platform Work Section 6.0 was implemented among suppliers who rely on digital platforms to provide services for the IKEA business.

Typical services performed by these workers include customer delivery and installation services. In these roles, workers often function independently and do not maintain an employment relationship with suppliers nor digital platforms. 

By embracing such technologies, organisations can gain greater visibility into their supply chains, identify high-emitting suppliers and work collaboratively on improvement plans, thus advancing their sustainability goals.

What role does green energy have to play?

"With supply chains accounting for a significant portion of a companies’ greenhouse emissions, organisations have a responsibility to embed sustainability throughout the supply chain. This shouldn’t be viewed as a burden, but as a business opportunity," continues Jin Pao. 

"Decarbonising the value chain is a significant undertaking and many companies are often unsure of what targets are realistic and achievable.

"The first step is to find a sustainability and technology partner who can help lay the right strategy. The next step is to decarbonise one’s own operations – but to do this alone is not enough. Businesses must also pay special attention to Scope 3 emissions.

"An example of what Schneider Electric is doing that can replicated is The Zero Carbon Project. We are working with our top 1,000 suppliers to halve their operational carbon emissions by 2025. We have armed them with a supporting infrastructure including comprehensive competency building program, digital tools and community,  expert resources, support onsite and with implementation support and regional and local workshops.

"Together we have significantly accelerated the top 1000 suppliers decarbonisation roadmap — all these actions has led to average operational carbon emissions of 33% by H1 2024.

“Decarbonisation is not a solo endeavour and it is imperative that we work together to achieve our collective sustainability goals. There is value for businesses to learn from one another while leveraging digital tools and gain total oversight of their operations to inform better, faster and more sustainable decisions," Jin Pao concludes. 

As companies strive to enhance sustainability within their supply chains, green energy plays a pivotal role in reducing emissions and optimising resource use.

Npower, for instance, leverages advanced data analytics to monitor and manage the lifecycle of its equipment, contributing to diminished waste and lower emissions.

Ben Whitelam, Director of Commercial at Npower, highlights the importance of this shift: “For businesses to truly benefit from a secure, responsive, low-carbon energy system that also supports the country’s net zero goals, a radical remodelling has to take place."

Ben emphasises that moving away from fossil fuels towards intermittent renewable power sources necessitates improved management of electricity usage: “A key enabler of this energy transformation will be Market-wide Half-Hourly Settlement", a reform by Ofgem, the energy market regulator.

MHHS will transform the British electricity market by providing more granular and timely data on electricity consumption.

Scheduled to begin in April 2025, MHHS will enable businesses to more effectively manage energy use through detailed data from various types of meters.

As highlighted by the latest Business Energy Tracker, which helps npower take the pulse of what businesses need, so it can provide solutions to help them meet their energy requirements.

It gathers the views of more than 100 large businesses on energy landscape pressures. “Almost a third (30%) of businesses say that they have changed their energy meter to one that provides more detailed data as a way of managing energy risk,” illustrating a proactive approach to harnessing green energy and enhancing operational efficiency.

Ben concludes: “With such huge changes afoot, the good news is that the businesses we spoke to for this year’s Business Energy Tracker are already becoming more energy data savvy. Almost a third (30%) of businesses say that they have changed their energy meter to one that provides more detailed data as a way of managing energy risk.”

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