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Not just meatballs and DIY furniture: Ikea could be your next renewable energy supplier

·4-min read
GABRIEL BOUYS—AFP via Getty Images

The world's largest furniture retailer has for decades been a temple of flat-pack book cases, cook wear, linens, and Swedish meatballs. But in the future, the home goods supplier is planning to take home basics to another level—as a renewable energy supplier.

Ingka Group, which owns most of the world's Ikea stories, is already offering renewable power to customers in Sweden, the brand's original home, in a pilot project that began in September. It also sells solar panels in 11 markets, and is expanding its products into "sustainable" home products, says Jesper Brodin, president and CEO of Ingka Group.

But the tentative push into renewable energy is the product of the brand's effort to power its own stores and warehouses with renewable energy.

"We saw an opportunity to put our money into renewable energy. And in the beginning, we had very low ambitions on it—just feeling that the money would do good," said Brodin, speaking to Fortune earlier this month at COP26 in Glasgow, Scotland. But investments into wind and solar power have pushed the group's renewable energy production to 130% of its demand.

"We have added more energy to the system than we consume in our retail and logistics operations," he said. However, that surplus energy is unevenly distributed—some markets have more renewable energy than the stores and operations need, and others have less, leaving the coverage for their entire operations at around 64%, says Brodin.

The ambition is to hit 100% coverage "and continue to invest", he said. Ingka Group has so far invested 2.5 billion euro (about $2.8 billion) and announced in April that it would invest another 4 billion euro ($4.5 billion) until 2030. As of September, IKEA owned and managed 547 wind turbines and 10 solar parks globally, as well as roof-top solar panels on stores and malls; the company has a total installed capacity of more than 1.7GW. The company's head of sustainability has previously said the group wants to roll out both the solar panels and energy offering to all of its markets.

Wind and solar

The pilot project in Sweden—based on a project several years ago in the U.K.—aims to offer this renewable energy back to consumers. Asked whether Ingka Group sees this as a new source of revenue, Brodin provided a tentative yes.

Brodin said the group had invested in wind and solar power to serve their own operations, but said that supply was currently all connected to their core retail business—not standalone investments in power networks.

"Wherever and whenever we could connect our own energy to sell it to customers, that would be lovely," Brodin said, but added that further standalone supply is "a matter of the whole infrastructure change . . . One day, I hope we will get there."

Brodin said the Group wasn't currently investing in hydrogen or battery projects, however, it had an interest in partnering with cities and companies given it has a target to make all of its deliveries zero-emission by 2025.

"We ourselves wouldn't invest in the battery technology, but we will partner with both mayors in order to provide infrastructure, but also companies that are good at providing the solutions," Brodin said. "And the sooner the better."

The Group has increasingly experimented with "circular" solutions to take back Ikea products and recycle them into new ones, including in a trial in the Netherlands to recycle old mattresses into new ones. Brodin said that recycling program made economic sense, adding, "this is not charity."

E-commerce and supply chain

Ikea is also in the midst of a multi-year plan to emphasize e-commerce, which has been accelerated by the pandemic. In 2020, the group had 20,000 days of store closures, Brodin said. "Before, if we would have had 15 days, we would have complained," he said.

That has forced the company to accelerate the e-commerce push it was developing pre-COVID.

"The pandemic, interestingly enough, has helped us to stress test everything on the online side again," he said.

The company still has three more years to "optimize" the scale it would need to make it economically more profitable, he said; "We are not fully there when it comes to economies of scale yet," he said. The e-commerce models comes with lower margins, but Brodin added that the alternative—sticking with bricks-and-mortar—"would never have worked out economically anyway."

But as store closures have eased off, the pressure of the global supply chain crunch has mounted. Brodin noted that the crunch has already lasted about a year, and it "looks like it's going to continue for a year. I'm hopeful that by spring we will see great progress, maybe before," he said.

But he said, "until then, we have basically set ourselves up to accept that this is the normality of the year we are in right now."

This story was originally featured on Fortune.com

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