2016–2017
IKEA GROUP
ANNUAL REPORT Great design, quality and affordability for all
IKEA GROUP
Great design, quality and affordability for all
CONTENTS IKEA GROUP INTRODUCTION 07 10 11 13 15 16
A message from Peter The vision and ideas IKEA GROUP at a glance Highlights of year Tackle climate change Co-workers
To create a better everyday life for the many people.
SUSTAINABLE GROWTH 19 21 23
Creating sustainable growth Research on life at home to products in stores and retails Development goals
PEOPLE AND PLANET POSITIVE 27 29 31 33 35 37 39
Positive strategy Cotton Wood and paper The IKEA way Packaging Democratic design Foundation
IKEA GROUP FINANCES 43 45 47
Our financial year 2016 Business ethics IKEA group taxes
01
IKEA GROUP INTRODUCTION
07 A message from Peter 10 The vision and ideas 11 IKEA GROUP at a glance 13 Highlights of year 2016 15 Tackle climate change 16 Co-workers
Peter Agnefjäll
INTRODUCTION | A MESSAGE FROM PETER
A MESSAGE FROM PETER AGNEFJÄLL
“We are in a good place for the future, always on the way. Together we build a better IKEA, taking on challenges and opportunities that lie ahead.” PETER AGNEFJÄLL
We want to attract, develop and retain people with diverse talents. As a result of everyone’s hard work, sales grew to EUR 34.2 billion.
Thanks to all our fantastic co-workers, we have had another year of strong growth and I am very happy to see the good steps we are taking to full our strategy “Growing IKEA Together in 2020”. Now, half way through the journey, much has been accomplished and by working together, we will continue to offer our customers improved products and a better experience. To create a better everyday life for the many people—we have a fantastic vision that guides us, today and into the future. And thanks to the great work of all co-workers, we continue to inspire more visitors and customers to visit the IKEA stores and websites. FY16 was in many ways a remarkable year. Together, we rallied around food and life in and around the kitchen with the theme It Starts with the Food. We created a movement, meeting and bringing people together around food in new ways. And we made the food served and sold in our stores more healthy and sustainable. As part of our sustainability agenda, we continued to invest in renewable energy. By the end of FY16, we have committed to own and operate 327 wind turbines around the world and have invested in 730,000 solar panels on our buildings worldwide.
Together with the rental income from the shopping centre business (IKEA Centres), total revenue increased by 7.4% to EUR 35.1 billion. During the year, we also prepared for a big change. On 31 August 2016, we sold our product development, supply chain and production companies to Inter IKEA Group. Following this change, and as a new financial year starts, IKEA Group has a new organization in place, ready to focus on bringing us closer to customers to meet their ever-changing need whether it’s through stores, pick up and order points or online. We are in a good place and we have an exciting journey ahead. We're getting ready to open stores in India and Serbia. We do not only want to grow we want to do so in a purposeful way. Our growth and profitability give us the freedom to choose our own way, the flexibility to move fast and the independence to think and invest long term. It’s also crucial in delivering to our vision. That’s why, as we move into the future, we will continue to have a strong focus on building value for customers, and on continuous growth and efficiency in our operations. It will mean that we use our resources and capabilities in new ways and unlock entirely new opportunities. We have a fantastic journey ahead of us and we are only getting started. Peter Agnefjäll, President and CEO, IKEA Group
Whether it’s doing our part to tackle climate change by offering 100% LED, or cotton from more sustainable sources, we will continue to invest in commitments to make a positive difference for people and the planet, in our own business and beyond. Investing in people is about giving people a chance to grow, both as individuals and in their professional roles.
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Our company has great design, quality, and affordability for all.
INTRODUCTION | THE VISION AND BUSINESS IDEAS
THE VISION AND BUSINESS IDEAS
IKEA has founded seven decades ago, in the farmlands of Småland, Sweden. The world has changed a lot since then, and so has IKEA. But even as a major global retailer, we always stay true to our values of being thrifty with what we have, working together and turning challenges into possibilities. Today, these values are more relevant than ever, as society faces some of the greatest social and environmental challenges of our time. We want to use our in influence, as a global company, to contribute to tackling these challenges. That is why we have set an ambitious strategy to create a positive impact on people and the planet.
Vision and business ideas “To create a better everyday life for the many people”, this is the IKEA vision. Our business idea is “to offer a wide range of well designed, functional home furnishing products at prices so low that as many people as possible will be able to afford them”. In other words, we earn our money before we spend it. This makes it possible for us to make long-term investments for the future. The IKEA vision is the foundation for our growth. We want to make sure that IKEA is accessible, so that more people can create a better everyday life at home. Bringing the concept to life The IKEA concept comes to life in many ways: through our worldwide stores, in the IKEA catalogue, via the web and apps. And most importantly in millions of homes around the world. We are working towards having an overall positive impact on both people and the planet while we continue to grow.
The story behind the name The IKEA name combines the initials of IKEA founder, Ingvar Kamprad, (IK) with the first letters from the names of the farm and village where he grew up Elmtaryd and Agunnaryd (EA). The IKEA logo has hardly changed during the company’s history and the 1967 version remains a consistent symbol of the business. Together we save money The IKEA customers play an important role. We at IKEA do our part by packaging the products smartly. And you do your part, assembling the products. Together we not only save money, but it also means easier transport for you and less trucks on the road for our environment. To reach many people, our products must be of good quality and affordable. We design with our customers’ needs in mind.
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IKEA GROUP AT A GLANCE
124,400
19,800 IKEA Industry
Retail
163,600
9,700
Range & Supply
Co-workers
7,500 Distribution
2,155 Shopping Centres
With the change in ownership of product development. Supply chain and production companies, some 26,000 co-workers became part of the Inter IKEA Group during FY16.
INTRODUCTION | IKEA GROUP at a glance
33% 48% Female Managers
Store Visits
Group Management
Shopping Centre Visits
We want a workplace where 50% of leadership positions are held by women and 50% of men. More than half of our co-workers are women, as 48% of our managers, 33%* of Group Management.
2.1
Billion
Visits to IKEA.COM
783
Million
425
110
Million
Million
Visits to catalogue, apps
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IKEA GROUP HIGHLIGHTS OF YEAR 2016
2.1 billion for renewable energy We have invested EUR 1.5 billion in renewable energy since 2009, and have committed a further EUR 600 million. A bright, sustainable future with LEDs In FY13, we sold more than 22 million LED products, of which over 12 million were LEDA-RE LED light bulbs. The LED bulbs alone will save our customers a total of $86 million per year through reduced electricity costs (compared to incandescent bulbs). In Portugal, we supported an art installation of 1,200 LED bulbs in the cultural centre of Lisbon over the Christmas holidays to inspire customers to live a more sustainable life.
Gender equality IKEA Switzerland was the first company worldwide to achieve the highest level of Economic Dividends for Gender Equality, Certification. This global standard evaluates equal opportunities for men, women in areas such as pay recruitment leadership development training mentoring, flexible working,company culture. Celebrating street art We celebrated street art in our “Art event 2017” and made the work of 12 international street artists available for our customers. This brought street art at an affordable price from various locations around the world into the homes of the many people.
Life in the kitchen To make sure that we can create smarter and better home furnishing solutions, we constantly learn about what life at home is like for different households around the world. This year we surveyed 11,000 people’s habits and attitudes to food in big cities around the world, like Shanghai, New York, Berlin, and published them in our Life at the Home report. Raising our voice on climate change World leaders met in Paris in December 2015 and achieved a historic agreement to tackle climate change. We were there—calling for climate action lighting up the city with 800,000 Christmas lights, powered by clean energy.
Healthier, more sustainable veggie balls With our new veggie balls, we are offering an even wider variety of healthier and more sustainable food in our restaurants and bistros. And with a carbon footprint of just 5% of that of traditional meatballs, they are better for the planet too. Making life simpler with cordless charging Our new cordless charging solutions were first introduced in our stores in April 2015. The “Home smart” collection’s beautiful and functional home furnishings such as bedside tables, lamps and desks double as charging spots for mobile phones and tablets. Powered by nature Another 30 windmills were taken into operation in Härjedalen, Sweden, in May 2015, which means we are now energy independent in the Nordic countries. This takes us another step closer to achieving our goal of producing as much renewable energy as we consume in our global operations by August 2020.
INTRODUCTION | IKEA GROUP and highlights of year 2016
EUR 34.2 BILLION TOTAL SALES FY16 (million) 17.4 31.9 34.2
17.4
31.9
34.2
FY06
FY15
FY16
Total sales translated into Euro increased by 7.1%. Adjusted for currency impact, total sales increased by 7.9%.
The “Home smart” collection’s beautiful and functional home furnishings.
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ALL-IN TO TACKLE CLIMATE CHANGE
In December 2015, France hosted the United Nations Climate Change Conference, officially known as the 21st Conference of Parties (COP21) in Paris. World leaders met at the event with the objective of achieving a universal agreement on tackling climate change.
“Every government, business, and citizen has a role to play in building a better and more sustainable future. The Paris Agreement, which was signed at the event, marked a turning point for humanity—a commitment to reducing carbon emissions to avoid the worst effects of climate change”, says Steve Howard, chief sustainability officer, IKEA Group. “We truly mobilized the business community. We Mean Business, the coalition we were part of founding, created a powerful platform for leading businesses to make commitments on climate change”. IKEA retail France lit up COP21 by installing a 20-metre-high wind turbine and 440 photovoltaic solar panels on the iconic avenue of Champs-Élysées, along with 120 bicycles, 60 swings, and 7 wheels so that passers—by could create renewable energy.
Through pedalling, swinging and running, approximately 1 million people helped create 3,000 kWh of energy, which was enough to light 800,000 LED Christmas lights for the entire holiday season. To connect with people who couldn’t visit the event, a digital platform was created to provide tips and ideas on how to live a more sustainable life at home. IKEA Retail France also donated 7,000 products to the official COP21 conference centre, which was later donated to a charity working for the homeless in France. Through our presence at COP21, we wanted to show that a few simple everyday changes can help us all live more sustainably, save money and reduce our impact on the environment. “We participated in the conference in order to share what we stand for, what we do to support, and to call for bold action to tackle this issue but we weren’t just addressing governments, businesses, associations, we believe that everyone has a role to play in addressing climate change.
It will take all of us, working together”, says Carole Brozyna-Diagne, sustainability manager, IKEA Retail France. Through our active participation at COP21, IKEA Group sent a strong message that forward—thinking businesses support bold action on climate change. “Our colleagues at IKEA Retail France did a brilliant job of engaging the many people at COP21. IKEA was highly visible and made an impact through all of our different activities. We are going all-in to tackle climate change, for example by switching the entire lighting range to energy efficient LED and in renewable energy. We must now look at where we can go further to make our business even more future proof climate positive”, concludes Steve.
INTRODUCTION | CO-WORKERS LEND A HELPING HAND
“IKEA is a humanistic, values-driven brand, company and employer with a vision to create a better everyday life for the many people.”
CO-WORKERS LEND A HELPING HAND
PETRA HESSER
Germany IKEA Retail Germany developed the initiative “Dein Einsatz”, means “Your Commitment” with the aim to help address the immediate need for furniture and other necessities in local refugee centres co-workers chose a project to work with and IKEA Retail Germany provided support by donating products worth up to EUR 10,000 to those projects. Altogether, more than 500 projects have been supported with over 16,000 refugees benefiting from these initiatives. Sweden In Sweden, all IKEA stores organized packing events where co-workers, customers, and representatives from save the children came together to prepare backpacks for children on the move and provide them with a sense of safety, comfort, and support. More than 37,000 welcome backpacks filled with toys and other products, mostly from the children’s IKEA range, were donated. Jannike Conradsen, project coordinator for the initiative says, “I am really proud of a number of co-workers that have been involved. It’s so powerful to see that we really can make a difference for those who need it the most”. Switzerland In close co-operation with regional authorities, IKEA Retail Switzerland has launched the “Refugee Inclusion Project” to give refugees a chance to enter the Swiss employment market and gain experience to help them in their future working lives. At the end of the project, refugees will receive a letter of reference and a certificate of work. This will help them in their future job search in Switzerland.
Austria By collecting nearly 24,000 signs of support as a “signal for solidarity”, IKEA Retail Austria not only created a sense of togetherness by involving co-workers, customers and partners, they donated around 30,000 IKEA products to help furnish close to 50 accommodations for refugee families worth EUR 300,000. The total value of the entire donation for the activity reached EUR 500,000. Denmark After working closely with local municipalities, IKEA Retail Denmark began offering trainee positions to refugees in need of work. During their traineeships, they are mentored by a co-worker, and currently all five stores have refugees working as trainees, with some progressing to take on full-time or part-time positions. Alongside this, the stores are also facilitating language and culture schools to further support integration. Canada IKEA Retail Canada donated nearly EUR 130,000 worth of IKEA home furnishing products and children’s toys to help welcome Syrian refugees. Brendan Sealed, Sustain—ability Manager, IKEA Retail Canada, commented, “By offering donations of home furnishings for refugees. We are not only providing the basic necessities for their new life in Canada, but more importantly offering the comforts of home in a time when they need it the most”.
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02
SUSTAINABLE GROWTH
19 Creating sustainable growth 21 Research on life at home to products in stores & retails 23 Development goals
31.9
Billion
In FY15 our sales grew to â‚Ź31.9 billion, up 11.2% compared to FY14.
SUSTAINABLE GROWTH | CREATING SUSTAINABLE GROWTH
CREATING SUSTAINABLE GROWTH
For us, growth is closely linked to understanding people’s lives at home. We improve our knowledge with consumer research and by visiting customers in their homes to see how they live. These insights are used to improve our range and services, and to decide on long-term investments in sustainable growth.
With people and their homes at heart, we look into global trends and always ask ourselves: “How do people live today, and how will they live tomorrow?” In some parts of the world, many of us will soon be living in big cities, in smaller homes without our own cars. We will live longer, and more of us will live alone or with many generations all in one household. As part of our constant research to improve our understanding of how people live,we visit thousands of homes around the world every year. By better understanding our customers involving them in our product development process, we can make products and solutions that they really want and need. And by continually exploring new ways to use materials and more effective production techniques, we are able to make better and affordable products.
We use the same approach when we develop our yearly themes. The aim for last year’s theme, “Bed & Bath”, was to provide our customers with better solutions for how they could have a better start, and end, with their day. With the insights from our research, we worked with partners through out our whole value-chain, which enabled us to offer a new and improved bedroom and bathroom products and solutions—a significant contributor to our growth in FY15. With 328 stores in 28 countries we are still small in most markets, and we see many opportunities to grow. Our longterm thinking means we can make important investments in the things our customers want and expect from us, now and in the future. For example, our new store formats and services make it easier for customers to visit IKEA by public. By collaborating with customers, suppliers, NGOs, governments other partners, we can develop a much deeper understanding of what they will need from us in the future. We know that however much we grow, our success will come from our focus on people, their homes making their life better.
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RESEARCH ON LIFE AT HOME TO PRODUCTS IN STORES & RETAILS
40
Shopping centres
Shopping centres We now operate 40 shopping centres and 25 retail parks, and we have 20 projects in the pipeline across several markets. These family friendly shopping centres all have an IKEA store as one of the main attractions. Online Online sales through our website and apps exceeded EUR 1 billion in FY15. Currently, we offer online shopping in 13 of our 28 retail countries. We are continually exploring how we can expand and improve the ways our customers can find out about our products be inspired by our range through digital channels, such as our website, apps and catalogue. Pick-up and order points Our three new pick-up and order points in Spain, Norway and Finland enable customers to see and buy selected products from our range, as well as collect pre-ordered purchases.
25 Retail
“The Swedish word KRAFTSAMLA means concentrating everyone’s efforts and doing things together, to get results. This was the spirit that got all of us at IKEA Spain excited and active in making our ‘Bed and Bath’ campaign such a big success.”
SUSTAINABLE GROWTH | RESEARCH IN LIFE AT HOME TO PRODUCTS IN STORES
Life at home can be very different for our customers around the world. But some things are the same: home is a place to sleep, eat and store things. Through extensive research including visiting homes and interviewing customers, we discover even more about how people live, and some of the findings are published in our “Life at home” report. Last year we learned that the bedroom is the place where we contemplate our day and recharge for the next. The bathroom can be a hectic crossroads, often meeting many different needs within one household. These are important spaces in every home, no matter how big or small, or where in the world. That is why in FY15 we focused on the bedroom and bathroom, where every day starts and ends, where people can be private, rest and relax. We further developed our range of products for these areas, including new bedroom series, bathroom accessories and textiles to provide space, storage and comfort. We also rebuilt the room sets in most of our stores to ensure they more closely reacted real life for households in the local market. With extra training and more co-workers available in the bed and bath areas of our stores, we provided visitors with further information about improved products, like our new mattresses and quilts for a good night’s sleep. By working together, we exceeded our sales target while enabling millions of customers to update and improve their bedrooms and bathrooms.
8.6
Million Mattresses
We sold enough mattresses for 8.6 million people to get a good night’s sleep, along with 26 million pillows.
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“Urgent action is needed to tackle climate change Communities across the world and the success of business depend on it.”
SUSTAINABLE GROWTH DEVELOPMENT GOALS
PETER AGNEFJÄLL
Decent work and economic growth We employed over 163,600 co-workers around the world in FY16, and we create employment for millions of people indirectly through our extended value chain. We want to ensure that what we do has a positive impact on their lives. Everyone should have access to decent work, under safe conditions. We set minimum requirements on the environment, social, working conditions throughout our supply chain through our code of conduct and programme for suppliers, IWAY. It ensures a mutual understanding with our suppliers. Some of whom we have worked with for several decades. We pay particular attention to vulnerable groups in our supply chain, such as migrant workers home-based and workers to ensure that access decent employment. Reduced inequalities We want to contribute to a more equal and inclusive society. Within our own operations, we want to create a work environment that enables all our co-workers to be themselves, regardless of their gender identity. We take a stand for decent jobs, fair wages and equality for the people in our supply chain. By helping to improve their lives, we can support positive economic, social and environmental development that contributes to reduced inequalities within and among countries.
Responsible consumption and production We aim to make high-quality, sustainable home furnishings that are accessible for the many people, not just the fortunate few. And we want to minimise the environmental impact of each product at every stage of its life, from sourcing to production, transport, use, and eventually end of life. We want our products to last as long as our customers need them and even longer! There comes a time when they’re no longer needed, and we are exploring how to close the loop to turn old products into a new resource. We already do this in our operations, and many of our home furnishing products are made from renewable, recyclable and recycled materials. It is not just about what we do, but what we can inspire our customers to do. Many of our products enable customers to live a more sustainable life at home, saving water and energy, and minimising waste.
Gender equality “To close the gender gap, we must all join together, governments, businesses, and individuals. There is a lot we can do in IKEA to boost women’s empowerment. Every step we take contributes to a better society. In September 2015, IKEA Switzerland became the first company in the world to reach the highest level of EDGE, the leading global standard for gender equality. This reinforces our commitment to ensuring a company structure culture that prevents pay gaps, under-representation of women in management positions, and that offers different career paths for women.” Affordable and clean energy To secure a reliable source of energy for the future, we must transition to renewable. Since 2009, we have committed to invest EUR 2.1 billion in renewable energy. We have already committed to own, operate 327 wind turbines and installed 730,000 solar panels on our buildings. We work to improve energy efficiency across our value chain—in our own operations and by working with our suppliers. Our new home solar offer enables customers to turn their roofs into power stations, contributing to our ambition to make clean energy available and affordable for as many people as possible.
SUSTAINABLE GROWTH | DEVELOPMENT GOALS
LED bulbs sold in Renewable energy Foundation Donated (Million)
2.1
79
23.5
FY16
FY16
FY16
Switching our entire lighting range to energy efficient LED is one of the ways we are going all-in to tackle climate change. As a result of the Soft Toys for Education and Brighter Lives for Refugees campaigns, IKEA Foundation donated EUR 23.5 million. In FY16 we produced renewable energy equivalent to 71% of the energy consumption of our operations.
Climate action We need bold action from governments and businesses to secure the future of our planet. We use our scale and influence to advocate for strong policies on climate change. Our chief executive officer and Chief Sustainability Officer were both at the COP21 climate conference in Paris in December 2015. We partner with others through coalitions such as we mean business, RE100, to promote a low carbon economy. With 783 million visitors to our stores each year, we have a great opportunity to inspire people to act on climate change in their everyday lives, by taking small steps to cut energy, water use or reduce waste. Find out more about how we are inspiring action on climate change.
Life on land The production of raw materials we source can have a big impact on local ecosystems, biodiversity, and communities. The materials we use most are wood and cotton, and we have a big responsibility to source them in a way that protects, restores, promotes sustainable use of terrestrial ecosystems and biodiversity. We have a great opportunity to use our scale and influence to transform the wider industry for materials to more sustainable sources. All the cotton we use for our products is from more sustainable sources, using more sustainable farming practices that improve farmers’ livelihoods and working conditions, and protect the environment. Now we are going beyond our supply chain to make more sustainable sources the norm across the whole industry. In FY16, we sourced 61% of wood from more sustainable sources. To reach 100% by 2020, we need to work with others to increase the global supply of sustainable sources of wood. Our goal is to become forest positive and promote the adoption of sustainable forestry methods.
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03
PEOPLE AND PLANET
27 Positive strategy 29 Cotton 31 Wood and paper 33 The IKEA way 35 Packaging 37 Democratic design 39 Foundation
PEOPLE AND PLANET POSITIVE STRATEGY
We are taking bold steps to transform our business respond to a rapidly changing world. This is our opportunity to play a small, but significant, role in helping to create a more sustainable planet. FY16 has been an important year. In December 2015, the world’s leaders committed to keep global warming well below the 2oC threshold, and the launch of the UN Sustainable Development Goals (SDGs) established a strategic direction for governments and business to create a sustainable future. We know that to be a viable business in the long term, we need to be a sustainable business. And we want to go beyond this, by going all-in to create a positive impact for people and the planet. The People & Planet positive strategy Our sustainability strategy, People & Planet Positive, sets out how we are working to make a positive difference for people and the environment today and tomorrow. The strategy focuses on three areas where we can have the most positive impact.
More sustainable and healthier life at home Inspire and enable millions of customers to live a more sustainable and healthier life at home. Take the lead in developing and promote save and generate energy, reduce and sort waste and use water more efficiently—all at the lowest possible price. Strive for resource and energy independence Secure long-term access to sustainable raw materials, promote recycling and use resources within the limits of the planet. Produce more renewable energy than we consume and drive energy efficiency throughout our value chain. Take a lead in creating a better life Take a lead in creating a better life for the people and communities impacted by our business. Extend our code of conduct throughout value chain; be a good neighbour, act in the best interests of children and support human rights.
Growing IKEA together 2020+ In order to better reflect the new role and strategic priorities for IKEA Group, we have updated our long-term direction. A few elements are new, now when we have started our journey towards becoming the world’s leading multichannel home furnishing retailer. But our starting point remains the same: We are here to create a better everyday life for the many people. Peter Agnefjäll says, “We have a positive view on the future! But growth will not come by itself. By working together, we can achieve a lot and develop IKEA further—customer by customer, and market by market”. Growing IKEA Together 2020+ is the IKEA Group direction with a holistic growth agenda, reflecting our role and strategic priorities. The direction is built on the same strong foundation as earlier directions and is reinforced with an even stronger customer focus; the positioning of IKEA as a unique, meaningful, trusted brand, company, and employer, and the transformation into a multichannel retailer of all markets.
PEOPLE AND PLANET | POSITIVE STRATEGY
New organisational structure In order to better support customs focused multichannel strategy, our management structure has been updated. This change enables us to strengthen our focus on what is really at the heart of our business, our customers. Going forward We will deliver world-class customer experience through improved cooperation between our core areas Retail, Customer fulfilment and Centres, and together work to support expansion and customer experience in all touch points. The restructuring also means that we simplified our decision making structure by eliminating one management layer, in order to avoid double decision-making. With the changes now in place and effective as of 1 September 2016, the new structure better supports customer-centric growth and makes IKEA accessible to many more people. The future brings new opportunities Change brings us new opportunities. We have a fantastic vision that inspires and guides us. People’s needs dreams of a better everyday life are at the heart of everything we do, and our new structure better enables us to deliver on that vision. By understanding and responding to changes in society and in people’s lives, we will discover new opportunities to meet the needs of the future. It is a transformational
where the IKEA stores will continue to be at the heart of our operations and will continue to play a fundamental role as our most important touch point in a multichannel IKEA stimulating interest in home furnishing and connecting with people. Stores are planned to be opened in new countries such as India and Serbia, with rapid expansion plans. As our e-commerce solutions expand into all our markets, logistics and distribution become even more important to help meet customers in even more efficient ways. Our journey to becoming the world’s leading multi-channel home furnishing retailer has just begun. Most things still remain to be done. And everyone is needed. What a glorious future! IKEA GROUP going forward As we look to the future, we will be able to focus even more on our customers and accelerate the process to roll out multichannel in all our markets. “During FY16, we took the first steps in the work where we defined how we lead, work and organise going forward. Our direction ahead is clear: The strategic focus is on home furnishing multichannel retailing.
This means that we will create an even better customer experience going forward and that everyone will have an even stronger focus on the customer and on our ability to grow”, says Peter. “Our opportunities are great. Many people across the world don’t yet have access to IKEA. In most of our markets we are still relatively small, and we have good opportunities to continue to grow in the countries where we operate. With more than 783 million visits to our stores, 2.1 billion visits to IKEA.com and 425 million visits to our shopping centres, we are well positioned and still just at the beginning of our journey”, Peter continues. “However, if we merely continue as we are today, we will not keep up with the changing expectations of our customers. Their expectations are constantly rising. We need to give every customer a fantastic experience online, in the stores and when they use our products at home”, says Peter. Our new direction will truly put our customers centre stage.
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We need more companies to follow IKEA’s lead.
PEOPLE AND PLANET | COTTON
COTTON
COUNTRIES WE SOURCE COTTON FROM (FY16) (% COTTON SOURCED)
17
25
5 We love working with cotton. In FY16 we used 130,000 tonnes for our bed linen, towels, furniture covers and more. That amounts to around 1% of the world’s cotton supply. But we are uncomfortable with the fact that conventional cotton production can have a negative environmental impact, and may be harmful to cotton farmers and their families. Many cotton farmers are smallholders with income levels close to or below the poverty line. That is why we commit to sourcing all our cotton from more sustainable sources and are working to improve conditions in the cotton supply chain. Organisations like Better Cotton Initiative (BCI) support farmers to improve their yields and incomes, enabling them to break the cycle of poverty. In FY16, all of the cotton we used came from more sustainable sources. Of the total amount we use in IKEA products, 17.8% is recycled cotton. The remaining 82.2% is contion grown to the Better Cotton Initiative (BCI) Standard (69.4%), or farmers working towards Better Cotton or another more sustainable cotton, such as the ‘e3 Cotton Program’ in the USA (12.9%). We reached this milestone at the end of FY15, so our challenge this year was to maintain 100%. To do this, we focused on putting the routines, training, and processes in place to turn cotton from more sustainable sources from an ambitious, ground-breaking project to our usual way of doing business.
In FY16, we conducted 40 audits with our suppliers and sub-suppliers. We want our customers to know that all of the cotton in IKEA products is produced in ways that are better for people and planet. That is why, in FY16, we communicated the milestone and the benefits it brings through store communication, videos, on our website and through social media. Evolving the cotton industry. We're positive about our progress, but we know that just one company by itself cannot transform a whole industry. We are one of the world’s largest users of Better Cotton. By sharing learning and experiences with the wider industry, BCI aims to improve the lives of cotton farmers and increase demand for—and supply of Better Cotton so that it makes up 30% of global cotton production by 2020. Our Cotton Leader, Pramod Singh, sits on the BCI Council and provides support and advice for new members of BCI. We work with government agencies, global and local partners to run projects in our sourcing countries.
11 23
18 India
Turkey
China
USA
Pakistan
Others
COUNTRIES from more sustainable SOURCE (% COTTON SOURCED) 76 94.8 100
76
94.8
100
100
FY14
FY15
FY16
Target
Includes cotton grown to the Better Cotton Initiative (BCI) Standard, farmers working towards BC, sustainable cotton from the USA (such as the ‘e3 Cotton Program’), and recycled cotton.
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WOOD AND PAPER
Wood is fundamental to IKEA. We are one of the biggest users of wood in the retail sector globally. Around two-thirds of IKEA home furnishing products contain wood, and we use paper in notebooks, napkins and much of our packaging.
In FY16, we used 15.75 million m³ of round wood equivalent, which is 2% less than FY15, despite an increase in the volume of products containing wood that we sold. This was thanks to new product designs and materials that enable us to make more from less. Wood is a beautiful, durable material that can last for generations. But forests are fragile and sensitive to how we treat them. The size of our operations means we have a great opportunity and responsibility—to protect the world’s forests. That’s why we have a goal to become forest positive. We aim to source 100% of our wood from more sustainable sources, and work with others to increase the area of global forests that are managed sustainably. All our wood is sourced in compliance with the IKEA Forestry Standard. In FY16, 61% of the wood we sourced came from more sustainable sources, including 57% from FSC® certified and 4% from recycled sources. IKEA is one of the world’s biggest users of FSC certified wood, purchasing over 9 million m³ annually—which accounts for over 3% of global output.
Around 30% of the wood we use comes from priority areas, where there is a higher risk of illegal or irresponsible forestry practices, such as China, Russia, South and Southeast Asia and Southeast Europe. We set an ambitious goal that all wood from these countries would come from more sustainable sources by August 2017. This raised the status of more sustainable sources of wood from those countries from a ‘goal’ to a ‘requirement’. We have achieved this milestone and from 1 September 2016 100% of our wood from priority areas was from more sustainable sources. From 50% in FY15 to 61% in FY16, we are moving closer to our 2020 target to source 100% of wood from more sustainable sources. However, reaching this goal will be a challenge. Although all wood that we source fulfils the IWAY Forestry Standard, we are already starting to see the limits of FSC certified wood available in the markets we source from—particularly given our big push in FY16. With current global availability, we predict that we could hit 80% by 2020. To reach 100% we need to think bigger.
PEOPLE AND PLANET | WOOD AND PAPER
COUNTRIES WE SOURCE wood FROM (FY16) (% WOOD SOURCED)
TYPES OF WOOD SOURCE(%)
40.6
27.7
36.5
58.7
7.0 4.3
6.9
5.2 5.4
6.9
Poland
Lithuania
China
Solid Wood
Russia
Germany
Other
Wood-based board
Sweden
Romania
TOTAL WOOD IN IKEA PRODUCTS (MILLION M³ RWF)³
WOOD FROM MORE SUSTAINABLE SOURCE4 (% WOOD SOURCED)
15.5
41
94.8
50
15.7
61
15.5
94.8
15.7
41
50
61
FY14
FY15
FY16
FY14
FY15
FY16
3 Round-wood equivalent (rwe) is the volume of round-wood (logs) required to produce IKEA products. Data covers all solid wood and wood-based board used in IKEA products, but excludes wood used in packaging and printing and paper used in products such as napkins.
4 From forests certified to the FSC Forest Management standard and recycled wood. Includes solid wood and wood-based board.
IKEA GROUP | 2017 ANNUAL REPORT
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THE IKEA WAY
Working with IWAY The IKEA way on purchasing products, materials and services—IWAY, is our supplier code of conduct and our programme for working with suppliers across IKEA. It is a pre-condition for doing business with us, and sets out our minimum requirements on the environment, social standards and working conditions. Working with new suppliers Suppliers are classified as “new” for the first 12 months from their first delivery date. Before we sign a contract, we require any new supplier to comply with a core set of IWAY requirements in areas such as business ethics, child labour, forced and bonded labour, severe environmental health and safety issues, minimum wages accident insurance. We call these IWAY musts, and we work with suppliers to maintain these at all times during our relationship. Once a contract is signed, we work with suppliers to ensure they implement uphold all IWAY requirements through a cycle of audits where needed, corrective action plans. Many varied suppliers Different industries vary hugely. We tailor IWAY working methods accordingly so that IWAY requirements can be applied appropriately to different supplier types.
Building strong relationships Good relationships with suppliers form the strong foundation for a stable, efficient and creative supply chain. Our average supplier relationship is 11 years. Like any relationship, we take time to get to know each other, to build trust and develop shared expectations values. Our regional business units, experienced Sustainability Developers and Auditors are the face of IKEA for all of our tier 1 suppliers. Development compliance are two sides of the same coin. By working on both, we can support our suppliers to achieve good environmental and social performance that goes far beyond passing an audit, and we can work with them to maintain compliance in between audits. Sustainability Developers, across each of our seven categories, collaborate with suppliers to find the best way forward on emerging sustainability concerns or to resolve IWAY compliance issues. Focusing resources With such a big supply chain, we have to focus our resources where they can make the most difference. Our best performing suppliers are categorised as “IWAY Well Developed”. Following initial IWAY approval and proof of consistent performance, they do not receive scheduled IWAY audits but do have unannounced audits and undertake self-audits. This enables us to pay closest attention to higher risk countries and suppliers that are likely to need more support in reaching and maintaining IWAY compliance.
Working with sub-suppliers Our sub-suppliers are a step removed from day to day contact with our teams and are not in a contractual relationship with IKEA. We ask our tier 1 suppliers to communicate IWAY must requirements with their own suppliers, and to register them on our sub-supplier tracking system. It is the responsibility of our tier 1 suppliers to audit their critical sub-suppliers and ensure IWAY must compliance. Staying up to date To maintain consistently high levels of IWAY knowledge and competence among co-workers, we provide training on four levels: basic, medium, advanced step 1 and advanced step 2. Basic training enables any IKEA co-worker to learn about the importance of IWAY, while the advanced training and ongoing competence development is focused towards our sustainability developers and auditors. During FY16, the compliance monitoring group conducted two reviews of the sustainability compliance auditors approval working method to ensure their continued competence, one in East Asia and Americas.
PEOPLE AND PLANET | OUR SUPPLIERS
OUR SUPPLIERS7
CATEGORY
NUMBER
Home Furnishing
DESCRIPTION
1,0288
Make our home furnishing products. These were the first suppliers to work with IWAY when we launched it in 2000.
Transport and services providers land and ocean
250
Transport our products to stores and distribution centres by road, rail, river and sea. No airplanes are used in our goods supply chain.9
Transport services providers customer delivery customer services
94
Deliver directly to our customers and provide product picking in-store, assembly and installation services. Not all service providers are contracted centrally—see also Retail service providers below.
IKEA Catalogue
31
Provide the pulp, paper and print services for our printed catalogue¹0
IKEA Food (global suppliers)
88
Provide the food and ingredients for the core range in IKEA Bistros, Restaurants and Swedish Food Markets.
IKEA Indirect Material and Services (IKEA IMS)
371
Provide the products and services needed to run our business. This includes equipment in our stores (such as trolleys, racking and lighting), uniforms for our co-workers and services such as facilities management and printing.
Retail cleaning, security, waste management and customer delivery service providers
359
Service providers to our retail organisation: cleaning, security, waste management and customer delivery providers centrally contracted through our Transport & Services function management and printing.
IKEA Components
381
Provide components and materials to IKEA suppliers and sub-suppliers that are used in IKEA home furnishing products¹¹
805¹²
Supplies solid wood, board on frame and board-based furniture to IKEA and companies in the IKEA supply chain.
IKEA Industry
7 Includes tier 1 suppliers within the scope of IWAY. 8 Includes IKEA Group’s own production operations. 9 Except in exceptional circumstances.
10 Does not include digital suppliers. 11 Does not include some suppliers delivering to packaging units. 12 Includes material suppliers and on-site service providers.
IKEA GROUP | 2017 ANNUAL REPORT
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PHASING OUT POLYSTYRENE PACKAGING
IKEA has phased out packaging solutions using expanded polystyrene (EPS) foam and replaced them with recyclable and more sustainable alternatives. “Why should we fill the air in our at packs with something that is more dangerous than the air itself?”, Says Peter S Larsson, packaging sustainability leader, IKEA of Sweden. We kept asking ourselves this question and decided to develop recyclable alternatives that are as good or better. It took four years, but now we can say “we made it!”, He continues. Polystyrene packaging is a cheap, durable and easy-to-use packaging material, widely used all around the world. But it is also a fossil-based product which can’t be recycled at industrial scale, and in some regions ends up in land fills. Still, there was a big resistance towards phasing out polystyrene packaging, both internally and with many suppliers. “Why should we change something that is good, cheap and something that we’ve used for ages?”, was a common way of thinking. Intensive development work took place. It took four years but the result will probably change packaging solutions in the home furnishing industry for good.
“Together with many co-workers and suppliers, we have managed to phase out and replace polystyrene packaging with recyclable and more sustainable bre-based materials. It can be recycled many times and works great together with the recycling systems used by most countries today”, says Peter.
Expanded polystyrene (EPS) foam has traditionally been used extensively for packaging because it is cheap, durable and lightweight. But it is fossil-based, and hard to recycle in many places. We set out to find a replacement, after a lot of research, we succeeded! The new material is honeycomb-shaped and acts as a natural shock absorber. Because of the holes between the hexagons, and it is light, yet strong; it’s made from fibre based materials and therefore fully recyclable.
PEOPLE AND PLANET | PHASING OUT POLYSTYRENE PACKAGING
The change also means that IKEA reduces the use of expanded polystyrene by 8,000 tonnes per year. This equals 7,400 trucks filled with polystyrene foam or more than half the volume of the Empire State Building. The decision to change filling material in IKEA at packs is valid for all packaging except for appliances. “We are simply too small in this segment to be able to affect the global industry. We are working on a more sustainable solution even within this field”, concludes Peter.
IKEA reduces the use of expanded polystyrene by 8,000 tonnes per year.
IKEA GROUP | 2017 ANNUAL REPORT
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DEMOCRATIC DESIGN
Everyone has the right to a better everyday life. This belief steers everything we do and it is why we want all of our products to have great form, function, and quality, be produced sustainably and to enable a more sustainable life at home, all at a low price. We call this democratic design.
This belief is why we design and develop all of the products in the IKEA range with five dimensions in mind, form function, quality, sustainability and low price. By creating products without compromising on any of these aspects, we become truly unique—offering a product range at an affordable price so that as many people as possible can enjoy them. We call it democratic design. The design of IKEA home furnishing products starts with understanding people’s everyday needs and dreams at home. For many companies, the design is simply about how something looks. It’s shape. Its colour. For IKEA, it’s something bigger. The design of IKEA home furnishing products starts with understanding people’s everyday needs and dreams at home. Because we believe everyone has the right to a better everyday life. At IKEA the way we think about designing and making products is called democratic design. It’s based on the five principles below, all equally important to making the right product for people.
Form Products that make our customers feel good while making the world a more beautiful place Function Products that work well and make everyday life easier and more meaningful. Quality High quality and long-lasting products that weather the wear and tear of everyday life. Sustainability Products made in ways that are good for people and the planet, and which can enable people to live more sustainable lives at home. Low price Products that are affordable and accessible to the many people.
PEOPLE AND PLANET | DEMOCRATIC DESIGN
9,500 Retail
Democratic Design is an idea with five dimensions—form, function, quality, sustainability and low price—and provides endless possibilities for developing the IKEA product range and making life at home better and more sustainable. Form is about the beauty of each thing, and also about how much better life becomes when you feel good about being at home. Function isn’t only about how well each thing works, but about how those things make everyday life easier and more meaningful. Quality is about lasting longer and ageing gracefully, and also about how much easier things become if the home can withstand the wear and tear of the everyday. When people can choose things that fit the ever-changing demands of life, then everyone will have good, long-lasting experiences. Sustainability is not only about producing in a way that’s good for the planet, but also about how life at home can become a way of having a positive impact on the planet. We always aim to exceed our customers’ expectations with new designs, function, sustainability, good quality and a low price—but not at any price. Sourcing more sustainable raw materials and supporting good working conditions are a prerequisite for sustainable business.
Creating the NORRÅKER dining series “We used the five elements of democratic design whenever we met a design challenge,” says Jon Karlsson who co-designed the NORRÅKER dining series with Nike Karlsson. All the cotton we use for our products is from more sustainable sources, using more sustainable farming practices that improve farmers’ livelihoods and working conditions, and protect the environment. Now we are going beyond our supply chain to make more sustainable sources the norm across the whole industry. Combining great quality craftsmanship with a familiar, homey feel, the chairs and table in the series are fine examples of Democratic Design. The visible fittings make assembly easier and enable us to offer the products to customers at a low price. “Tough technical demands for public use in restaurants resulted in a special look, a form that gives NORRÅKER a traditional feel with a modern Scandinavian expression,” says Nike. The design team integrated smart and userfriendly functions. “The stackable chairs save space and the rounded table corners make it safer for kids to run around. The hard-wearing surfaces withstand stains, and they are made out of sustainable, and 100% renewable material,” says Jon. But no matter how great the quality, the product won’t sell unless it is also beautiful and affordable. That’s why we chose solid birch, a wonderful sustainable wood at the right price.
IKEA GROUP | 2017 ANNUAL REPORT
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IKEA GROUP FOUNDATION
“A secure home, good health, a regular income, a desire to keep our children safe, to see them get a good education and succeed in life.” INGVAR KAMPRAD
Children are the most important people in the world. They have the right to learn, play and grow. IKEA Foundation, the philanthropic arm of Stichting Ingka Foundation (the owner of the IKEA Group), supports projects in some of the world’s poorest and most vulnerable communities—improving opportunities for children and their families. Along with its partners around the world, the IKEA Foundation focuses on four important areas of a child’s life: a place to call home, a healthy start in life, a quality education, a sustainable family income. The IKEA Foundation is the philanthropic arm of Stichting INGKA Foundation, the owner of the IKEA Group. The IKEA Foundation’s mission is to create substantial and lasting change by funding holistic, long-term programmes in some of the world’s poorest communities that address children’s fundamental needs: home, health, education and a sustainable family income, while helping communities fight and cope with climate change. The IKEA Foundation is working towards a world where children living in poverty have more opportunities to create a better future for themselves and their families. All children should have a safe place to call home, a healthy start in life, a quality education and a sustainable family income. The IKEA Foundation funds programmes that address these needs, creating circles of prosperity for children living in poverty.
PEOPLE AND PLANET | IKEA group FOUNDATION
IWITNESS Each year, the IWITNESS programme enables IKEA co-workers to visit projects run by saving the children, UNHCR and UNICEF, and supported by the IKEA FOUNDATION through annual good cause campaigns. August 2020
500
At least 500 co-workers from around the world will have participated in IKEA Foundation IWITNESS trips.
Since 2012
373
Co-workers from 34 IKEA countries have been on 59 trips across the globe
Designing for a good cause In February 2016, at the Democratic Design Day in Zurich, IKEA Foundation, the philanthropic arm of Stichting Ingka Foundation (the owner of the IKEA Group), teamed up with the UNHCR and the Dutch organisation, What Design Can Do (WDCD), to launch a global design challenge, showcasing design as a catalyst for change. The competition named What Design Can Do Refugee Challenge, called on designers and creative thinkers to submit game changing yet feasible ideas to help refugees integrate in urban areas. More than 600 teams from 69 countries entered their concepts to help improve the quality of life for refugee children and their families. Eight of those teams were made up of IKEA co-workers. The entries covered solutions to many different needs, from connecting people through digital social networks and access to knowledge and work, to practical solutions such as bicycle powered phone chargers and foldaway showers. Some of the most innovative ideas were presented to the world media and other influencers at the Democratic Design Day in June, held in Älmhult, Sweden. From the 600 entries, five winning idea were selected received funding of EUR 10,000 each, along with expert support to convert ideas into feasible plans and working prototypes. The final winners were announced in July 2016, with the jury consisting of internationally renowned design professionals including Marcus Engman, Design Manager, IKEA of Sweden.
A better world with good cause campaigns IKEA Foundation’s mission is to create substantial and lasting change by funding holistic, long-term programmes in some of the world’s poorest communities that address children’s fundamental needs home, health, education a sustainable family income, while helping communities light and cope with climate change. In FY16, just like in previous years, global campaigns for a good cause, Brighter Lives for Refugees and Soft Toys for Education continued to engage customers and co-workers to improve children’s lives. Brighter lives for refugees Through the brighter lives for refugees campaign, IKEA Foundation donated EUR 30.8 million to improve access to lighting, renewable energy and primary education for around 380,000 people in refugee camps across Asia, Africa and the Middle East. Soft toys for education Since 2003, IKEA Foundation donated EUR 88 million to Save the Children and UNICEF, supporting 99 educational projects for 12 million children across 46 countries in Africa, Asia and Europe.
IKEA GROUP | 2017 ANNUAL REPORT
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04
IKEA GROUP FINANCES
43 Our financial year 2016 45 Business ethics 47 IKEA GROUP taxes
We continued working on opening our first stores in India and Serbia.
IKEA GROUP FINANCES | OUR FINANCIAL YEAR 2016
OUR FINANCIAL YEAR 2016
SALES FOR REGION 4% 69% 9% 18%
Thanks to solid sales growth, EUR 4.2 billion net profit and an increasing focus on multichannel retailing, FY16 was another good year. We saw sales growth in comparable stores, as well as new stores and e-commerce. We also have our focus on integrating physical and digital commerce to enable customers to shop interact with us in ways that suit their needs. Our markets In FY16, our sales grew in 27 out of 28 markets with China remaining one of the fastest growing countries for IKEA Group together with Canada, Poland, and Australia. The five largest retail markets based on sales value were Germany, USA, France, United Kingdom and Sweden. We opened 12 new stores and 19 Pick-up and Order Points during FY16 and further developed our multichannel distribution network to increase accessibility for customers. We welcomed 783 million visits to our stores, 2.1 billion visits to IKEA.com and 425 million visits to our shopping centres. In addition, we continued working on opening our first stores in India and Serbia.
Our performance In FY16, total sales for IKEA Group amounted to EUR 34.2 billion. Total sales of goods translated into Euro increased by 7.1% and adjusted for currency impact, sales increased by 7.9%. Sales in comparable stores grew by 4.8% compared to FY15. In FY16, we offered e-commerce in 14 out of 28 markets, related sales grew by 29% to EUR 1.4 billion. We plan to roll out e-commerce to all our markets in the coming years. Together with the rental income of EUR 0.9 billion from IKEA centres, our total revenue amounted to EUR 35.1 billion, an increase of 7.4% compared to FY15. The rental income increased by 18.0% compared to FY15. Gross margin ended on 46.1%, an increase due to different sales mix and strong performance in the cost out agenda. Operating expenses as a percentage of revenues increased to 33.2%. The acquisitions of IKEA centres in the course of FY15 and increased expenses from business development contributed to the higher cost percentage in FY16. Our financial net result of EUR 0.9 billion was significantly above last years. During the year, cash and securities increased by EUR 6.5 billion to EUR 23.2 billion with a large contribution
4%
69%
Russia
Europe
9% Asia/Australis
18% Americas
from the sale of shares in our product development, supply chain, and production companies to Inter IKEA Group. The estimated cash consideration for the shares is EUR 5.2 billion. Net pro t was EUR 4.2 billion, an increase of 19.6% compared to FY15. Total assets increased during the year from EUR 50.0 billion to EUR 54.0 billion while we further increased our solvency with 38.9 billion of equity at year-end. Our strong financial position enables us to continue investments in co-workers, our stores, digital technology, the distribution network, as well as shopping centres and renewable energy. In FY16 we did not pay a dividend to our owner Stichting Ingka Foundation out of the result from FY15. However, a dividend of EUR 840 million will be paid out in FY17 out of the result from FY16.
IKEA GROUP | 2017 ANNUAL REPORT
43 44
“Simplicity and common sense should characterize planning strategic direction.�
BUSINESS ETHICS
INGVAR KAMPRAD
Investments Continued growth and long-term profitability give us funds to invest and to have a positive impact, both on our core business and through our financial investments. In FY16, we invested EUR 3.2 billion mainly in stores, shopping centres, distribution centres and renewable energy, to better serve our customers. Training We train our co-workers on our Code of Conduct, the IKEA Group Standard on AntiCorruption and the IKEA Group Policy on Anti-Corruption to ensure they understand how to act on behalf of IKEA. Our purchasing organization, Range & Supply, is more exposed to corruption risks and receives more in-depth training on business ethics.
Ethical conduct Honesty, respect, integrity and fairness are at the heart of everything we do. It is essential that our co-workers respect and live these values every day. We expect all co-workers and partners to comply with our Code of Conduct, Good Business with Common Sense, the IKEA Group Standard on Anti-Corruption and the IKEA Group Policy on Anti-Corruption. We take a zero tolerance approach to corruption, harassment, and alcohol and drug abuse. Misconduct We offer clear guidance on how to manage co-worker misconduct and undertake regular risk assessments in this area on a regional and national level. If any policy breaches do occur, we investigate quickly and carefully. We ensure a consistent accountable approach to our internal investigations through the IKEA Group rule of investigation. Anti-corruption The principles of transparency and fairness are key values of IKEA. Corruption is contradictory to the objective of doing good business. It damages the confidence our co-workers, suppliers, customers and other stakeholders have in us. We do not tolerate corruption of any kind. Anyone acting on behalf of IKEA Group must not engage in corrupt practices, such as accepting or offering kickbacks or loans. In FY16, we completed an extensive riskmapping exercise across the business, including finance, industry, property, retail, supply and IKEA centres.
Raising concerns At IKEA we promote an open culture of trust and honest communication, built on a foundation of respect and fairness. All co-workers are encouraged, and should feel empowered, to come forward in good faith and raise any concern they may have. Concerns are normally raised with the people involved. If this is not appropriate, they are raised with the respective manager, senior management, human resources or worker representatives. Any work-related concerns about corruption or misconduct can be reported to the IKEA Group trust line. In FY16, the Trust line was available 24/7 online and by phone in local languages across 44 countries. When an issue is raised, Trust line managers evaluate it escalate to Human Resources or Risk managers where appropriate. In FY16, we rolled out the Trust line to the United Arab Emirates. We aim to make it available to third parties, such as suppliers and shopping centre tenants towards the end FY17. In FY16, the Trust line received 165 reported incidents, 33 were investigated, of which 6 were allegations relating to corruption. We did not investigate concerns that were considered out of scope, as they did not include IKEA co-workers, or there was not enough information available to substantiate the matter.
IKEA GROUP FINANCES | BUSINESS ETHICS
TOP RETAIL SELLING COUNTRIES 14% 8% 5%
14%
14%
Germany
USA
9%
5%
France
Sweden
Honesty, respect, integrity, and fairness are at the heart of everything.
IKEA GROUP | 2017 ANNUAL REPORT
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IKEA GROUP OF TAXES
We have a strong commitment to manage our operations in a responsible way and to contribute to the societies where we operate. We want to create long-term value through growth, customer experience and a positive impact on people and the planet.
FY12-FY16 TAX (BILLIONS OF EUROS) Other tax and duties Corporate income tax
2
1.5
1
0.4
FY12
FY13
FY14
FY15
FY16
Over the last five years (FY12-FY16), corporate income tax and other taxes amounted to approximately EUR 7.7 billion.
Over the years, IKEA Group has had a good development and created tens of thousands of jobs directly in our stores and warehouses and indirectly at our external suppliers which in turn generate taxable incomes. We continuously invest throughout our business in stores, shopping centres, distribution, renewable energy lower prices to customers. We pay our taxes in compliance with national and international tax rules and regulations in a responsible and sustainable way. We enter into maintain long-term relationships with our stakeholders with regard to tax, based on trust and transparency. We do our utmost to ensure that our tax statements are true, timely and transparent. In FY16, IKEA Group corporate income tax was EUR 1.2 billion globally, which equals an effective corporate income tax rate of 21.6% (18.9% in FY15). In FY16, our total tax bill, including other taxes and duties amounted to approximately EUR 1.9 billion. Over the last five years (FY12– FY16), corporate income tax and other taxes amounted to approximately EUR 7.7 billion. In addition, we collected substantial tax amounts on behalf of governments, such as VAT and employee taxes.
IKEA GROUP FINANCES | Ikea group taxes
CONSOLIDATED BALANCE SHEET Assets (In millions of Euros)
FY16
FY15
Property, plant and equipment
23,033
22,840
Other fixed assets
1,955
2,515
TOTAL FIXED ASSETS
24,988
25,355
Inventory
1,713
5,498
Receivables
4,115
2,500
Cash and securities
23,151
16,659
TOTAL CURRENT ASSETS
28,979
24,657
TOTAL ASSETS
53,967
50,012
(In millions of Euros)
FY16
FY15
Long-term liabilities
1,385
2,061
Other non-current liabilities
1,908
1,971
TOTAL NON-CURRENT LIABILITIES
3,293
4,032
Short-term liabilities
5,126
4,880
Other payables
6,641
6,204
TOTAL CURRENT LIABILITIES
11,767
11,084
TOTAL EQUITY AND LIABILITIES
53,967
50,012
GROUP EQUITY
38,907
34,896
CONSOLIDATED BALANCE SHEET Equity and Liabilities
IKEA GROUP | 2017 ANNUAL REPORT
47 48
Ikea products should come free with happy meals.
IKEA has founded seven decades ago in the rugged landscape of Smüland in southern Sweden. Life here wasn’t always easy. To make ends meet, people had to be resourceful, work hard together and make a lot out of a little. We hope our Annual Report will give you some ideas, we will update this report. Read more to go IKEA.COM.
Designer Keshuang Wang Class GR601 Type System Instructor John Nettleton
Ikea.com 888–888–4532 1700 E. Bay-shore Rd. East Palo Alto, CA 94303