IKEA’s Risk-Based Approach to Supplier Due Diligence: Sustainability Innovation in the Supply Chain

Ikea stands as a beacon of responsibility and innovation within the realm of ethical procurement practices. As one of the world’s largest home furnishing retailers, IKEA is committed to driving positive change through its robust supplier due diligence practices. With over 1,600 suppliers in 50 countries, IKEA’s sustainability approach is rooted in transparency, collaboration, and continuous improvement.

But what makes their strategy truly noteworthy is their risk-based approach to managing suppliers—an approach designed not only to mitigate risks but also to create lasting value for people and the planet.

Deep-diving into Ikea’s Approach to Responsible Sourcing

At the core of IKEA’s strategy lies their IWAY Standard, a comprehensive code of conduct that outlines expectations for suppliers regarding human rights, labor conditions, environmental responsibility, and anti-corruption. To ensure compliance, IKEA uses a risk matrix that assesses suppliers on multiple dimensions:

• Location Risks: Suppliers in regions with higher socio-political risks, such as weak labor laws or environmental regulations, undergo deeper scrutiny.

• Material Risks: Products with significant environmental footprints, such as textiles or wood, are closely monitored to ensure responsible sourcing.

• Supplier Performance: Historical compliance records, audit findings, and recurring issues are used to categorize suppliers into risk levels, allowing IKEA to prioritize high-risk suppliers for intensive audits and corrective action.

  
  

The result? A supply chain where proactive risk identification helps IKEA achieve its ambitious goals, like becoming climate positive by 2030 and sourcing 100% renewable or recycled materials.

Collaboration and Continuous Improvement

What sets IKEA apart is its emphasis on collaboration. Instead of simply penalizing suppliers for non-compliance, IKEA works with them to address root causes and implement improvements:

• Training and Capacity Building: IKEA provides suppliers with tools and training to align with the IWAY standards, helping them improve their labor conditions, reduce environmental impact, and achieve long-term compliance.

• Audits and Follow-Ups: High-risk suppliers are subject to frequent audits, while all suppliers are regularly monitored to ensure ongoing adherence to sustainability goals.

  
  

Using AuditSense AI to Enhance IKEA’s Supplier Due Diligence Process

1. Insights: Elevating Risk Analysis

IKEA deals with vast amounts of data, from audit reports and supplier certifications to SMETA assessments and year-on-year performance metrics. Using AuditSense AI’s Insights feature, IKEA can analyze these multiple datasets to uncover trends and patterns—automatically.

The Insights center can identify recurring labor compliance issues in a particular region or highlight suppliers consistently reducing their carbon footprint, allowing IKEA to refine its risk matrix and prioritize resources more effectively.

2. Corrective Action Plans (CAP): Streamlining Supplier Collaboration

IKEA excels at collaborating with suppliers, but AuditSense AI’s CAP feature could bring structure, precision, and speed to these efforts. By automatically generating tailored corrective action plans as per a company’s internal guidelines, AuditSense AI can save responsible sourcing teams tens of hours in generating these remediation plans.

3. Due Action: Enhancing Accountability and Time Management

With a vast supplier base, tracking the status of corrective actions can be overwhelming. AuditSense AI’s Due Action feature provides a centralized dashboard where IKEA can monitor the progress of each issue, set deadlines, and ensure timely closure.

The Future of Supply Chain Responsibility

IKEA has set a high standard for building sustainable supply chains with its risk-based approach and commitment to supplier collaboration. This is a benchmark for other enterprises in the industry and social compliance teams globally to follow.

Elm AI’s AuditSense technology empowers companies like IKEA to lead the way in responsible procurement by transforming data into actionable insights, automating corrective actions, and streamlining accountability in a fraction of the time. For businesses looking to balance ethical responsibility with operational efficiency, this fusion of strategy and technology is the key to a brighter, greener future. Book a demo today to transform your supply chain!