Published 9 months ago.
About a 7 minute read.
Image: Francesco Ungaro
So far, the company is facilitating access to renewables for suppliers in 13 countries through PPAs and a finance mechanism for suppliers keen to invest in onsite projects.
Investment in clean energy is finally picking up. According to
last year saw record levels of money being channelled into renewable power
projects. Roughly half a trillion dollars was spent on low-carbon energy
generation in 2022, with solar investment jumping 36 percent year-on-year to
$308 billion. The second-largest sector,
benefitted from £175 billion.
In the five years that followed the signing of the global Paris Agreement to
reduce greenhouse gas emissions (GHGs) sufficiently, the annual growth rate in
clean energy investment stood at just 2 percent. That has since increased to
but experts predict much more will be needed if the Paris deal is to be upheld.
Yes, governments will need to step up. While the US’ climate response has
been deemed “insufficient” by
Climate Action Tracker, President Biden’s recently signed Inflation
Reduction Act promises to inject $369 billion to deploy clean-energy
But companies must also play their part — and luckily, many of them already are.
In fact, some have been reinvesting their profits into clean-energy schemes that
will lower their overall footprint for decades. Take Amazon, for example: In
January, the online retailer set a new
for the most clean energy purchased by a single company. It now has a renewable
energy portfolio of more than most countries — its 20GW capacity is enough to
power over 15 million homes a year.
For many companies, cutting the GHGs associated with their power use is one of
the most important immediate steps they can take on climate change — and
contributing financially to developing new clean-energy generation is seen as
the most transparent and effective approach. Corporate power purchase
agreements (PPAs) are increasingly seen as a sure-fire way for firms to
not only trace their energy provision back to a specific wind or solar farm, but
also to lock in their energy prices for the long term and gain protection from
power price fluctuations. In Europe, 161 renewable-energy PPAs were
last year — with corporate buyers accounting for 83 percent of the total 8.4GW
of capacity that came on stream in 2022.
Of course, developing your own renewable-energy assets, whether onsite (e.g.
solar panels on factory roofs, for example) or offsite (e.g. by having an equity
share in a new local project) can be even more straightforward. The continuing
fall in the
and installation is helping to fuel this trend.
However, making the switch to clean energy is not always an easy thing to
achieve — especially for smaller businesses. Cost pressures often make
investment hard to square in the face of day-to-day operational costs. And
misconceptions remain about the price, value and implications of transitioning
to renewable energy.
It is a challenge that homewares giant IKEA has been trying to solve these
past couple of years. In 2021, the firm launched a dedicated
to support its suppliers in China, India and Poland in accessing
more clean energy. The scheme created bundled framework agreements and PPAs
making it easier for suppliers to buy renewable power from the grid. It also set
up a mechanism to provide finance for suppliers keen to invest in onsite
Recognising that many of IKEA’s suppliers struggle to purchase 100 percent
renewable electricity — and that only a portion can be generated onsite — the
firm says it has “shown that it’s possible to make renewable electricity both
accessible and more affordable.” The initiative has already contributed to
reducing IKEA’s climate footprint by a further 5 percent and doubled the share
of renewable electricity being used in China from 32 percent in 2021, to 64
percent in 2022. According to the company, offers for affordable renewable
electricity contracts in India and Poland have been “successfully finalised and
will come into effect during 2023.” In Poland, PPAs from wind and solar have
been secured — giving suppliers at least 50 percent cheaper electricity compared
to current market prices.
Now, IKEA has announced plans to expand the
further this year, with suppliers in 10 more countries — including Germany,
Italy, Lithuania, Sweden, Turkey and Vietnam — set to take
advantage. The combined electricity consumption for production in the 10 nations
accounts for around 13 percent of the climate footprint associated with IKEA’s
production; so, success is crucial if IKEA is to meet its goal to be people-
and planet-positive by
“We’re aiming for 100 percent renewable energy throughout our value chain,
taking into account both Scope 2 and 3 emissions,” Peder Weibull
Hartman, the company’s Project
Manager for Renewable Electricity for Supply Partners, told Sustainable
Brands®, adding that the program is “instrumental”
in enabling suppliers to help IKEA meet its value chain commitments. Electricity
makes up 40-50 percent of total energy consumption in production. “This program
is critical in two ways: First, it facilitates the transition to renewable
electricity for the existing electricity consumption; secondly, it lays the
foundations as we strive for electrification for the majority of the remaining
50-60 percent of energy consumption,” Hartman says.
On top of offering the two finance solutions, IKEA is also working hard to
increase awareness and improve the understanding and competence among suppliers
on the subject of clean energy. The business has run a number of training
sessions which Hartman says have been “highly appreciated.” Ultimately, IKEA
wants every single one of its suppliers to use 100 percent renewable electricity
through whatever approach works best for them. So, the program has been designed
so that suppliers can take advantage of financial mechanisms on offer, or find
their own clean-power solutions.
So far, solutions with framework agreements have been the most popular setup,
Hartman says — noting that the most common options vary widely across
geographies. “In many markets, there are regulatory barriers that prevent the
acceleration of the
to renewable electricity,” he says. “In those markets, we’re continuously
assessing opportunities for advocacy and working with industry stakeholders and
IKEA’s approach to engaging suppliers — and successfully helping them to adopt
carbon-cutting technology — will appease some agitators who have long called for
brands to get better at ‘supplier marketing.’
“In an era of digitalisation and data collection, supplier marketing is the next
logical step for procurement,”
Anthony Payne, Chief Marketing Officer at supplier management software
company HICX. “[This is] the process by which companies
engage suppliers, build strong supplier relationships and create supplier value
in order to capture value from suppliers in return.”
Supply chain business expert and Chair of Scope 3 Peer Group, Oliver
Hurrey, agrees. He urges brands to
“listen to and empathise with suppliers, in the same way you do customers —
especially when it comes to sustainability.”
So, what’s the secret to IKEA’s success in fostering climate action among its
supply base? Hartman says the company’s overarching sustainability
which includes climate sub-goals for specific parts of the IKEA value chain,
provides the perfect foundation.
“Internal buy-in within IKEA has set the foundation to run the program with
adequate resources,” he says. Periodic review by management ensures that the
project stays on track; and dedicated project managers have been assigned to
take suppliers through a step-by-step approach and handle questions or concerns.
Project managers work closely with country project teams to provide in-depth
local knowledge, delivering the most effective solutions.
But building trusted, long-term relationships is everything in turning the dial
on sustainability performance, Hartman says. “The average length of IKEA
collaboration with home-furnishing suppliers is 11 years. IKEA is often a large
share of a supplier’s annual turnover; so, developing long-term relationships
helps build trust and improve knowledge sharing. Establishing strategic
partnerships that are based on shared goals leads to mutually beneficial
Published Apr 24, 2023 2pm EDT / 11am PDT / 7pm BST / 8pm CEST
Tom is founder of storytelling strategy firm Narrative Matters — which helps organizations develop content that truly engages audiences around issues of global social, environmental and economic importance. He also provides strategic editorial insight and support to help organisations – from large corporates, to NGOs – build content strategies that focus on editorial that is accessible, shareable, intelligent and conversation-driving.