The popularity of the issue of sustainability has been growing in the past several decades and it now represents a priority point for the strategic planning and operations of companies, organizations, but also for communities and whole countries (Bell and Morse, 2008). This report addresses one particular area of sustainability from a business perspective and that is the area of monitoring and evaluation.
In order to enable this, the report refers to the theory behind the concept of monitoring systems, indicators and most importantly, the characteristics and features that these systems and indicators need to possess in order to be successful and effective.
To enable a more detailed analysis, this specific sustainability area has been overviewed by applying the selected theory to practice. IKEA has been chosen as the company of interest of this report, and its sustainability efforts, accomplishments and plans have been considered from the perspective of the three sustainability dimensions.
To furthermore focus the research and analysis conducted in this report, one specific dimension of sustainability, the environmental one, has been chosen and reviewed in more depth. In relation to this, an identification and selection of relevant indicators has been conducted and these indicators have been analyzed in terms of their measurement and limitations. The purpose of this was to ensure the tangibility of the indicators and to identify the potential problems that the company may encounter while pursuing the set objectives and goals.
Over the last three decades, sustainable development has become priority for a large number of countries, communities and organizations. All of these expect one thing from their various development programs and projects and that is to deliver results (Bossink, 2012). This is why the ideas and actions that are implemented in these projects and programs have begun to be evaluated form one perspective – whether or not they promote, enable, improve sustainability. But, in order to answer this question, countries, communities and organization in fact have to provide the answers to two other questions – what will success mean and how do we know that this success have been achieved (Gorgen & Kusek, 2009).
Monitoring systems are what makes the answers to these questions possible. By definition, monitoring stands for the periodic and repetitive measurement of specific values of variables, and represents one of the crucial factors in the actual achievement of sustainability (Chai, 2009). The sustainability monitoring systems are designed to gather information, cross reference it in regards to a set scale and support the decision making process. The data that is received as a result from the monitoring systems enables the decision makers to assess whether or not they are on the track with sustainability progress and helps them to quickly identify if something has diverted the organization from the planned path and how to quickly move back to it (Devuyst, Hens & De Lannoy, 2001).
In order for monitoring systems to achieve the objectives they have been designed to achieve, they need to be well defined, optimized and tested continuously to ensure their adequacy. But, what they need the most is a good set of indicators that will be used for the actual measuring (Dalal-Clayton & Bass, 2002).
Indicators related to various aspects of the society have become increasingly popular after World War II. Economic and social indicators have been introduced during the second half of the twentieth century, even though some of them did not manage to capture the political acceptance that they aimed for. In addition to these indicators, the environmental ones began to take up a significant portion of the public attention with the strengthening of the global environmental movement (Lawn, 2006).
After the emergence of all these indicators, sustainability became the No. 1 topic during the 1990’s making sustainability indicators as important as the issue itself. These indicators were first developed by the United Nations, but they have been continually developed and widened with the use of various different approaches (Zoeteman, 2012). The greatest improvements of the sustainability indicators were introduced by a number of non-governmental agencies, and mostly the United Nations, the OECD, the European Union and the World Bank, who have been investing significant resources and efforts into the development of these indicators (Patterson, 2002).
However, their efforts did not end there, which leads to the next most important trend in the development of sustainability indicators. Namely, after setting up the base of indicators, the aforementioned agencies and organizations have attempted to standardize this set across different countries in order to enable the tracking and comparing of the achieved progress in relation to one another. Today, this set of basic sustainability indicators numbers about 200 indicators, about 50 of which are considered as core sustainability indicators (UN, 2013). And even though they have been primarily intended for use by countries, today they are widely accepted and used not only by countries, but also by communities, companies and various organizations (Hak, Moldan & Dahl, 2007).
What Makes Good Monitoring Systems And Indicators?
According to Espinosa and Walker (2011), it is essential that the monitoring system used is well defined and relevant. In addition to a base set of indicators, every monitoring system needs to integrate four crucial elements in order to be successful and efficient. These four elements are ownership, management, maintenance and credibility. Here, ownership stands for and comes from all of those who use the system in every level, or represents the stakeholder of the system. Kusek and Rist (2004) argue that if people who do not recognize the need of such a system or do not have any use of the data collected with the monitoring system, than there will be issues related to the control of the quality.
Management answers the questions of who, where and how will manage the system, which is crucial as it ensures timely collection and distribution of data in order to support the decision making process. Maintenance ensures that the system used will not crash or decay. This means that updates, improvements and control continuously undertakes to enable the renewal, rebuilding and strengthening of the system. Finally, credibility ensures that reliable and valid data are collected with the system, which means that the data will be realistic or not tempered with, and also that both bad and good data will be displayed and used by the system (Kusek & Rist, 2004).
The selection and use of indicators is also one of the main factors that define the quality of the monitoring system in general. When selecting these indicators, it must be taken into consideration that their number should be relatively small and that they should be chosen in accordance with the following criteria (Gosling & Edwards, 2006):
- Data collected will clearly show whether set objectives have been achieved or not
- The problems to which the indicators refer are of priority for the organization
- The data needed is available and it can also be gathered accurately and effectively
- The data gathered will be used for evaluation and reporting
In addition to these criteria, sustainability indicators should also have a number of other qualities including tangibility, regardless of whether qualitative or quantitative indicators are used, linkage to the set objectives, relevancy for various stakeholders of the monitoring system, they need to be specific, need to reflect different situations, to reflect changes and to have a well-defined and specific baseline data that will clearly show whether results are good or bad (Gebremedhin, Getachew & Amha, 2010).
The history of IKEA which spread across 6 decades of success actually began in the 1920’s in a farm in southern Sweden where the IKEA’s founder Ingvar Kamprad was born. He pursued the idea of having his own business ever since he was a little boy, and at the age of five, he began his first trading attempts by selling matches to his neighbors. He soon found out that he could buy matches in greater amounts for cheaper price from Stockholm and then sell them with good profits. His matching endeavor was so successful that he expanded his business to selling greeting cards, flower seeds, Christmas ornaments, pencils and pens (IKEA, 2013).
In 1947, Kamprad introduced furniture into his business. He used local manufacturers, enabling him to lower the costs of the items he sold, which led this branch of his company to become very successful. In fact, it became so successful that he soon turned out all of his other products and decided to focus solely on furniture. IKEA opened up its first showroom for the furniture in 1953 (IKEA, 2013).
During the following several years, IKEA began to sell more and more furniture, which soon led it to come into direct confrontation with its main competitor and soon entered into a price war. In order to minimize the expenses as much as possible, and thus make the price war endurable, IKEA started implementing some of the concepts that will eventually make it one of the world’s greatest companies. These concepts refer mainly to stylish and innovative design which enabled flat packaging. This in turn, enabled a minimization of the transportation costs, reduced the damaged acquired during transport, increased the capacity of IKEA’s inventory, and made it easier for customers to take their own furniture home (Parker, 2012).
According to Haig, the innovative approach to packaging and the main focus of IKEA to producing stylish and good quality products at affordable prices is not the only reason why IKEA is being referred to as a concept company. Namely, the spirit of the company, in the words of Kamprad himself, consists of thrift, enthusiasm, humbleness, responsibility and simplicity. These are the very qualities that the company does not implement only in the design of its products, but also in all of its operational practices (Haig, 2007).
The Three Dimensions of Sustainability in IKEA
The extent to which IKEA is committed to sustainable development is evident from several perspectives. Primarily, IKEA has created a sustainable strategy that is systematic and well defined, but has also been upgraded and improved continually. Besides from setting short-term objectives in its annual strategies, IKEA has also constructed a long-term strategy setting its goals and priorities for achievement of sustainable development by the year of 2020. This strategic plan offers concepts and guidelines that the company follows in the achievement of its goals of environmental, societal and economic nature, thus addressing the three dimensions of sustainability (IKEAa, 2013).
The environmental dimension in the IKEA’s sustainability strategy is represented through a number of initiatives and programs which include supply of the wood used for the production of furniture from preferred sources. In 2012, over 22 per cent of the total wood used came from FSC – Forest Stewardship Council certified forests. It is also projected in the long-term strategy that this percentage will be over 50 per cent by the end of 2017. Furthermore, the cotton used in the production of furniture is produced in alignment with the Better Cotton Initiative, and it is planned that 100 per cent of all the cotton used should be such by the end of 2017 (IKEAa, 2013).
The company also invests in the sustainability training of farmers and foresters to ensure that the issues are addressed at the very source. Other environmental initiatives include production and use of renewable energy from the wind, the sun and biomass. In 2012, the company has produced 34% of the total energy it consumed from renewable resources, enabled through the quarter of a million solar panels placed on the company’s facilities and 83 wind turbines that have operated during 2012 (IKEAa, 2013).
The social dimension of sustainability is also addressed in IKEA. Not only that the company is committed to designing and production of furniture that will improve the quality of life for all of its consumers, but also the company makes significant efforts to ensure the rights and well-being of all of its workers. The company also requires that all of its suppliers also be compliant with the people strategy of IKEA. This strategy is based on the UN Guiding Principles on Business and Human Rights that have been implemented. Furthermore, the company also supports the best interests of all children, and implements the Children’s Rights and Business Principles all throughout its operations to ensure the protection of their rights. Finally, it must be stated that part of the sustainable strategy of the company is to ensure that 95 per cent of employees and suppliers as well as 70 per cent of all the consumers consider the company as a company that is highly environmentally and socially responsible (IKEAa, 2013).
The economic dimension of sustainability is represented in both the short and long-term strategy of the company. In fact, in terms of economic performance and growth, IKEA has set a series of goals which include the increase of production and sales volumes of its products to four times by 2020. In the meantime, IKEA is focused on achievement of short-term goals, sales and growth. In 2011, for example, these goals were both achieved as the company has opened up stores in several new countries, finishing the year with 287 stores in 26 different countries, and has managed to increase its global net profits by almost 7 per cent, amounting to a total of 24, 7 billion Euros (The Local, 2012). This indicates that the economic dimension of sustainability still remains to be an important focus of the company.
The Environmental Sustainability Dimension in IKEA
In accordance with what has been stated above about the three sustainability dimensions applied to the operations of IKEA, it is clear that the company is dedicated to all three dimensions equally, and is investing serious resources and efforts to achieve positive financial goals and positive social impact, while reducing the damage and negative influence on the environment, and this is, in fact, the true purpose and goal of sustainability. Considering the nature of business that IKEA runs, and its great impact on the environment in particular, which is due to the use of natural resources as production materials, this dimension of sustainability is especially interesting for IKEA. Indeed, the company needs to employ additional efforts to ensure that the negative impact of its operations on the environment are minimized and/or diminished. This is why this dimension has been selected for further exploration.
List and Assessment of Sustainability Indicators
The importance of the environmental dimension for IKEA is so great that it is necessary for indicators for monitoring this dimension to be very carefully selected. In order to enable this, the criteria for selection of indicators stated above were used. Also, the key features of effective indicators were also considered during the selection. Consequently, a list of several indicators for monitoring environmental sustainability has been created and is given in detail below:
|Increase of FSC certified wood used||Ensure that all the wood is certified and comes from companies – suppliers that are also committed to sustainability||Percentage of FSC certified wood used in the production of furniture (goal – 100 per cent).||Lack of FSC certified companies – suppliers present and operational locally, which may increase total cost of expenditure due to transport and import costs|
|Increase of Better Cotton Initiative cotton used||Ensure that all of the cotton used in the production of the furniture is in compliance with the Better Cotton Initiative||Percentage of Better Cotton Initiative cotton used in the production of furniture (goal – 100 per cent)||Lack of suppliers aligned with the Better Cotton Initiative present and operational locally, which may increase total cost of expenditure due to transport and import costs|
|Increase of main furnishing materials used for the production of the furniture that are made from renewable, recycled or recyclable materials||Ensure that all of the materials used in the production are renewable, recycled or recyclable||Percentage of renewable, recycled or recyclable materials used in comparison to total materials used||None|
|Production of renewable energy||Production of as much renewable energy as it is consumed by the company||Percentage of renewable energy produced in comparison with the consumption||None|
|Use of electric vehicles and environmentally safe transport solutions||Use of electric vehicles and environmentally safe transport solutions to and from the store to ensure that all aspects of the company related to energy used are from renewable sources||Percentage of used electric vehicles from the car parks of IKEA and the proximity – availability of environmentally safe public transport to the IKEA stores||Local level of sustainability, government policies|
If this list of indicators is analyzed, it shows that all of the indicators selected are very realistic, in line with the priority problems of the company in relation to the environmental dimension of sustainability, and above all measurable. Indeed, for each of this indicator a good base line is identified and it is easy to assess what the progress of the company actually is in its achievement of the set goals and objectives. However, the analysis also shows that there are two types of factors that influence the limitations or challenges related to these indicators. The internal factors are related to the company and refer mostly to the increase of costs of production which is not considered to be a serious problem. The external factors, on the other hand, refer to forces that are outside of the influence of the company. These are mainly related to the existence of suppliers with the desired sustainable operations in terms of certification or compliance. Given that the company acquires its materials and products made by other supplier locally in order to reduce the expenses, this can be considered as a serious problem. However, the demand that IKEA sets on its suppliers may influence setup of such companies due to economies of scale.
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