Affordable & Sustainable: Ingka Group's Procurement Vision

Amid economic challenges, Ingka Group, IKEA’s largest retailer, is re-establishing its commitment to both affordability and sustainability.

The group reports US$44.1bn in revenue for fiscal year 2024 (FY24), a 5.5% drop from the prior year. This decline results from a conscious decision to invest more than US$2.2bn into lowering prices, aiming to keep IKEA’s products accessible during financially tough times.

Despite the revenue dip, Ingka achieved a 3.3% rise in store visits and a 28% increase in online traffic. Online orders grew by 9%, reflecting the growing effectiveness of IKEA’s omnichannel approach and evolving consumer habits.

"It was a year of courageously investing in the future to make IKEA more affordable, accessible and sustainable," says Juvencio Maeztu, Deputy CEO and CFO of Ingka Group.

"For us, it has never been more important to side with the many people."

Sustainability anchors IKEA’s future

While affordability has taken centre stage, sustainability remains a pillar of IKEA’s strategy.

The company is steadfast in its environmental ambitions, aiming to cut operational emissions by 85% by 2030 and achieve net zero emissions across its entire value chain by 2050.

Ingka has invested US$7.9bn in renewable energy projects, deploying US$4.4bn to date. These initiatives have elevated the company to the status of a mid-sized renewable energy producer, not only powering its own operations but also contributing to wider energy transitions.

In FY24, renewable heating and cooling systems were installed in 11 IKEA units across seven countries, with plans to incorporate such technology in all future locations.

"Our unique business structure and financial independence enable us to make choices and invest for decades to come," adds Juvencio.

"This makes us more resilient to global and economic events, allowing us to remain focused on our business and our customers for the long term."

Procurement drives sustainability and savings

IKEA’s ability to blend sustainability and affordability stems from a robust procurement strategy.

By focusing on sustainable sourcing, the company aims to use 100% renewable or recycled materials by 2030, selecting suppliers who align with its stringent sustainability goals. This is part of its commitment to a circular business model, ensuring materials can be recycled or repurposed.

Cost-efficient procurement is another critical factor. The US$2.2bn investment in price reductions reflects careful supply chain optimisation, demonstrating how cost management can coexist with green practices.

Additionally, IKEA’s US$7.9bn renewable energy investment helps to lower operational energy costs, creating a more stable and sustainable framework for the future.

Ingka also prioritises ethical sourcing, maintaining fairness across its supply chain and fostering long-term partnerships with suppliers who evolve alongside IKEA’s sustainability objectives.

This strategy, paired with a commitment to innovative materials like sustainable fibreboard, ensures IKEA’s procurement practices remain at the forefront of sustainability and affordability.

Beyond retail: A broader impact

Ingka Group’s ownership structure allows it to reinvest 85% of its net profits into the business, with the remaining 15% directed to the Stichting INGKA Foundation.

This foundation funds the philanthropic IKEA Foundation, which focuses on fighting climate change and poverty. By the end of 2023, it had granted US$2.1bn to partners tackling these global challenges.

"Our profit is very meaningful: it gives us the resources necessary to make us a better company, both now and in the future," explains Juvencio.

Beyond its sustainability investments, Ingka is innovating in areas like forestry and circular design. These measures support IKEA’s goal of sourcing all wood sustainably and fostering circular product life cycles.

Future-proofing through innovation

Ingka’s diversified model bolsters its resilience beyond traditional retail.

Its Ingka Centres manage shopping spaces across 13 markets, including recent acquisitions like Brighton’s Churchill Square. New ventures, such as the Saluhall plant-based food hall in San Francisco and Livat, a meeting space in Xi’an, China, illustrate its adaptive business approach.

To future-proof its brand, Ingka has allocated US$3.7bn to enhance customer experiences, fulfilment and real estate development. These investments ensure that IKEA stays competitive and relevant in a rapidly changing retail environment.

Jesper Brodin, IKEA’s CEO, adds: "Our everyday purpose is to deliver to the vision of IKEA – creating a better everyday life for the many people."

Reflecting on the year, he concludes: "We have invested US$2.2bn in lowering our prices to make IKEA more affordable and accessible for people with big dreams and needs in life at home, no matter the size of the wallet."

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