Green Procurement

As goods and raw materials are flowing through a supply chain, it is of importance for the entire supply chain’s environmental profile which raw materials and processes the other units have used. When purchasing, many firms have requirements that need to be fulfilled by their suppliers in order for a trade to take place. If the downstream company of a supply chain sets some demands for their purchasing, the upstream companies need to follow them if they want to sell their goods to this company.

In a paper supply chain where the main raw material is wood, green procurement concerns predominantly forest management and production facilities. For a forest supply chain to be a

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part of the climate change solution the forest must be managed sustainably. Both Norske Skog and IKEA have stated their requirements and preferences when it comes to forest management. For a product to be certified, the entire supply chain must be certified, from the forest, to the mills and the end product. Forest managers have systems for Sustainable Forest Management (SFM), while forest products traders rely on Chain of Custody certification so that they can trace the products origins (Norske Skog, 2011f).

Figure 7.b: Certification of Fresh Fibre through the Supply Chain

Source: Norske Skog Annual Report, 2010, p. 25

Both IKEA and Norske Skog require that their suppliers of wood are managing their forests sustainably. While Norske Skog recognizes PEFC, FSC and ISO 14001 standards, in addition to other declarations that prove that the forest is managed in accordance with national environmental laws and regulations, IKEA has stricter requirements. They only recognize FSC, including the Forest Management and Chain of Custody standards, as approved forest certification. However, even though they only recognize FSC, they still buy wood that does not fulfill these requirements. The share of certified fresh fibre that Norske Skog sources is 76 per cent in 2010 (Norske Skog Annual Report, 2010, p. 14), while of IKEA’s catalogue suppliers only 21 per cent is CoC-certified with FSC (IKEA Sustainability Report, 2010, p.

21).

Since it do not exist a Norwegian FSC-certification at the present, the FSC certification is not very widespread in Norway yet. According to Erling Bergsaker (2011) in NORSKOG the

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forest owners do as the market demand and today only two out of a few hundred Norwegian forest owners that sells through NORTØMMER is FSC-certified, while all of their members are PEFC-certified. It seems therefore that the forest owners have little problem selling timber that is only PEFC certified.

As Norske Skog does not own a significant amount of forest themselves, they are depending on the choices that forest owners make. Their global wood purchasing policy is to ensure the procurement of only sustainable managed forests. Wood represents 51 per cent of the total raw material that is consumed by Norske Skog (Norske Skog Annual Report, 2010, p. 26), and the IKEA catalogue is produced with paper coming from the production mill, Saugbrugs.

Traceability of the raw materials and its origin is important, and their CoC-system ensures that they only buy wood from sustainably managed forests. Saugbrugs is CoC-certified after the PEFC-standard for their SC uncoated paper (PEFC, 2011a).

The IKEA IWAY states some start-up requirements before one can become their supplier, both general and industry specific requirements. The basic requirements for their suppliers are not concrete numbers, but for example that there shall be “no severe pollution” from the suppliers business activities and they must “prevent pollution” and “work to reduce energy consumption” (IKEA Sustainability Report 2010, p. 38). Their criteria are vague, but at least they have a focus on it and state that their aim is to improve the greenness of their supply chain. They check their suppliers annually by sending them a questionnaire that they fill out and send back (IKEA Sustainability Report, 2009, p. 25). From 2010, IKEA decided to conduct systematic audits of the IKEA Catalogue Suppliers in addition to the questionnaires (IKEA Sustainability Report, 2010, p. 50).

IKEA has also industry-specific requirements, and states special requirements for the different types of suppliers, like furniture suppliers, food suppliers and catalogue suppliers. As mentioned above, IKEA introduced a new format for their catalogue in 2009, and with this some new specific requirements for supplier documentation followed. From now on catalogue suppliers have to document water usage as well as energy consumption, including share of renewable energy as IKEA requires that a minimum of 50 per cent of energy must come from renewable sources (IKEA Sustainability Report, 2009, p. 25-26).

Other requirements described in the Sustainability Report 2009 for the paper suppliers of the IKEA catalogue is that: no elementary chlorine may be used in the bleaching process, all transportation of fibre pulp and paper must be documented and specific limits on emission to

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air and water. With these measures taken, IKEA claims that its catalogue’s environmental impact has been reduced (IKEA, 2011c). Table 7.a gives a summary of some of IKEA’s key indicators of environmental performance for its 39 magazine catalogue suppliers. IKEA has managed to increase their performance in four out of five areas. However, the share of IWAY certified paper suppliers have decreased since the peak of 94 per cent in 2009. According to IKEA this is due to a new supplier that has not yet been certified, and they claim that measures have been put in place to get the supplier certified within the end of 2011. The share of FSC-certified suppliers is even less than IWAY-approved paper suppliers. Even though IKEA states a clear preference for FSC, the table shows that only one fifth of their fibres are FSC certified, however it is a great improvement from the five per cent until 2009. IKEA’s IWAY standard is their map for becoming a more sustainable business. They have a lot of preferences, but as the numbers indicate they are still behind on their targets. The recent increase of their share of certified wood is a consequence of more available certified wood over the last few years, as well as that they are more actively supporting certification processes in some of their main sourcing areas, such as Russia and China (IKEA Sustainability Report 2010, p. 59).

Table 7.a: Catalogue suppliers

Source: IKEA Sustainability Report, 2010