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IKEA May Tighten Carbon Rules to Protect Environment

  • Reuters

FILE - People walk past IKEA's first city center store in Hamburg, Germany.

FILE - People walk past IKEA's first city center store in Hamburg, Germany.

IKEA Group, the world's biggest furniture retailer, may introduce an internal carbon emissions price to help its drive to protect the environment and create a “new and better” company, chief executive Peter Agnefjall said.

IKEA, seen as global trend-setter among retailers on green issues, is also on target to invest $1.5 billion in solar and wind power by 2015, and bought a higher proportion of its wood and cotton from sustainable sources in 2014 to aid consumers shift to greener lifestyles.

“We see sustainability as a driver of building a new and better IKEA,” Agnefjall told the Reuters Global Climate Change Summit. “It is a driver of a renewal of our business, renewal of our products and a driver of innovation of all kinds.”

After attending a U.N. summit on climate change in New York on September 23, Agnefjall said the Swedish furniture giant will consider internal carbon pricing - a system that can give incentives to shift investment from fossil fuels.

“There was a lot of discussion about carbon pricing and putting an internal price on carbon,” he said of the meetings in New York. “That's definitely something we bring home and that we will analyze in the coming months.”

Asked whether IKEA's sustainability plans would raise or cut prices of IKEA goods and earnings, Agnefjall said: “It's an integrated part of our business. It is impossible to separate it out.” Agnefjall, formerly IKEA's Swedish country manager, took over as CEO last year.

Carbon dioxide is the main greenhouse gas that a U.N. panel of experts says is driving up world temperatures, and stoking heat waves, droughts and rising sea levels. Almost 200 nations plan to agree a U.N. deal in late 2015 to limit climate change.

Shadow prices

About 150 major companies worldwide, including Google , Exxon Mobil and Wal-Mart Stores, used some form of internal pricing of carbon emissions in 2013, mostly for long-term planning, according to the Carbon Disclosure Project (CDP) in a survey of 4,500 companies.

The price put on carbon emissions by companies for internal accounting and long-term planning varied widely, from $6-60 a ton, CDP said.

The idea is to discourage investment in high-carbon fossil fuels by making clean renewable energies such as wind or solar power seem relatively cheaper, once the cost of future carbon emissions is taken into account.

Such pricing might help strengthen IKEA's drive to generate renewable electricity. “Internal carbon pricing should make the business more efficient” rather than drive up costs, said Paul Simpson, CEO of CDP.

IKEA will study how a shadow carbon price “will affect the choices of materials, the investments we'll make with suppliers,” IKEA chief sustainability officer Steve Howard said.

He noted that IKEA has already invested heavily in greener energy. It has 700,000 solar panels on its stores and a commitment to own and operate 224 wind turbines.

IKEA had 775 million visitors over the past year to its stores known for flat-pack furniture in about 50 countries - equivalent to more than a tenth of the world population.

All emissions assessed

“We have decided that we should grow IKEA. We almost feel obliged to do it, to live the vision of creating a better everyday life for the many people,” Agnefjall said. IKEA plans to raise turnover to 50 billion euros [$64 billion] by 2020 from 28.7 billion in the year ended August 31.

Agnefjall said IKEA was on track for a goal to get all its wood from more sustainable sources by 2020 after raising the share to more than 40 percent in 2014 from 32 in 2013. Its main sources of timber are Poland, Sweden and Russia.

Howard said the company was trying to improve usage, for instance making thin stool legs from small bits of wood that were previously discarded, or making wardrobe doors from board rather than solid wood.

Agnefjall also said the company got 88 percent of its cotton in 2014 from sources that complied with standards to limit water, pesticide and fertilizer use - up from 72 percent in 2013 and on track for a goal of 100 percent by 2015.

And IKEA expected to invest another $1.5 billion on renewable energies from 2016-2020 to reach a goal of generating clean electricity equivalent to its consumption, matching its level of investment in clean energy from 2009-15, he said.

IKEA is one of very few companies to assess its entire greenhouse gas emissions - from raw materials to the disposal of its products. For 2013, it put its worldwide total at 28 million tons, equivalent to half of Sweden's total emissions.

Mark Kenber, head of the London-based Climate Group non-profit organization, praised IKEA's environmental goals. “Across the whole of the consumer-facing world it is definitely one of the leaders, if not the leader,” he said.

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