S2E5: Leading by example (reduce, replace, rethink by IKEA)

[MUSIC PLAYING] Welcome to the Supply Chain Talks podcast. My name is Sophie Fulin-Enk. In season two of this podcast, I will dive into the world of sustainable container supply chains. As decision-makers, cargo owners and freight forwarders play a key role in boosting sustainability in the logistics chain. But how do you build a CO2 neutral? And at the same time resilient supply chain? And what are the possibilities and stand out examples that exist today? In this podcast series, we've discussed the decarbonization of the container supply chain with various players in the industry, using the replace, reduce, rethink strategy as our guiding principle. In this last episode of season two, we're joined by Elizabeth Munk of Rosenschild, head of sustainability, and Stephen Kategor, the project leader ports at IKEA Global Transport and Logistics Services. With their impressive handling of over 1.7 million shipments annually, resulting in 1 million tons of CO2 emissions, IKEA stands at the forefront of decarbonizing its supply chain. IKEA is committed to reducing, replacing, and rethinking how they reduce their greenhouse gas emissions all the while supplying us with those wonderful products that we all have in our house. So welcome, Elizabeth, and Stephen, it's very good to see both of you. We're connecting via the screen because you are in Switzerland, right? Yes. Elizabeth, let me start with you. Maybe you can introduce yourself. You're the head of sustainability. So what does that mean working at IKEA? Thank you so much. Yeah, I lead sustainability then in IKEA Supply Chain operations. I've been with IKEA for the last almost eight years, based out of Switzerland here together with Stefan. And throughout my career, I've been working within sustainability, and it's a passion of mine. And in IKEA Supply Chain operations, we are responsible for all the global movement of home furnishing goods from the suppliers to the warehouses and stores. And then for the last mile, that is handled by the IKEA retail organization. But for all of these 1.7 million shipments, that is the responsibility of IKEA Supply Chain operations. Yeah. And you mentioned that sustainability is a passion of yours. Why does it matter so much to you? I think I've always been interested in this topic. And I think it's about bringing positive change, trying to get people to actually make these changes. And I am really fortunate to be part of this organization, where sustainability is really integrated into the business. And we have the opportunity to actually make a positive difference. Yeah, that's one of the exhilarating things for me working on this podcast that we're talking with players that are so big. If you start making a change, it's actually on a scale that really matters. So that must be exciting, working for IKEA. Stefan, so you are the project leader, ports. So that means like you love ships and ports. And what is it that you do? Yeah, indeed. The project leader ports within IKEA SEO, so the same organization as Elizabeth is in here in Switzerland. I started with IKEA two years ago, when this role was newly implemented into the SEO structure. So I have a passion for port. I think it's very interesting. You're in the wrong country. Yes, we have small ports at the Rhine. So we have to start at a small level. But for sure, it's very exciting. And being IKEA now for two years coming from the freight forwarders end, where I worked for 15 years, and it has been a very exciting journey, especially. Now we're also deep diving into the sustainability topic. Elizabeth, could you tell me a little bit more about the replace, rethink, reduce model in terms of from IKEA's perspective? Yeah, absolutely. Maybe I can start by saying that in IKEA, I would guide it by our people and planet positive strategy. And there are three focus areas in this strategy. It is about healthy and sustainable living. It's about enabling people all over the world to live a better and more sustainable life at home. Then we have the climate and circular part of it, where we're really trying to transform into a circular business and really work towards science-based climate targets. And the third part is about fair and equal is about ensuring diversity, inclusiveness, et cetera, throughout our supply chain. And as this being a big global shipper, we, with this 1.7 million shipments, we emit a substantial amount of greenhouse gas emissions. But also involved in the everyday life of drivers and sea farers and warehouse workers, et cetera. And it gives us a big responsibility, but also a big opportunity to make a difference. And we are striving towards in clean and fair goods flow. And by clean, we mean that we want to go zero emissions in our transport value chain. And we want to use 100% renewable electricity and energy in our operations. And by fair, it's really about enabling a better everyday work life for all of the people handling our goods in the value chain. But also have a positive impact on the communities where we are involved in. And if we look at then reduce-replace rethink, we have a very important milestone in 2030. So when it comes to transportation, we say that we are to reduce the carbon footprint from every transport that we do by minus 70% compared to our baseline year of 2017. We are on our way, and we just released our climate report. And we have now reduced since 2017 minus 25% on average for memory transportation. But it is a long way to go. And we really now need to speed this up. So what is guiding us is our strategy on reduce-replace rethink, where reduce is about really capturing efficiencies in everything we do. Replace is about replacing fossil fuel with much better alternatives. And rethink is about integrating new types of innovation, technologies and new types of collaborations into our value chain. Well, you've really sort of peeled off the onion quite a bit. That's a good place to start. So let's dive into this reduce concept. You touched on it already, of course, a little bit. So it's about reducing fuel and energy consumption, of course, increasing the use of equipment, switching to intermodal solutions, really, and optimizing your transport networks. And going digital, of course, plays an important or crucial role in achieving this goal, because you want to reduce existing emissions by having the right information. How else would you even measure your improvement? How important are our visibility, transparency, and speaking a common language in terms of those data for you, Elizabeth? For us, this is super important. It is a key foundation when executing our strategy and to reach our targets. And to have a really a fact-based foundation for everything that we do, it's also about really about speaking the same language internally, externally with our service providers. But also with all other stakeholders to enable benchmarking, to share good practice and learn from others on what we can do better. Yeah. How just a question also for Stefan, you work with all these different kinds of ports. Do you find that there is a common language port to port? Or do you think, oh, I'm now talking to this port? They have this system. And do you have to-- how does that work? Yeah, your spot on with that. And I think we're also on a journey when it comes to the port, the emissions, how to report it, and what type of figures to report. It's still quite very unstructured. But of course, by having a structuring to that, it will help them to have this foundation, which Elizabeth was referring to. And if you look at the different parts of the supply chain, different parts are more advanced or less advanced. And ports, I think, are still to cover a lot of mileage to have that foundation then at the end. Yeah. I can add to that also because we are actually reporting emissions from ports. But we used an average general estimate on the emission. And I think it's less than 1% of our total carbon footprint. But what we really want to have is to have the transparency and visibility from the ports as well as part of our end to end visibility of our transportation. And for our understanding, what percentage of the total carbon footprint is actually-- attributed to logistics Stefan? When we look at the specific part where we are responsible within supply chain operations meaning supplier to warehouse or logistics units, product transport and logistics services represent 4.2% of the total emissions and half of it within that comes from our ocean flows and half from our land flows with 2% from the warehousing part. That's how we have split it. So it is a small part but still in the quantities that IKEA is working on, it's still significant amount of course. Yes and very important that we have this every step count. So no matter how big the percentages of the total footprint we still need to make take our actions and half our measures to reduce that to reach our overall goals. So 4.2% to go. In transportation from the port to the warehouse what percentage is intermodal and how is that modal split divided within the transportation area of IKEA Stefan? Yes, we use intermodal solutions such as rail, short sea, inland waterways in many transport routes, many more than only from the port to our warehouse. So switching from diesel trucks to intermodal transport also reduces 50% of the emissions on average. Therefore we can proudly say that 51% of our land flows is on intermodal. Wow, that is a lot. And then many shippers and freight forwarders face challenges in making their supply chains more sustainable due to the perceived high cost or the potential impact on reliability and efficiency. And that of course is so key when delivering goods that it's difficult to let go and to trust that you can also do it in a different way. What advice would you offer to these shippers and freight forwarders? Yes, that's a very famous topic and for us it's really the answer is all aspects have to be looked at. So in any business case we consider the cost, the reliability, the quality and the sustainability perspective. So to weigh in all these factors as an integral part and then consider that with our goals to make the business decision. So I would say there are many pathways and we are making investments for the future. On that end the cost of not doing the investment will result in much higher costs in the future. And along this journey we have so much learnings to find opportunities that serve various different perspectives. So that's why we are really convinced that it's important to get many on board to even shorten that transition time which we are in. Yeah. And to share your best practices I guess to convince others. And what about premium for using zero mission fuels which are still more expensive than the traditional fuels obviously. So what incentive is then needed for the market to finally help aboard and make the switch. Maybe for both of you really Elizabeth. That's a really good question, an important question. There's not one answer but many different answers to that question. So many things that needs to fall into place. But for us in IKEA first of all we do not believe that sustainability should come after premium. That you need to pay more for sustainable products. I mean sustainable products should really be the better option, the option that you choose for the benefit of the environment and the customer. But we also see that to create the necessary climate impact there are lots of investments that need to be made. Right. And there is also a need for collaboration to create these zero mission solutions. And we are not willing to pay a forever premium for sustainability. But we are willing to be part and share the investments that are needed in order to make this transformation. And just as Stefan mentioned what we really want to see now is that we make a fast transformation. We don't want this to drag on for years and years but to really get as many as possible on board now so we can make this shift that is the needed. Of course the strong policy support is needed as well to support this journey. Yes, that is something that we've heard throughout this podcast as well. It's very much a joint effort and companies cannot do this by themselves. You want to really ensure a level playing field. All right. So I think we've sort of tackled the reduced part for now. Thank you so much. Let's move over to replace and focus on that for a moment. So transitioning from fossil fuels to cleaner alternatives, that's really the essence of replacement obviously. An example of replace is carbon in setting. Maybe you can explain what that is Elizabeth. Yeah. First I can maybe stop is saying that in IKEA we don't do offsetting because we believe that we need to tackle the root cause of the problems within our own value chain which is really the concept of in setting. Right. So when it comes to ocean shipping there is not yet the scale of biofuels or zero emission solutions to be able for us to ensure that the goods we ship are placed on using these solutions. So if we compare this for example on land transportation we know that we can can buy land transport service on a truck for example and we know when we can say this is the fuel that we want to use. So it's a different setting but when it comes to shaping our goods over the oceans we want to be part of increasing the demand enable the scale up of these solutions. So for example we buy biofuels from our ocean carriers but it might not be that the exact vessel that our goods are on actually burn this biofuel. Still we say we want to ensure a geographical connection that the vessel that burn this biofuel is on a root on let's say from EU to the US for example and ultimately as this is deployed and scaled and the solutions are out there of course we want to ensure that our goods is placed on the zero emission solutions the zero emission trucks the zero emission warehouse in units etc. Yeah so and where does that stand today how far along is this process where you can really say yes this is actually the way that we're working all cross the board. I would say this is a journey that we are all on it's a development right I mean if we look at biofuels we started this back in 2019 with a pilot actually together with Porta Rotterdam CMA CGM and Goodfuel's good shipping and where we then together tested biofuels for the first time on a notion going container ship and it was proven successful and and there is no not yet standardized accounting methodology on on how to account for for for these we don't have the detailed visibility of the emissions from the individual shipments but we are using working with clean cargo we are using the average trade lane data we are then deducting the biofuels that we are buying from our service providers from the carbon footprint and I think what is happening right now there's a lot of work going on to develop this methodology which is super good and we are closely following this what the really the focus for us right now is that we need to reduce the emissions here and now and this methodology needs to follow and and it is yeah yeah yeah that that comes back to that point that we talked earlier about how important it is to have a set of data and a language a shared language to understand what it is where we are how so this this this pilot actually is a good example do you see that more often stay fun that other ports are running pilots like this or what's the role of Rotterdam in this perspective yeah across the globe with ports there are very very many interesting initiatives on the ports becoming hubs for bunkering of alternative fuels green corridors are coming up so we are monitoring that with high interest to see what could be a perfect match for us yeah the port of Rotterdam authority offers a substantial port fee reduction for ships that bunker sustainable fuels in Rotterdam and so supporting initiatives like the Zero Emissions Emeritium buyers of Alliance, mostly known as Zemba. IKEA is also involved in that. As one of the initial members, can you elaborate Elizabeth on this initiative's success? - Yes, we are members of Zemba, and we believe it's a great example of how signals from different shippers can be channeled into concrete actions. So it actually started back in 2021, where we signed the Co-7 Ambitions Statement, which is cargo owners for Sierra Emissions vessels, where we committed to only ship our goods on Sierra Emissions vessels late as 2014. And then in 23, we joined Zemba, which is then a buyer's group of cargo owners. We are now more than 20 companies in Zemba. So we've come together to demand Sierra Emissions shipping. And what is happening right now is that there is actually a request for proposal out for 600,000 TUs over a period of three years. And now in not a long time in spring, we're looking forward to see who the winner of this request for proposal will be. And then the work will start for us or the individual companies to actually buy these Sierra Emissions solutions from the winner. And Zemba is an important example of innovative ways of coming together, collaborating, aggregating demand that actually will generate concrete results. And it sends a strong signal that the demand is here and further builds that trust and confidence that this is the direction that we need to take altogether. And it's a very action oriented and hamson way of collaboration, I would say. - Yeah, so it sends a strong signal, but to whom? I wonder how does IKEA communicate? These types of effort in making your own supply chain more sustainable, you're working with all different kinds of partners, stakeholders, do you make it understandable for them? Like this is what we're doing. Do you actively proactively go out and talk about these achievements? - Yeah, but absolutely. And I think communication, engagement, dialogue is crucial to get the collaboration going. We need to come together, we need to talk about this. And the good thing is that it is being talked about more often and frequently and different stakeholders are coming together, finding ways of how to collaborate and drive this agenda. So for us then, what we do, for example, in a standardized way, we are reporting on our carbon footprint from transportation and logistics in the IKEA, sustainability reports, the climate reports, et cetera. We are reporting exactly on our carbon footprint, both from the land transportation, the ocean transportation, the warehousing activities. We're presenting the examples of how we are working with our reduced replacement agenda and the different actions that we are doing. So that's an important thing. What we're also doing and we're in the midst right now, it's our good yearly good examples catalog because we are collecting good examples from across the globe with how we work with our stakeholders, with our service providers and actually very fact based on saying different projects, what reductions do they actually result in, but also this year letting the people really working with these things to talk about what they are doing because it's really about engaging us all into this topic. And also with a strong message that every step counts towards zero. It's really, this topic is bigger than IKEA. We really need to engage with others. We are engaging a lot with our service providers. So the business people, this is a dialog, constant dialogue, together with our service providers. What can we do? And it's a completely integrated part of how we do business. Yes, but of course, IKEA is a very big name, not only for me as a consumer, but also within the industry. So you actually have another IKEA catalog, if I understand you correctly, that shares these positive stories. And is this the type of thing and tool that you can bring with you, Stefan, when talking to shippers and freight forwarders who might hesitate to really go for such alternatives because of the higher costs? Well, about this catalog definitely, that's what we carry with us to, when we have the dialog with the stakeholders, or my side mainly with the ports and terminals, to share that with them, inspire, but also we get a lot of inputs from the ports and terminals, which is quite a new business intelligence we want to bring into our organization. So it's really this give and take on inspiring each other and learn from each other. And are there today, carry the big convincing argument for shippers and forwarders to choose these alternatives? Or do you sort of custom make the argument for every individual person you talk to? Yeah, of course, the bigger topics like electrification and alternative fuels that comes in most of the conversation, but then it really, it's a matter of what could be a fix, what could be workable for us, and what kind of your partner offers. So that's then the fine tuning of it. Yeah, that has been such a through line. I think in this entire series in the podcast that I've been hosting now, that's what everybody really comes back to. You can't do it alone. The task is just too big. And within this dialog, you can rethink solutions, which brings us to the final topic. Obviously, rethink, rethinking supply chains is about thinking outside the box, I guess, and collaborating with others and really drive that innovation and look at things that you've done a certain way for decades and really trying to put it, turn it on its head and go at it differently. So rethinking these supply chains really involves collaborations that might not initially seem obvious, but they need to sort of evolve. How does IKEA perceive this, Elizabeth? Well, as you said, rethinking is much about collaboration. Collaboration is key, because rethinking is not just about innovative technologies or new innovative fuel. It's about people. It's how we collaborate with each other. So we need innovation in collaboration, finding new ways of coming together. And we just spoke about Zemba. And another example is what Stefan just talked about about the ports, which is also a new stakeholder to us in that sense, to really start and discuss and learn from, et cetera, et cetera. So I think for us, we are very much open to collaboration. We are very much reaching out to meet new stakeholders, understand and learn, and also bring our knowledge and confidence of what we have learned along the way to find new ways. Yeah. Have you had experiences that have really surprised you? Like, oh my god, we were talking to APM terminals earlier this series. And they said that they'd had a session sitting together with lots of different partners. And they actually found a way to reduce 22% while clearing a shipment. So that was just really big number. And that was just a matter of sitting together and really thinking, how can we be more efficient? Have you have an example like that? I think actually that is very much our good example's catalog because what we see in the catalog and this good example, it's actually about people coming together, sitting down, thinking out of the box, finding new ways, and then also applying this fact-based approach. You can actually see what has this actually generated, what results. And I think it is this that we really want to inspire because tackling the climate change is not about the sustainability department working with us. It's about everyone in their daily operations to take this on and find the ways of how to do that. And that is really what we would like in the good examples catalog to share. All of these good examples that we see generate results. Right. Yeah, and it inspires. Well, as we know, the Port of Rotterdam wants to be a front runner in sustainable supply chains through electrification, shore power, promoting sustainable modalities, obviously. What is your view, Stefan, on the role of a Port Authority in this perspective? Yeah, I think really the port, especially the Port Authority, can be an important enabler to bring the stakeholders together. And then, catalyze and direct-- the energy of the different stakeholders to a clear roadmap. And that's why we also started to work with ports and port organizations to be part of the discussions. And in the case of Rotterdam, I think you have your agenda, you're on your way with the green and digital corridors, you have implemented and you're working on the green hydrogen journey and the whole circular economy which you're tackling. So I really think it's about being innovative, new ways of collaboration to connect on these initiatives. Yeah, it's interesting because of course as a portrait facilitator you need to facilitate the customers that are still using mostly fossil, which is the majority at this point still, but you also want to facilitate that movement forwards of course. So yeah, it's interesting to hear your perspective on that Stefan. Good to hear that. You feel that Rotterdam is playing how do you feel Rotterdam is taking up its role? No, yeah, as I said, I think you have your agenda which is probably on the forefront of the industry, but also Rotterdam being the biggest container port in Europe. So I think you're on a good track there and the inspire others as well from the port industry as such. Yeah, well thank you. Thank you so much. Both of you, is there anything you feel like we need to add to this interview, anything that you feel like you'd still like to say? I think the dialogue and communication collaboration continues and we would like to thank you so much for inviting us and also thank you for this initiative also of coming together and having this discussion. Yes, it's a good step. Thank you so much. Right, that's all part of the process, right? Getting together and really exchanging ideas. Well, IKEA has shown us that there are several ways to move forwards to a sustainable supply chain examples like the carbon insetting are the first steps that could be taken right now as we can see because you're doing it to get our goals for 2015 within reach action needs to be taken now obviously and not in the future. I would like to thank both of you, Elizabeth, stay fun for joining me today for your great pioneering roles in making the global supply chain more sustainable and working on that every single day with passion and dedication and on a knowledge and fact-based basis so that is absolutely vital. With this episode we have come to the end of this supply chain talks season and what a finale it was. So thank you so much all of you for listening and if you still would like to learn more about sustainable container supply chains and initiatives then check out portofrotardam.com/containershipy. [Music]