‘Tariffs create an opportunity for us in the long term,’ says Ikea's global head of sustainability for supply

The India visit of Christina Niemelä Ström, global head of sustainability for supply at Inter IKEA Group, comes at a time when its 10th most important sourcing hub has been a victim of victim to 50% trade tariffs imposed by the U.S. In an interview with Fortune India’s Ajita Shashidhar, Ström talks about how its capability of sourcing from over 50 countries helps it to adjust and balance from where it sources and where it sells, amidst the geopolitical tensions that are impacting global supply chains. Ström is also joined by Linn Roslund, supply area manager, South Asia, Inter IKEA Group.

Excerpts:

The one thing that is occupying the mindspace of businesses and leaders across the globe is the United States of America’s tariff policy. India has been imposed the steepest tariffs. Ikea sources a lot of products from India that are sold globally. How badly impacted are you?

Ström: The entire world is carefully looking at what is happening in the U.S. From India, fortunately, we don’t have so much going into the U.S. But we do sell made-in-India products all over the world. We can navigate with that and decide where we send what.

Our commitment to India is not for the short haul. The tariffs create an opportunity for Ikea in India in the long term, because it means now we have manufacturers that are looking for new partners and could contribute to our supply chain.

It’s not just the tariffs that are giving sleepless nights. Disruptions, be they geopolitical or climatic, are galore. Are you doing anything different to tide you over these constant ups and downs?

Ström: We have been around for 82 years, sourcing for over 80 years; there’s always been challenges. I agree that there is a lot today. Luckily, being a global player, our sourcing is spread out. We can navigate disruptions quite well. In India, we have been sourcing for over 50 years, so we can bring those learnings on how to navigate through these challenges.

We have access to data, so we know how the weather will develop. We know it’s going to be hotter in some parts of the world, and it will be extreme weather in some parts. Cotton, for instance, is a thirsty crop (India is the fifth largest market for Ikea for cotton sourcing). We are trying to reduce water usage. We know it’s not going to be easier, so we need to secure how we can use the scarce resources of water more carefully. At the same time, when the rain comes heavily, we also need to have a way to hold the roots. We can adapt as well as mitigate risks.

You have been sourcing from India for 50 years. Ever since Ikea set its retail presence in India, the mandate has been 30% of the products sold in India have to be sourced from India. We now hear that you are looking at sourcing 50% from India. It will be interesting to hear how you have strengthened your supply chain in India.  

Ström: India is one of our focus markets. We have been sourcing from here for over 50 years. We started mainly with textiles, fabrics, and now that has expanded to plastics, metals, and mattresses. Since we first started sourcing from India and retail came in later, most of the made in India products are sold all over the world, and that will still continue. With retail presence here, we also get extra muscle in finding out newer segments, which we hope will not only go for India, but also from India to the world. That is our strategy.

What we have done in the last 50 years is work on impact. In our first tier of suppliers, there are 100,000 people employed. If you go to the second tier, there are an additional 2,70,000, but we don’t stop there. We also go down to the farmland by working with cotton farmers. We want to work in the whole system, that is the journey we have been on, and that is the journey we will continue to be on. We need to keep developing; if we stagnate, we will go backwards. We always find new ways of working, new ways of improving productivity and sustainability.

Can we get some details on the interventions you have made with the cotton farmers?

Ström: We have been working with them for 50 years, but if I talk from a sustainability strategy, since 2009, we have joined hands with a few brands and formed a better cotton initiative, and today we source only through that collaborative initiative. The idea is to go from conventional cotton farming to more sustainable sources. We work with farmers on how to reduce the amount of water used and reduce the use of fertilisers with pesticides, and thereby increase output. We want to ensure that the farmer has more money in their pocket. That is what we call empowerment or creating social impact.

We are now growing organic cotton. We are also working with regenerative agriculture practices that help in further reducing water usage. We have a project going with 55,000 farmers where we are seeking a reduction of CO2 emissions by 30%. We are working with farmers in terms of education, spreading practices, and implementing digital platforms.

So, cotton field is one part, but how can we diversify for diversity reasons, for climate, and also for livelihood - we are investing in agro-forestry. There are 22,000 cotton farmers doing that. We add fruit trees to get more shade and keep the water in the soil, and also give additional income.

We also need clean wood for our furniture. So, in the wood-based part, we work with acacia as a species. We help forest owners get longer rotation times. We let the tree grow thicker. We are also working with eucalyptus. We need to know where we are sourcing because only then can we do responsible sourcing. Traceability and transparency are important to show that we are ethical.

What percentage of the cotton that you source from India goes into your products?

Ström: India is among the top five markets for cotton sourcing for Ikea. Most of the cotton we source goes into the products that we make for the Indian market. But a lot of it is also exported. We have always sourced cotton from India; we have now expanded. Cotton is an important material for Ikea.

What we are now working on is to get 100% recycled cotton. Even for glasses, plastics, and metal, we need to increase the amount of recycled materials because of the carbon footprint and resource scarcity.

We have a supplier in South India, where there were 350 workers, and now, we have 4,000 people. Over there, we make bedspreads. When we started in the nineties, we sold 27 million of them. Today, over 50% of that same product is made out of recycled cotton fibre, to make our bedsheets softer. In fact, 20% of the cotton that we use across our products is recycled.

Can we get details of categories you are sourcing from India, apart from cotton?

Roslund: We are doing solid wood furniture. We are on a journey to find sustainable raw materials for our furniture. We are upskilling farmers to grow eucalyptus and get a better yield. We have worked with mango wood and acacia farmers. We have worked with mixed line products where we combine metal with wood, but for the flatline furniture industry, it needs bigger quantities and an optimised production to maintain quality. That is new.

Ström: What we are trying to do is not by coincidence; it’s designed. We need to develop competitive supply chains – it’s about choosing the right kind of suppliers. We are trying to find that beautiful mix. We have suppliers who stand behind our vision to create affordable and sustainable products. Affordability is an important factor for Ikea.

You just talked about affordability being an important factor for Ikea. As far as I know, sustainability comes at a cost. How are you balancing cost with affordability?

Ström: Sustainable products shouldn’t only be for the wealthy; they should be for all. It has to be affordable. So, we have to work really hard behind the scenes, building supply chains, ensuring that our factories are shifting to renewable energy, we transport in the best possible way by using electric vehicles, and we also work with ocean carriers to see how we can reduce CO2 there.

How cued in are your Indian suppliers to your sustainability narrative?

Ström: Our average length of association with our suppliers is 11 years and some of the suppliers we have in India we have been associated for over 50 years. There is trust and mutual respect.

They are helping us to become better. They also want to embrace sustainable practices. We are on this journey to switch into renewable energy. In India, it is common to use coal, as you need high temperatures to get the colour into your fabric. We are now transitioning into bio-fuels and solar power. We have a renewable electricity programme. India is at the forefront with 70% of our partners making the switch to renewable energy. When we started three years ago, they were at 16%. Our goal is 100% and we are well on that journey.