(Editor's note: The following has been updated with comment from Ikea.)
About 80 percent of furniture maker Ikea’s revenue comes from its stores in Europe — not the idea place you want to depend on your cash flow these days as the continent’s collective economy struggles to stay above water.
So Ikea is keeping itself busy expanding into – where else? – Asia, where it made $31.4 billion in its last fiscal year, which ended Aug. 31. Ikea had been opening one store a year in China but has now upgraded that to three, according to Bloomberg. And it is waiting to see what happens with legislation in India in hopes of entering that country’s retail space as well.
“Cautiously we are adding new markets,” Ikea CEO Mikael Ohlsson told Bloomberg. “We have big interest in opening in India. When the conditions are ripe in India we can start to prepare for an opening there.”
Back in January, the Indian government ruled to allow a 51 percent limit on foreign ownership of stores that sell a single brand, though the companies would still be required to have at least 30 percent of their needs filled locally, Bloomberg reports. Ikea has kept its eye on the rules since then and there may be some movement again to make it even easier for them to enter the country.
But it's another marekt — Russia — where the company is also focused on growth — as in old growth forests. That's where Ikea’s wholly owned production subsidiary, Swedwood (a cornerstone of its sustainable forestry pledge), is finding itself on the hot seat.
A new report from the Global Forest Coalition, alleges that Swedwood “is responsible for some rather irresponsible logging practices in a large swath of ancient forest in the Russian Karelia,” Forbes reports. The trees range in age from 200 years old to 600. This, of course, has more than few people upset and “several large protests” have been occurred at Ikea headquarters. According to the publication, Ikea consumes about 1,400 acres of forest each year.
"In response to our critique, Ikea has so far only answered with lies, claiming that they do in fact not cut virgin forests or forests with high conservation values, saying that the forests they log in Karelia are only 160 years old, with only a few older trees scattered around," said Daniel Rutschman and Linda Ellegaard Nordström, both of Protect the Forest, via email, the L.A. Times reports.
In other sustainability moves, Ikea U.S. is increasing its solar footprint and planting trees across America, while the company (along with adidas) have severed ties with the world's largest beef producer over claims of Amazon deforestation — but it's Ikea's own forestry policy that has environmentalists and other watchdogs keeping a close eye on the maker of all those Billy bookcases.
Update: Ikea spokesperson Mona Liss sent us this official comment on the Global Forest Coalition report:
Wood is one of the most important raw materials for IKEA. This is why we take responsibility for the forest from which we source our wood. We have very tough demands and among the toughest systems in the world to control that those demands are met in every part of the chain and in every forest.
Karelia is an area with high nature values and the decision to source wood in this area brings on great responsibility. We take that responsibility very seriously. We source with long term consideration and we want to make sure that the way we source helps protect biodiversity.
In Karelia, IKEA has taken the lead to develop responsible forestry together with authorities, NGOs and local interests. This is paving the way for a more responsible forestry, in our lease and in Karelia as a whole.
Swedwood was the first company to be FSC-certified in Karelia in 2006 and is annually inspected by an independent third party audit for compliance with the FSC standard.
Also, Anders Hildeman, forestry manager for Ikea, commented to the Los Angeles Times today: “This area, in Northern Karelia, does contain high conservation value forests. And inside the lease that Swedwood has up there, there definitely are high conservation values. We agree on that with the NGOs, that this is an area that has to be managed with a lot of extra precaution. So there’s no argument about that.”
[Top image via Shutterstock.com]