IKEA finance chief busts four ESG ‘myths’

Dive Brief:

• Ingka Group-IKEA CFO Juvencio Maeztu said his peers at other companies can sustain robust profits while upholding high environmental, social and governance (ESG) standards by quashing four myths, including the ideas that sustainability works only for the rich and imposes high costs on business.
• “I don’t know anyone who wants to destroy the planet, but I know people who are confused,” Maeztu said. Achieving sustainability requires “busting myths and dilemmas” among top executives, employees and other stakeholders. 
• “We cannot be a victim of the dilemmas — we have to be a leader in the way forward,” he said Monday during Sustainability Week U.S., a conference sponsored by The Economist. “You can turn dilemmas into inspiration for the world,” according to Maeztu, the top financial executive for Ingka Group, the holding company that owns 392 IKEA stores worldwide.

Dive Insight:

Shareholders, consumers, regulators and other stakeholders across the globe are increasing pressure on CFOs and their C-suite colleagues to uphold ESG principles across the full range of business operations, from production and procurement to hiring and compliance.

Investors with $130 trillion in assets under management have asked companies to disclose their climate risks, according to Securities and Exchange Commission (SEC) Chair Gary Gensler. The agency is refining a proposed rule requiring companies to regularly release detailed reports on their carbon emissions.

CFOs and other executives will more easily answer the call for sustainability, Maeztu said, by overcoming confusion created by four misperceptions:

1/ Sustainability works only for the rich.

“No, it cannot be like that,” Maeztu said. “Sustainability has to be affordable for many people or it will never take off.”

Recognizing long-term cost savings and reductions in energy use, IKEA in 2016 decided to substitute on a mass scale LED lights for traditional lighting.

“We decided to go all in with that because it’s only volume that allows us to invest in technology, optimize production and achieve efficient economies of scale,” he said. “Now LED is helping many people to save massively in energy consumption, so it’s saving money while saving the planet.”

2/ Sustainability increases company costs.

“No, sustainability cannot be a problem for P&L,” he said. “It’s actually good for business to be good business.”

For example, consumers favor IKEA products that closely align with sustainability, he said. Internally, the company has invested $3.1 billion in renewable energy and currently runs 575 wind turbines in 17 countries, 20 solar parks and 935,000 solar panels on the roofs of IKEA stores and warehouses. On a global basis, it produces more energy than it consumes.

Ingka Group grew its business by 17.6% from 2016 until 2021 while shrinking its climate footprint by 6.5%.

3/ Sustainability is understandable only to experts.

“No, sustainability has to be simple to the many,” Maeztu said. “We have to inspire with simplicity and offer really easy solutions.”

“I can hardly imagine a business leader who knows nothing about P&L, financial topics or cash flow,” he said. “In the future, I can hardly imagine a leader who knows very little about sustainability, or who knows about sustainability but is unable to turn that into a simple message and clarity-in-action.”

4/ Sustainability hinges on cutting consumption.

“Climate-friendly” production undergirds sustainable consumption, Maeztu said, noting that IKEA aims to achieve climate positive status by 2030. Along with such status “you create additional benefits in society — you create employment, you pay taxes and you create opportunities for a range of services or products for people to have a better life.”