CSRHub Blog Research on ESG metrics and comments on sustainability best practice

By Carol Pierson Holding

Ikea’s announcement that it would sell solar panel solutions in its UK stores was startling for any number of reasons. Ikea may be a leader in renewable energy for its own operations, with over half a million solar panels installed on its store and factory roofs and a fleet of its own wind turbines. But solar power for its customers?

From a business perspective, it makes little sense. Margins on solar panels are very thin, especially at Ikea’s prices. And this year, with China suppliers awash in panel inventory, wholesale panel prices have been extraordinarily low.

Ikea’s one year pilot project at its Lakeside UK store near London sold “one photovoltaic (PV) system almost every day.” They’re not running out the door, despite generous government incentives in the UK.

PV systems require a new business model for Ikea, requiring installation and maintenance services. Ikea’s panel supplier is Hanergy Holding Group Ltd, a privately-held Chinese company whose panels may be subject to “quality, environmental, after- sale service and product warranty concerns.” One wonders how quickly other franchise owners will take on the reputational risk of the solar panel business.

If Ikea decides to roll out its solar panel program in the U.S., it will face competition from stores experienced in home installations such as Lowes and Home Depot, which has been advertising and installing solar panels since 2005 through its partnership with BP.

There are plenty of potential problems with Ikea’s solar panel business. But from a branding perspective, it makes total sense. As early as 2003, culture watchers, environmentalists and even designers have found fault with the underlying ethic of Ikea’s approach. In a short piece on ethics in graphic design, Ikea is charged with designing its products with planned obsolescence in mind. In 2009, Salon reviewed Cheap: The High Cost of Discount Culture, Ellen Ruppel Shell’s criticism of our cycle of consumption that is destroying the environment and harming labor as well. Focused on discount chains like Wal-Mart and Target, Shell “gently damns” Ikea for its cheap, disposable products that are as bad for the environment as Wal-Mart’s. The environmental blog along the trail aptly called Ikea “consumerism on steroids.”

[csrhubwidget company="IKEA-group" size="650x100" hash="c9c0f7"]

A recent glance at Ikea’s U.S. consumer web site reinforces this idea: most of the site’s new offerings are doo-dads and children’s toys.

Now, with its solar offerings, negative impressions associated with Ikea’s disposable “stuff” could be tempered by solar panels in the stores. The company’s 2012 Yearly Summary launched its campaign of “People & Planet Positive.” But the greenwashing of the last two decades has put consumers on alert to eco claims that are mere promotion. Ikea’s success with solar panels to generate energy for its own use has been much ballyhooed. Solar for consumers is its next big chance to reinforce its good guy mantle.

Not a moment too soon. A new study by BBMG, GlobeScan and SustainAbility found that—

“…the sustainability proposition has changed from being the ‘right thing to do’ to being the ‘cool thing to do’.  …For decades, green marketers have been speaking to the wrong consumers, assuming that by engaging the most committed ‘advocates’ we would create significant business growth, cultural relevance and change at scale. What makes Aspirationals so compelling is that they combine an authentic commitment to sustainability with a love of shopping, design and social status, aligning economic, cultural and social forces to shift the way we shop.”

For consumers, Ikea’s long-admired design sensibility is intertwined with its sustainability. The chain’s commitment to affordability doesn’t have to fight with perceptions of sustainability. But Ikea must tread very carefully to preserve all three. A potential money-loser like solar panels could boost its environmental reputation and enhance its brand’s coolness. After all, the announcement about its UK stores carrying solar panels was carried widely across U.S. consumer, environmental and business media. So far, it looks like a branding home run.

Photo courtesy of lydia_shiningbrightly via Flickr CC.

Carol Pierson Holding writes on environmental issues and social responsibility for policy and news publications, including the Carnegie Council's Policy Innovations, Harvard Business Review, San Francisco Chronicle, India Time, The Huffington Post and many other web sites. Her articles on corporate social responsibility can be found on CSRHub.com, a website that provides sustainability ratings data on 8,300+ companies worldwide. Carol holds degrees from Smith College and Harvard University.

CSRHub provides access to corporate social responsibility and sustainability ratings and information on 8,300+ companies from 135 industries in 104 countries. By aggregating and normalizing the information from 270+ data sources, CSRHub has created a broad, consistent rating system and a searchable database that links millions of rating elements back to their source. Managers, researchers and activists use CSRHub to benchmark company performance, learn how stakeholders evaluate company CSR practices and seek ways to change the world.

By Bahar Gidwani

The folks at BigRoom have worked for a couple of years on a side project (their main goal is to launch an  .ECO suffix for the Internet).  They are trying to capture, document, and categorize the various green, eco, and sustainability-oriented certification programs.  So far, they’ve found more than 300.

Some are pretty well known.  For instance, the Department of Energy and the EPA combined in 1992 to launch their Energy Star ratings.  They now put Energy Star ratings on appliances, building supplies, and homes.  Underwriters Laboratories—which is famous for its hugely-respected safety ratings—also offers UL Environment (ULE) certificates.  The Forest Stewardship Council has gotten a lot of wood and paper manufacturers to make the changes needed to earn its FSC certificate.  And buildings that conform to the US Building Council’s LEED standard get a lot of attention both from their owners and from those who work in the buildings—and seem to enjoy them.

Certification is also becoming part of supply chain management.  Manufacturers (like Procter & Gamble and Seventh Generation) want to ensure that their suppliers are well-behaved.  Retailers (like WalMart and Home Depot) need to be sure that the products they sell are socially responsible.  These companies are sending out surveys and asking for data on carbon use, chemical emissions, and labor practices.  Suppliers are hoping that getting approved in one program will turn into a credential they can use to get passes from other programs.

Of course, it is hard to know how far to trust certificates.  How can a consumer know whether or not the wood in a chair really came from a sustainably harvested tree?  How can we know that the chair wasn’t made using child labor or that the varnish on it didn’t pollute the water in the community where it was made?  How do we know that the drivers who transported our chair were properly trained and that their pensions and health care are adequate?  Can we be sure that the store we bought the chair in didn’t just stick a fake certificate on it?

The fact that most certification programs rely on self-reported data can make things worse.  Some suggest that a third party, like a consultant or an accounting firm, verify this data.  But there is obvious pressure on these third parties to give favorable rulings.  In most certification programs, there is no central repository of the data that has been collected.  Thus, there is no easy way to cross check the data, either at a top level or in detail.

There are a few independent organizations that  do their own testing and rating of products.  For instance, the Eco Index is tracking 377 eco labels in 211 countries and trying to put together a supply-side view of product sustainability.  ULE is working on an ambitious plan to integrate rigorous third party review of sustainability information into a standard called ULE880.  We are also seeing people use our ratings as a high-level way to test whether or not a company is likely to be telling the truth, when it claims to be performing responsibly and sustainably. 

In the end, certification systems need the same kind of independent audit process that financial statements receive—plus the same external review and criticism that financial statements are supposed to get from investors and analysts.  We hope that our CSRHUB ratings may eventually become part of this feedback loop.

Bahar Gidwani is a Cofounder and CEO of CSRHUB. Formerly, he was the CEO of New York-based Index Stock Imagery, Inc, from 1991 through its sale in 2006. He has built and run large technology-based businesses and has experience building a multi-million visitor Web site. Bahar holds a CFA, was a partner at Kidder, Peabody & Co., and worked at McKinsey & Co. Bahar has consulted to both large companies such as Citibank, GE, and Acxiom and a number of smaller software and Web-based companies. He has an MBA (Baker Scholar) from Harvard Business School and a BS in Astronomy and Physics (magna cum laude) from Amherst College. Bahar races sailboats, plays competitive bridge, and is based in New York City.

Photo inset: Creative Commons licensed by joiseeshowaa.