IKEA: The timber monster
Part I: Fast furniture, over-consumption, fascism, cost cutting, and tax avoidance.
A recent documentary on the European TV channel Arte takes a close look at the impact IKEA’s demand for timber has on forests. Titled, “How IKEA is plundering the planet”, the film was made by Zavier Deleu and Marianne Kerfriden.
For two years, Disclose, an investigative media NGO, carried out research into IKEA and “its system of wood predation around the world”.
Over the next few days, a series of posts on REDD-Monitor will cover the various issues raised in this documentary. The documentary looks at the history of IKEA and how its appetite for cheap timber and never ending growth requires every more raw materials. The documentary team travels to Poland, Lithuania, Romania, Sweden, Brazil, and New Zealand. They investigate how IKEA hides behind the Forest Stewardship Council certification scheme, but still ends up consuming illegal timber.
This series of IKEA posts is a bit of a detour from REDD-Monitor’s usual focus. But one of the structural blind spots in the REDD system is its failure to address issues such as over-consumption, and the neocolonial way a giant corporation like IKEA can take over, and destroy, ecosystems on huge areas of land around the world.
In New Zealand, the documentary investigates IKEA’s carbon plantations which brings us back to more familiar terrain for REDD-Monitor.
IKEA paints a nice green picture of its operations, but the reality is that it relies on a vast amount of timber. IKEA consumes about 1% of all the timber harvested globally - more than 20 million cubic metres per year. In 2020, the NGO Earthsight calculated that IKEA consumes one tree every second. And the amount consumed keeps increasing.
Forest ecosystems that have developed over thousands of years old are being destroyed and replaced with monocultures to supply IKEA.
Fast furniture: Buying, throwing away, buying again
IKEA produces fast furniture. Frequent new designs and new styles, are marketed as something we need. Every year, IKEA adds 2,000 items to its catalogue. Much of it ends up in a landfill after 15 to 20 years.
Cecilia Soler, Professor of Marketing, at the University of Göteborg, explains in the documentary that,
“I think fast fashion, fast food, and fast furniture, the commonality is the low price and the severe environmental impact. When the price is very low, you can almost always be sure that somebody or something paid the price. Nature is paying the price for these low-priced products.”
And Sara Kristoffersson, Professor of Design History, Konstfack Art College, says that in the past in Sweden it was more common to buy large heavy pieces of furniture and furniture was passed down from one generation to the next. “Today it’s easier to buy a sofa, throw it away, and buy another one,” she says.
Buying, throwing away, buying again. “IKEA introduced mass consumption to the home decor industry,” the documentary states.
In a 1969 interview shown in the documentary, Ingvar Kamprad, IKEA’s founder, said,
“Our vision of furniture has evolved nowadays. Before, we invested for future generations. Now their fashion items. I wanted to move away from archaic concepts. In the past, we would buy a suit that lasted 20 years. Now, it’s more like two per year. It’s the same in the furniture industry.”
John Stenebo is a former assistant to Kamprad. Stenebo tells us that IKEA has created something called “neuro-marketing”:
“Everything in an IKEA store is geared to manipulating the customer. That’s the concept, from start to finish. Once you’ve taken one of those bags and put the first item in it, you are in a buying mood. That’s how they manipulate you. In the end, you will buy much more than you actually planned, because once you’ve put something in there then you just fill the bag and then your shopping trolley, always full. But they’re things you don’t really need.”
Ingvar Kamprad and the Swedish fascists
IKEA was founded by Ingvar Kamprad on 28 July 1943, when he was 17-years-old. According to IKEA’s website, Kamprad was “just a regular, small-town boy from rural Sweden who would come to be one of the world’s most successful entrepreneurs”.
The IKEA website doesn’t mention that Kamprad was a member of fascist organisations when he founded the company.
Thomas Sjöberg is a journalist whose book about Kamprad and IKEA was published in 1998. “Something significant happened in 1994,” Sjöberg says.
“It was revealed that Ingvar Kamprad had been an active member of Nazi and fascist organisations during World War II. It was simply outrageous. It was hard to imagine that Kamprad, this through and through good man, could have been a sympathiser of Nazi and fascist ideas. In addition, this was while World War II was raging. It was like a bombshell, not only in Sweden, but also worldwide.”
According to Stenebo, Kamprad’s former assistant, “Kamprad just laid down on his back and said, ‘Sorry, you know, this is true, but . . . ’. Within IKEA, that died down very, very, quickly.”
Kamprad tried to hide the fact that he remained a member of the Swedish Nazi party until 1951, six years after the end of the war.
Per Engdahl, the leader of the fascist movement in Sweden, died in 1994 and his personal correspondence were made public. The letters revealed that in 1942, at the age of 16, Kamprad had joined Engdahl’s Nysvenska Rörelsen (New Swedish Movement).
In 2010, Kamprad told journalist Elisabeth Åsbrink that “Per Engdahl is a great man, and I will maintain that as long as I live.”
Kamprad was also a member of another fascist organisation, Svensk Socialistisk Samling (Sweden’s Socialist Union - the successor to the Swedish Nationalist Socialist Workers Party).
In 1994, Kamprad wrote a letter to IKEA’s employees apologising for his links with fascists in the 1940s and 50s. The period was “a part of my life which I bitterly regret,” he wrote.
“You have been young yourself. Perhaps something happened during your own youth which you now, a long time afterwards, think was silly. In that case it will be easier for you to understand me.”
Sjöberg is not convinced by this argument. He says that,
“I also found a photo of Ingvar Kamprad taken in 1950. At the time he was 24 years old. In this photo he was wearing a fascist badge on his lapel at a fascist conference in Malmö. For me it was great to be able to show that Kamprad’s discourse about his alleged youthful mistakes was completely false.
“But it had no long-term consequences. It was like a damp squib. People continue to buy his products. They don’t care that he was a Nazi. What they want is cheap and good quality furniture. That’s all.”
IKEA’s cheap furniture
In the 1950s, because of IKEA’s low prices, most of the Swedish furniture industry boycotted IKEA.
Kamprad started looking for suppliers outside Sweden, in Finland, Poland, and Russia. IKEA found cheaper timber, and cheaper labour, and therefore cheaper manufacturing costs.
Stenebo, Kamprad’s former assistant, explains IKEA’s move to Poland:
“They were fairly good at making wooden furniture. Above all, they were extremely cheap, compared to the West, anyway. By doing that, you could source furniture at extremely low prices and very high volumes as well. That started in the 1960s and just kept expanding over the years.”
Sales boomed, helped by the fact that following World War II, large numbers of people in Sweden moved from the countryside to towns and cities.
In 1965, the Swedish government introduced the Miljonprogrammet, a public housing programme to build one million new homes in 10 years. All of these houses needed furniture.
Also in 1965, IKEA opened the largest furniture store in the world. It was built in a suburb called Kungens Kurva, a suburb of Stockholm, 20 kilometres south of the city. This was a new way of selling furniture that was reliant on customers having cars. It was also another cost-cutting move. Land outside the city was cheaper.
Sjöberg says,
“All you had to do was leave the motorway, park in front of IKEA, load the car with furniture, and drive back home. Previously, that just did not exist. In the town centres, there were only small local stores. Cars became, to a certain extent, IKEA’s best friend. Hotels were even built so that customers could stay overnight. After an eight-hour drive and spending the day at IKEA, you could sleep in an IKEA hotel, eat IKEA food, and drive home the next day. It was just perfect.”
The stores were self-service, just like the hypermarkets that also appeared around that time. And the company’s flat-pack furniture saves storage space and reduces the company’s storage costs.
Cheap material, cheap labour, and short product life resulted in huge profits for IKEA.
IKEA’s tax avoidance
One area that the documentary does not cover is IKEA’s corporate structure and tax avoidance. In 2006, The Economist investigated how “The overall set-up of IKEA minimises tax and disclosure, handsomely rewards the founding Kamprad family and makes IKEA immune to a takeover.”
Kamprad moved to Switzerland in 1973 to avoid paying Sweden’s high taxes. He returned in 2014 four years before his death.
Since the early 1980s, IKEA has not legally been a Swedish company. The parent company is a private company called INGKA Holding B.V. based in Leiden, in the tax haven of the Netherlands. This company is in turn wholly owned by Stichting INGKA Foundation, a tax exempt, non-profit organisation, also based in Leiden, the Netherlands. Kamprad founded Stichting INGKA Foundation in 1982.
Stichting INGKA Foundation is one of the largest non-profit organisations in the world.
The Economist reported that five people form an executive committee to run the Stichting INGKA Foundation. Kamprad chaired this committee. The committee appoints the board members of INGKA Holdings. When one member of the committee leaves or dies, the remaining four appoint a replacement. “Nothing can happen at IKEA without the committee’s agreement”, The Economist wrote.
The IKEA trademark and concept is owned by Inter IKEA Systems, another private company registered in the Netherlands. Inter IKEA Systems is not part of the INGKA Holding group. The Economist reported that Inter IKEA Systems’ parent company is Inter IKEA Holding, registered in Luxembourg which belongs to a company with the same name registered in Curaçao.
The Economist reported that IKEA refused to identify the beneficial owners of Inter IKEA Holding.
Inter IKEA Holding makes its money from the franchise agreements it has with each IKEA store. All franchisees pay 3% of sales. The INGKA Holding group is the biggest franchisee.
“Clearly, the Kamprad family pays the same meticulous attention to tax avoidance as IKEA does to low prices in its stores,” The Economist concluded.
In 2016, the Greens/European Free Alliance in the European Parliament put out a report titled “IKEA: Flat Pack Tax Avoidance”.
The report found that from 1991 to 2014, the Inter IKEA Group “seems to have used a Dutch conduit company to avoid paying tax on 84% of the €14.3 billion in royalty income it received from IKEA stores around the world”.
In the six years from 2009 to 2014, IKEA avoided €1 billion in tax revenues.
The report highlights another part of the IKEA corporate structure: the IKANO Group, which is controlled by Kamprad’s three sons. It is owned through a holding company in Curaçao. “IKANO’s main lines of business are financial services and real estate,” the report states.
The Greens/EFA report states that Inter IKEA Holding (registered in Luxembourg) is owned by Interogo Foundation, registered in Liechtenstein in 1989. “This arrangement remained a closely-guarded secret until it was exposed by Swedish investigative journalist Magnus Svenungsson in 2011,” the report states.
Here’s how the report explains the money flow:
IKEA Group subsidiaries move a large part of their income to Inter IKEA Systems BV in the Netherlands. Subsequently the Inter IKEA Group makes sure much of this income remains untaxed by transferring it (directly or indirectly) to other entities, including the Liechtenstein-domiciled Interogo Foundation.
In December 2017, following the publication of the report, the European Commission launched an investigation into IKEA’s tax affairs. And In April 2020, the Commission extended its investigation. The investigation is still ongoing.
Excellent reporting! Thank you! What you see here is the finest example of Corporate Success. The other big names in business, especially the online players, follow the same schemes. They make Trump look like a toddler. It’s simple to make the most money - vertically integrate, exploit all inputs (capital, labor, resources, the planet) and totally exclude inept revenue-hungry jurisdictions from your business plan. Paying taxes is for the ignorant and incompetent.
Great subject and start. I saw a documentary on Ikea in the last year or two pointing out the destructiveness of their products. I rarely buy much of anything anymore, but antiques and consignment shops often have great, well-made stuff, and the hunt is much more interesting than assembling a piece of junk. This may be useful to you. https://www.youtube.com/watch?v=sft1wVGyEnk