2 July 2015

Ikea is turning the tables on energy investment


Last week Bill Gates announced he was doubling his renewable energy investments to $2 billion. He compared the field to the early days of the tech industry out of which Microsoft, Apple and Google burst into global companies turning their investors into millionaires. Calling for a Manhattan Project style research and development push he said : “It’s classic capitalism. There’s some wild-eyed companies, but it’s great. I wish governments would help those guys out because there’s a ten per cent chance it’s the magic solution.”

Some of the most radical investment in the latest renewable technology is coming from business, so much so that national governments are having to play catch up. Take for example everyone’s favourite purveyor of Swedish meatballs, Ikea. The furniture company recently announced it would invest more than $1billion in renewable energy, leaving some national leaders looking red faced as their rhetoric to promote a low carbon economy was overshadowed by developments in the private sector.

Ikea’s CEO Peter Agnefjall said the investment would be split, with $600m being spent on solar and wind energy installations, whilst $400m from the Ikea Foundation would go to support communities already suffering from the effects of climate change. The company already has 700,000 solar panels on its roofs and has signed up to own and operate 314 wind turbines. This latest investment will put the world’s largest furniture retailer on track to be powered completely by renewable energy. It also plans for its entire operation to be energy independent by 2020, something it has already achieved in the Nordic countries and Canada.

At the recent UN climate talks in Bonn, environment campaigners held up Ikea as an example for nation states to follow, showing how companies are increasingly outpacing governments. Australia, with a GDP of $1.5 trillion, pledged less than $200m to the Green Climate Fund when it opened last year. Ikea with an annual revenue of only 29 billion euros has just invested five times that. Steve Howard, the company’s chief sustainability officer, told the FT that a similar investment from other businesses could lead to a transformation of the energy system. “If every business and organisation did what we did, we would flip electricity generation into being renewable-based by 2020 or shortly thereafter.” He added that for companies with a global footprint like Ikea climate change has the potential to cause mayhem with supply chains and damage future markets. By pledging the $400m for resilience and adaptation these companies see the global interdependence which characterises business in the 21st Century. Howard said: “Carbon is a significant risk so if you can eliminate that risk, or a good share of it, that’s a good thing for investors.”

Håkan Svedman, the company’s Swedish retail boss, said the business case for such moves were clear: “We invest in renewable energy because it is the right thing to do for people, the planet and for the future of our business.” As the costs of solar and wind continue to fall the financial case for corporate investment in clean energy, not to mention the PR benefit, will only get stronger.

The announcement from Ikea is part of a growing movement of businesses trying to give politicians a wakeup call. Earlier this month 80 British firms, including Tesco and Sky as well as two of the big six energy companies, wrote to David Cameron urging him to take stronger action on climate change both at home and abroad. The letter, also signed by Coca-Cola, Unilever, John Lewis and Thames Water, called for the UK economy to be more energy efficient while urging Cameron to set an ambitious domestic carbon target and push for a strong UN deal at a summit in Paris this December.

Even six of the biggest European oil and gas companies; BG Group, BP, Royal Dutch Shell, Statoil, Eni and Total, recently added their voice to calls for a pricing system for carbon emissions.

The Paris summit will be the first time a truly global climate deal will be negotiated covering all nations. At a meeting of business leaders in Paris last month, Patrick Pouyanné, the CEO of French oil group Total, said that the agreement would need a ratcheting mechanism to ensure it continued to be strengthened over time and kept global temperature rise below two degrees Celsius. He told the Guardian: “We have to be pragmatic, if we take the sum of commitments made by countries then I am afraid we will not be on the 2°C trajectory. There will be a gap.” He said that come December they will need “at least some commitments by governments and businesses, and a mechanism in place to improve it.”

This was a sentiment shared by Unilever CEO Paul Polman. He said: “It is very likely that all the agreements coming in will not add up to what we need to stay below two degrees. Those commitments will be around 40 per cent of that in reality. That is why we are mobilising the private sector. If we work together we can close that gap.”

However firms recognise they can’t make this happen on their own. They need politicians to set the right framework to encourage businesses to be more sustainable. Claus Stig Pedersen of global biotech company Novozymes, said after the failed talks in Copenhagen in 2009 some business leaders tried to step into the vacuum and forge ahead regardless. “After some years, business in general realised that we couldn’t do this alone,” he said. “There is no way we can do this without partnering with politicians and making agreements going forward. So if we should end up with a Paris failure, like we’ve had before, then I do think we’ve learnt we can’t do it alone. We have all the solutions needed, it’s just about applying it. Regulation, a carbon price and ambitious goals from the UN climate talks will drive that faster.”

Governments are being shown the way forward by some of the most innovative and future proof businesses. It’s time politicians did more than just rearrange the furniture.

Joe Ware is Church & Campaigns Journalist at Christian Aid.