Exploring the effect of integrating sustainability into strategic management on sustainability leadership: A case study of IKEA

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Exploring the effect of integrating sustainability into

strategic management on sustainability leadership:

A case study of IKEA

MSc International Business & Management

Faculty of Economics and Business

University of Groningen

Erwin Boekhoudt

S2574527

e.d.boekhoudt@student.rug.nl

Supervisor: dr. D.H.M. Akkermans

Co-Assessor: dr. M.H.F. de van der Schueren

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ABSTRACT

Recently, corporate sustainability has advanced to the central stage of business strategies as companies are strategically approaching their environmental performance by appointing a CSO in top-management. The existing literature strongly emphasizes the central role of embedding sustainability within strategic decision-making, however has not yet explored the implications on leadership for sustainability. The purpose of this study was to improve the understanding of how managers’ perception of organizational support influences their sustainability leadership behaviors within the organization.

A mixed-method case study on IKEA was conducted to explore how integrating sustainability into strategic management fosters sustainability leadership among managers. Primary data was collected by means of semi-structured interviews with several managers and a questionnaire among employees, whereas secondary data concerning the organizational context was collected through academic literature and IKEA’s disclosure of publically available sustainability-related information.

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1. INTRODUCTION

Today’s executives are running organizations within a complex “brew” of social, environmental, and technological trends that requires sustainability-based management (Whelan and Fink, 2016). As the president of the Unites States has recently decided to pull the U.S. out of the Paris climate agreement, the need for environmental sustainability management becomes all the more relevant and pressing. This major shift in the governing branch’s attitude toward climate change has left a large void in the world’s environmental management, one that the private sector is compelled to fill (Winston, 2017). The role that companies should and can play in sustainable development is increasingly expected by the general public (Senge et al., 2008), which has contributed to the growing importance of corporate sustainability within business management. Yet, executives remain reluctant to place sustainability at the core of their company’s business strategy, despite empirical evidence demonstrating how embedded sustainability efforts result in a noteworthy positive impact on both business and environmental performance (Whelan and Fink, 2016).

1.1 Research topic

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authority, and relations with the CEO and board of directors (Kellogg, 2011). Anyone who takes responsibility for understanding and acting on environmental issues, however, qualifies as a sustainability leader, whether or not that person holds a formal leadership position (Ferdig, 2007). Sustainability leadership – or more precisely, leadership for sustainability – is about providing support and stimulating others to think about the environment, leading with rather than over employees in ways that foster a sustainable way of living (Ibid: p. 25). Sustainability leaders are guided by their value of and identification with nature and aim to inspire individuals and mobilize organizations to become sustainable (Egri and Herman, 2000). Sustainability leadership directly and indirectly influences employees’ environmental behavior by evoking their passion for the environment and shaping their behavior through leaders’ own behavior (Robertson and Barling, 2013). This makes leaders crucial agents in organization’s transition toward sustainability, because for environmental-related strategic decisions to be of any significance, employees need to be involved and engaged with sustainability (Yin and Schmeidler, 2009). Without employees engaging in environmental behavior, sustainability-related organizational practices are reduced to symbolic, ceremonial, and unsubstantial activities (Boiral, 2007a).

For companies aspiring to enhance their environmental performance, then, the challenge lies in the means to foster sustainability leadership. According to Paille et al. (2013), leaders are more encouraged to motivate employees’ environmental behavior if they themselves perceive that the organization supports their contribution. Being strongly influenced by their perceptions of corporate values (Turnbull, 2001), managers’ perception of organizational support toward sustainability is a fundamental determinant regarding their enactment of environmental behavior (Interviewee 2son et al., 2005). This suggests that providing organizational support toward leaders’ contribution to sustainability encourages them to influence employees’ environmental behavior in order to enhance the organization’s environmental performance.

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How does integrating sustainability into strategic management foster sustainability leadership?

1.2 Case company description

Determined to enhance its environmental performance, IKEA Group1

made sustainability integral to its core business strategy and a fundamental part of its decision-making by appointing a CSO to the board of directors (Rangan et al., 2015). Having made sustainability one of the cornerstones of its long-term business direction, IKEA ensured that sustainability was included within the annual business plans of every part of the company (Gandini et al., 2014). To guide organizational member’s behavior, IKEA relied on the logic of its corporate values and management system to make them feel responsible for working in a sustainable way (Alänge et al., 2016: p. 1018).

Looking back, sustainability has always been a part of the IKEA philosophy. In Ingvar Kamprad’s “Testament of a Furniture Dealer”, the founder of the Swedish furniture giant dreams of “good capitalism” where companies consider the impact they have on society (IKEA, n.d.). Nevertheless, IKEA only started to directly and publically address environmental issues after several public scandals involving environmental regulation violations2

(Nattrass and Altomare, 1999). This commitment to corporate sustainability, however, did make IKEA one of the pioneering companies in the 1990s to take a systematic approach to sustainability across the organization’s operations (Nattrass and Altomare, 1999: p. 1012).

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in emerging markets such as China and Russia (Rangan et al., 2015). At the same time, IKEA introduced and started to implement its new sustainability strategy named “People & Planet Positive” (P&PP), which aimed to transform all aspects of the company’s value chain to make them more environmental friendly (IKEA, 2012). Remarkable was that IKEA’s growth strategy had to go hand in hand with its sustainability strategy, rather than the other way around (Rangan et al., 2015).

The P&PP strategy covered all aspects of IKEA’s value chains and set ambitious targets that required venturing on a variety of fronts to bring about this transformation (Martin, 2015: p. 26). IKEA’s focus shifted to 1) creating a more sustainable at home for consumers, 2) becoming resource and energy independent, and 3) ensuring a better life for people and communities impacted by IKEA (IKEA, 2016). Having made sustainability one of the cornerstones of its long-term business direction named “Growing IKEA Together”, sustainability was now to be included within the decision making of every part of the organization (Gandini et al., 2014).

This sustainability transition was formulated and implemented by Steve Howard, IKEA’s first ever Chief Sustainability Officer. Appointing the CSO in the board of directors was a fundamental step for IKEA to enhance its environmental performance and make sustainability integral to its corporate strategy (Rangan et al., 2015). Steve Howard’s seat at the company’s Group Management (GM) reflects the relevance of leadership within strategic management in order to efficiently address environmental issues.

“95% of actions will happen through leadership and sustainability being embedded in the organization” (Steve Howard, cited in Rangan et al., 2015: p. 5)

1.3 Research disposition

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2. THEORETICAL FRAME OF REFERENCE

The literature review will discuss how the concept of corporate sustainability has advanced to the central stage of business strategies and is becoming integrated in the highest strategic decision-making within organizations. In this paper, sustainability will explicitly refer to environmental sustainability, defined as “meeting the needs of the present without compromising the ability of future generations to meet their own needs” (WCED, 1987: p. 43). Accordingly, corporate sustainability is defined as “managing natural resources and the natural environment in the process of conducting business” (Ones and Dilchert, 2012: p. 450). Based on these definitions, the act of enhancing the organization’s environmental performance will refer to either the ecological impact of the organizational activities or the pro-environmental initiatives that are implemented.

2.1 Corporate sustainability

Over the years, the field of corporate sustainability has been overrun by an array of definitions and concepts. Consequently, scholars and practitioners frequently confuse the concept of corporate sustainability with corporate social responsibility (Pfeffer, 1993). Bansal and Hee-Chan (2017) argue that both fields have lost their distinctiveness and become deeply entangled due to the use of similar definitions. This convergence has caused academic confusion (Suddaby, 2010) and made it difficult for members within the organization to grasp what sustainability entails (Faber et al., 2005).

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compliance to environmental regulations is insufficient to effectively respond to environmental issues and is only useful as a marketing effort to enhance the organization’s environmental reputation (Hart and Milstein, 1999). Consequently, while the number of sustainability reports that have been issued over the years has grown dramatically (Khan et al., 2015), companies’ environmental performance has not.

Nowadays, companies are becoming increasingly aware of their ecological footprint and are realizing the importance of corporate sustainability (Searcy, 2016). More and more organizations are integrating sustainability into their operations in an attempt to enhance their environmental performance (Salzmann et al., 2005). Implementing sustainability strategies, however, is found to involve a considerable amount of complexity, as decision-making concerning sustainability issues is fraught with uncertainty (Bonn and Fisher, 2011; Rezaee, 2017). Most organizations, therefore, remain skeptical about the added value of corporate sustainability and are reluctant to fully commit to sustainable development (Starik and Kanashiro, 2013). Consequently, companies’ sustainability activities are argued to be disconnected from their corporate strategy and the advances in reducing their ecological footprint are limited (Goncz et al., 2007), neither making any meaningful environmental impact nor strengthening their long-term competitiveness (Porter and Kramer, 2011: p. 4). Indeed, recent literature suggests that the limited impact of sustainability initiatives can essentially be explained by a lack of strategic orientation (Baumgartner and Rauter, 2016).

2.1.1 Strategic environmental management

Academics have recently established the relation between sustainability strategies and Porter’s (1985) notion of competitive advantages, shaping the field of strategic environmental management that “manages ecological issues, while simultaneously creating value for the firm” (Stead and Stead, 2008: p. 73). Scholars from this field argue that corporate sustainability needs to be approached through systemic strategies to fully embed sustainability within the organization.

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to existing activities and initiatives, which is argued to keep organizations from fully embedding sustainability due to a lack of employee engagement (Lazlo and Zhexembayeva, 2011).

Corporate sustainability, therefore, has recently advanced to the central stage of business strategies (Jain et al., 2016), as companies are recognizing that, through strategized environmental initiatives, one can drive revenue growth and sustainable financial performance (International Federation of Accountants, 2015). These companies are becoming central actors in achieving sustainable development (Baumgartner and Rauter, 2016), raising their voice during climate conferences and initiating impactful environmental-initiatives3

. This implies that the once isolated approach to corporate sustainability is currently transitioning to an integrated approach in which sustainability strategies are aimed to tackle environmental issues within companies’ global and daily operations (Baumgartner and Ebner, 2010).

Integrating sustainability, however, entails extensive organizational change that employees need to accept and support if sustainable principles are to be successfully implemented (Ruud, 2002). Both scholars and practitioners stress the importance of having the organizational culture support this integrated approach to corporate sustainability, providing meaning to changes in actor’s environment (Linnenluecke and Griffiths, 2010). The sustainability-oriented organizational culture is argued to encourage employees to accept the changes to their everyday work and, thereby, increase employee engagement to sustainability (Steyn and Niemann, 2014).

2.1.2 Organizational culture

Our cognitive structures – beliefs, values, and assumptions – allow us to organize and make sense of environmental stimuli, providing a sense of predictability and meaning (Weick, 1995). According to Schein (2010: p. 400), culture is our “learned solution” on how to make sense of the world, stabilize it, and avoid the anxiety that comes from social chaos. The culture within an organization, then, is the set of shared basic assumptions that determines employees’ thoughts and feelings (Schein, 2010: p. 14), guiding decisions and shaping behavior (Brown, 1998). To most employees, however, it is simply ‘the way we do things around here’.

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enactment of environmental activities (e.g. Nilsson et al., 2004), implementation of sustainability into the organization (Jarnagin and Slocum, 2007), and long-term environmental performance (Accenture, 2013).

Nevertheless, it remains uncertain how to embed sustainability into the organizational culture (Daily and Huang, 2011) and the literature is only capable of providing generic prescriptions on how to realize sustainability-oriented cultural change (e.g. Linnenluecke and Griffiths, 2010). The process of embedding sustainability into the organizational culture is found to be remarkably difficult and, therefore, most organizations initially rely on other methods to advance their sustainability strategy (Galpin et al., 2015). Most recently, researchers have extended the leadership literature to investigate leaders’ influence on organization’s environmental performance (Robertson and Barling, 2013), as implementing sustainability requires “a change of thinking and attitude that needs to start with leadership” (Millar et al., 2012: p. 491).

2.2 Leadership

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2.2.1 Transactional leadership

The transactional leadership theory is based on the promotion of employees’ compliance through rewards and punishment, focusing on the relation between supervision and performance (Bass, 1985). Subordinates attempt to fulfill the leader’s requirements to receive praise and rewards or to avoid punishment (Bass et al., 2003). Transactional leadership, therefore, involves the ongoing discussion regarding the requirements and rewards that will be offered if specific conditions are satisfied (Bass and Avolio, 1994). Transactional leaders primarily clarify tasks, provide confidence, and motivate employees to achieve desirable performance (Burns, 1978; Bass, 1985). Transactional leadership, therefore, involves leading through social exchange (Bass and Riggio, 2006: p. 3) and contingent reinforcement (Bass and Steidlmeier, 1999: p. 184), focusing on accomplishing the organizational goals rather than on an employee’s personal development (Northouse, 2007).

2.2.2 Transformational leadership

Transformational leadership goes beyond straightforward exchange relationships, as it provides deeper levels of connection and higher levels of commitment, performance, and morality (Burns, 1978). Bass (1985) considers it a practice that transforms employees to go beyond expectations and focus on sustainable long-term, rather than short-term, accomplishments. Bass and Riggio (2006: p. 4) argue that transformational leadership aligns the organization’s and leaders’ objectives with employees, inspires followers, and facilitates personal development by empowering them.

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providing emotional and instrumental support and demonstrating concern for individuals’ needs (Gill, 2006).

These leadership theories differ in that transformational leaders influence employees through their informal power, whereas the relation between transactional leaders and employees is based on the power derived from formal positions (Barling, 2014: p. 9). As a result, transformational leadership is considered “high-quality” leadership. Indeed, the ability to lead derives from the informal power that is acquired on the basis of the quality of the relationships that are developed (Jackson et al., 2013). Transformational leadership fosters a deep level of employee commitment to the organization that impacts different elements of organizational performance (Meyer et al., 2002). Within the environmental management literature, this employee commitment plays an essential role.

2.3 Sustainability leadership

Anyone who takes responsibility for understanding and acting on environmental issues qualifies as a sustainability leader, whether or not that person holds a formal leadership position (Ferdig, 2007). Sustainability leadership is about providing support and stimulating others to think about sustainability, leading with rather than over employees in ways that foster a sustainability way of living (Ibid: p. 25). Sustainability leaders attempt to make sustainability personally relevant and create opportunities for others to explore and learn about environmental issues (Ibid: p. 31).

Sustainability leadership can best be conceptualized as “the process in which, inspired by their own personal values, leaders strive to influence others at all levels of the organization in an effort to benefit the natural environment” (Robertson and Barling, 2015: p. 5). Sustainability leaders are guided by their value of and identification with nature, through which they aim to inspire individuals and mobilize organizations to become sustainable (Egri and Herman, 2000). As is the case with the literature regarding general leadership, transformational leadership is currently the dominant theory applied to understanding sustainability leadership (Robertson and Barling, 2015: p. 172).

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on encouraging pro-environmental initiatives” (Robertson and Barling, 2013: p. 177). Such leaders are “driven by their own values to engage in these behaviors to enhance their organizations’ environmental performance through their influence on subordinates” (Robertson and Barling, 2015: p. 174). Sustainability leadership, therefore, evokes employees’ passion for the environment and influences their behavior through leaders’ own behaviors (Roberston and Barling, 2013).

Before we are able to gain a full understanding of the effects of sustainability leadership requires that we first appreciate who these leaders are, describing the values, attitudes, and perceptions they typically hold.

2.3.1 Antecedents sustainability leaders

The values people hold predict behavior that extends beyond self-interest. The relation of environmental values and sustainability leadership has been well recognized in the literature and strong links have been established in predicting environmental behavior (Steg and Vlek, 2009). Bansal and Roth (2000) find that leaders’ concern for the natural environment determines their environmental initiatives within the organization, whereas Fryxell and Lo (2003) argue that “eco-centric” values affect their propensity to engage in different forms of pro-environmental behavior.

Theories such as reasoned action (Fishbein and Ajzen, 1975) and planned behavior (e.g. Ajzen, 1991) highlight how environmental attitudes can predict environmental behavior. Leaders with strong attitudes toward the natural environment tend to formulate, engage in, and implement more corporate environmental initiatives compared to leaders who think environmental-related activities should not be a priority within an organization (Robertson and Barling, 2015).

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environmental initiatives, and 4) view environmental issues as opportunities for the organization to address (Robertson and Barling, 2013: p. 170).

In the following section, we shall explore the behavior that sustainability leaders adopt to influence employees’ environmental behavior.

2.3.2 Sustainability leaders’ behavior

Sustainability leadership directly and indirectly influences employees’ environmental behavior by evoking their passion for the environment and shaping their behavior through leaders’ own behavior (Robertson and Barling, 2013). Supportive behavior toward sustainability has been considered a dominant factor in influencing employees’ environmental behavior (Ramus and Killmer, 2007). The action of “backing up” subordinates has been found to increase participation in environmental projects, as managers’ support stimulates employees to become involved with environmental initiatives (Howard-Grenville et al., 2008; Ramus and Steger, 2000). This relates to the concept of perceived organizational support (POS), which is the extent to which people believe that the organization values their contributions and cares about their well-being (Eisenberger et al., 1986). POS is based on the organization support theory (OST), which states that employees tend to personify the organization and view their treatment at work as an indication that the organization favors them or disfavors them (Eisenberg et al., 1986). Employees, thus, are willing to engage in environmental behavior in exchange for (implicit) consideration (Daily et al., 2009: p. 8).

2.4 Employee environmental behavior

Steg and Vlek (2009) argue that environmental behavior refers to any behavior that has an impact on the environment. Similarly, Ramus and Steger (2000: p. 606) refer to this behavior as “any action taken by employees that would improve the environmental performance of the company”. Extending this definition, Boiral et al. (2014: p. 21) argue that “employees’ environmental behavior includes all types of voluntary or prescribed activity undertaken by individuals at work that aim to protect the natural environment or improve organizational practices in this area”.

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Based on this notion, two dominant perspectives have been identified in the environmental behavior literature. The environmental management perspective considers employees as part of larger environmental practices and organizational change processes that rely mostly on employee involvement to be successful (e.g. Boiral, 2005). The organizational psychology perspective, on the other hand, argues that employees’ environmental behavior is mainly voluntarily, rather than enforced, and focuses on voluntary and individual initiatives (e.g. Boiral and Paillé, 2012).

The literature stresses the importance of employee environmental behavior, as the organization’s environmental performance results to a large extent from the aggregation of such behaviors (Boiral, 2005). For sustainability-related strategic decisions to be of any significance, employees need to be involved and engaged with sustainability within the organization (e.g. Yin and Schmeidler, 2009). Without employees engaging in environmental behavior, sustainability-related organizational practices are reduced to symbolic, ceremonial, and unsubstantial activities (Boiral, 2007a).

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2.5 Discussion

The underlying theme of this discussion depicts the socio-political environment that condones, encourages, or motivates individuals to act in sustainable ways (Lamm et al., 2015: p. 209). Socio-political support relates to the characteristics of the work-environment that include a supportive climate, employees’ perception that the organization values them, and the level of interpersonal trust (Seibert et al., 2011: p. 983). Concerning corporate sustainability, it reflects the specific beliefs organizational members hold regarding the degree to which the organization values their contributions toward improving its environmental performance (Lamm et al., 2015: p. 209).

Paille et al. (2013) extend this logic and argue that supervisors are more encouraged to motivate employees’ environmental behavior if they themselves perceive that the organization supports their contribution. Paille et al. (2013) find that feeling supported by the organization is a foremost concern in order for supervisors to engage in efficient social exchanges with subordinates. According to Erdogan and Enders (2007), supervisors who perceive that the organization will support them in their endeavors are enabled to pass this support through to their subordinates. Erdogan and Enders (2007) derive their findings from the Social Exchange Theory (SET), which states that a reciprocal relationship is formed when a party returns a favorable treatment received before (Gouldner, 1960). Organizational members who receive support or resources from one exchange are believed to be willing and capable of sharing them with others in a different exchange (Molm et al., 2000). Supervisors, thus, transfer the treatment they received from the company to their subordinates (Tepper and Taylor, 2003), which implies that organizational support ‘trickles down’ from upper level- to lower level employees. This explains why leaders’ behaviors are affected by the way they are treated at work, both positively and negatively (e.g. Mawritz et al., 2012).

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provide organizational support toward sustainability, are less likely to promote leader’s environmental behavior.

2.6 Hypothesis

The previous section concluded with the notion that the degree to which sustainability leaders are willing to enact environmental behavior depends on the organizational support they perceive. As was discussed, sustainability leadership directly and indirectly influences employees’ environmental behavior by evoking their passion for the environment and shaping their behavior through leaders’ own behavior (Robertson and Barling, 2013). Organizations that aspire to enhance their environmental performance rely on its sustainability leaders to develop and champion sustainability at work (Ramus and Steger, 2000), actively supporting and participating in the implementation of environmental initiatives (Jenkin et al., 2011). This suggests that the effectiveness of improving the organization’s environmental performance through the construct of employee environmental behavior depends, to a degree, on sustainability leaders’ perception of organizational support. In other words, organizations must be aware of the importance of aligning environmental objectives with their leaders’ environmental concerns so that they can involve and engage employees with sustainability.

What emerges from the discussion in section 2.1.1 is that integrating sustainability into strategic management signals a clear message that sustainability is important to the organization and will become central in the corporate story (Bonn and Fisher, 2011). In this study, it will be assumed (from previous literature) that the ability and willingness of managers to motivate the environmental behavior of employees is influenced by their perception of organizational support toward sustainability. Accordingly, this paper hypothesizes that:

Integrating sustainability into strategic management will provide organizational support toward sustainability that stimulates sustainability leaders to engage in environmental

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3. PRACTICAL METHODOLOGY

This chapter will provide an explanation of the methodological approach to answer this paper’s research question.

3.1 Research methods

This study aims to explore how integrating sustainability into strategic management fosters sustainability leadership among managers. In order to carry out this study, I shall consider all participants, managers and employees, to be active agents that construct and shape the organization they act in. As such, I will draw my conclusions based on the assumption that their subjective perspectives can bring light to the role of leadership during the organization’s transition toward sustainability. Differently said, it is both an interpretivist and a constructivist stance that I will take throughout my analysis.

3.1.1 Research strategy

Given that this study will consider organizational support and sustainability leadership as variables, I have decided to take on a mixed-methods design. Indeed, measuring and quantifying said variables could prove challenging because of the social meaning and the shared construction behind these concepts. My belief is that the subjective perspectives of the participants will provide a depth to my variables that a sole quantitative study could not have offered. Nonetheless, a quantitative approach will prove most valuable to measure the effect of integrating sustainability in strategic management on sustainability leadership. As such, a mixed-methods design will enable me to 1) analyze how leadership for sustainability is built through strategic management and 2) interpret the performance of leadership generated by the qualitative method. As a result, one may say that the qualitative method will be set as priority and the quantitative one as a sequence.

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3.1.2 Research design

In order to carry out this research strategy, I shall use IKEA Groningen as a single case. My belief is that the effects of integrating sustainability into strategic management on sustainability leadership can be reliably analyzed in this setting based on two premises.

First-of-all, IKEA can be considered an exemplifying case. When it comes to sustainability, IKEA epitomizes multinational corporations in the sense that they face similar pressures and challenges both internally and externally (e.g. government, public opinion, etc.). Nonetheless, the particularity of IKEA is the reputation it has built in the sustainability area since the appointment of Steve Howard to the Group management as CSO. Consequently, the case of IKEA is adequate to analyze how sustainability leadership is produced through strategic management. Thereafter, the strategy chosen by IKEA to transition toward business sustainability can prove useful for other companies to adopt or reject this approach.

Secondly, this case study is revelatory because of the point in time where IKEA Groningen finds itself. The transition toward sustainability initiated in 2011, nonetheless, the environmental performance of the company has not yet reached its ambitions, especially regarding involving and engaging employees. As a result, this case can highlight the evolution of sustainability leadership within the company. More specifically, I am conducting my research during a transition - from an isolated approach of sustainability to an integrated one - which will give me the unique opportunity to analyze how sustainability leadership ‘has been’ and more importantly ‘is being’ produced.

Based on these grounds, IKEA was chosen as a case study. In addition, I had exclusive access to IKEA Groningen as I was hired as a Sales co-worker last November. This resulted in a convenience sample that could not have been achieved, was I not working for IKEA. This matter will be further discussed in the following section and in the passage dedicated to ethical concerns.

3.2 Data collection 3.2.1 Sampling

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business management; this curiosity was complemented by my work at IKEA, which invited me to learn more about the company’s approach to sustainability. As a result, before starting my research, I approached my team-manager to ask whether it would be possible to interview various people within the company for my thesis. Thus, access to the company was offered to me before embarking on my research. As I started my research, I made initial contact with a small group of managers within IKEA Groningen who I deemed relevant for my topic. Following my first interviews, these participants guided me toward other members of the organization, which enabled me to collect more in-depth and rich data. The initial sample gradually grew as observations were made regarding sustainability leadership within IKEA.

Different criteria were taken into consideration in order to choose the relevance of the participants. The first criterion was the position of the manager within the organization. Literature on organizational leadership distinguishes three levels of management: senior management, middle management, and lower management - also called supervisory positions (Barling, 2014: p. 100). The latter position is the most relevant for leadership due to its status within the organization’s hierarchy. According to Eisenberger et al. (2010), employees tend to perceive supervisors as those who embody the company, whereas senior- and middle management are often considered to be ‘too distant’. Thus, the lower management positions were deemed more adequate to this study. Secondly, research participants were required to work at IKEA since 2010 in order to adequately analyze the evolution of sustainability leadership. Although this criterion would reduce the possible sample size significantly, it improves the quality of the data obtained. Thirdly, managers were to have sufficient and relevant experience in sustainability. This could, for example, relate to environmental initiatives or environmental performance-related decision-making.

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3.2.2 Primary data

Primary data was collected by means of semi-structured interviews and a questionnaire.

Semi-structured interviews

In order to understand how the integration of sustainability in strategic management affects sustainability leadership, it was crucial to understand how managers perceive the organization’s support toward sustainability. Accordingly, the importance of participant’s perception supported the choice of semi-structured interviews, which would give them flexibility to answer questions whilst giving them the opportunity to guide the conversation. For my part, the interview guide consisted of 10 questions that focused on two overall themes, namely organizational support toward sustainability at IKEA and sustainability leadership4_.

In total four interviews were organized between May and June 2017 with participants in varying positions at IKEA the Netherlands. For confidentiality reasons, all data is made anonymous5

. The conversations were one hour in average, where I presented myself as a student from the University of Groningen and an IKEA employee studying sustainability strategy within IKEA. The data collection resulted in over 20 pages of raw interview transcript. All participants were informed that they were being recorded, and that the information would be kept anonymous6

.

Questionnaire

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leadership development interventions (Robertson, 2017). The ETFL measurement was adapted to assess how sustainability leadership within IKEA changed after sustainability was integrated in strategic management according to the employees’ perspective. Participants rated the ETFL items on a scale from 1 (strongly improved) to 5 (strongly worsened).

In order to examine the consistency among measurement items of each construct, the internal reliability of those items was checked using Cronbach’s alpha test and factor analysis (Field, 2013). The preliminary analysis revealed that item EII 2 had to be removed due to its low Cronbach’s alpha score in order to improve the reliability of the construct. After removal, the Cronbach’s alpha score of all measurement items and constructs were very near or above the general accepted value level of 0.7 (Kline, 1999, cited in Field, 2013). Additionally, the Cronbach’s alpha score if item is deleted were also deemed in the range of acceptable values. Subsequently, the measurement items were analyzed using factor analysis in which both statistical tests showed the adequacy of the sample size of this research. The Kaiser-Mayer-Olkin (KMO) score was above the minimum criterion of 0.5, whereas the Bartlett’s Test of Sphericity showed significant results. The results of the reliability analysis can be found in appendix B.

All together, these four sections counted for 23 questions with multiple choices. The questionnaire was distributed through an app of IKEA called “SpeakApp”, which is only accessible by employees and limited to IKEA Groningen. The questionnaire managed to collect raw data set N = 68 responses7

, which after screening was reduced to N = 43 complete responses having removed participants not working at IKEA long enough. The questionnaire was targeted at employees who, at least, worked at IKEA since 2010. This was done to ensure that participants were at IKEA before, during, and after the CSO was appointed and, thus, vividly experienced its implications. All participants were informed of the anonymity of the questionnaire. The overall goal of these questions was to assess employees’ awareness and motivation to sustainability and measure the performance of sustainability leadership. Differently said, the questionnaire gave employees the opportunity to bring a new viewpoint to the conversation about leadership for sustainability.

Table 1 shows that most of the respondents were female, between the age of 40-49, and not in a supervisory position. At IKEA Groningen, there are currently 363 workers employed, mainly working at Sales (105), Food (80), and Customer Relations (79) respectively. Taking

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into account that IKEA relies greatly on temporary contracts (e.g. holiday-workers), the response rate of around 12% was considered a fair representation of the population.

Sample characteristics

Variable Category Frequency (N = 43) Percentage

Gender Male 16 37.21%

Female 27 62.79%

Age group 18-29 years old 12 27.91%

30-39 years old 8 18.60%

40-49 years old 16 37.21%

50-59 years old 6 13.95%

Above 60 years old 1 2.33%

Position Supervisory 3 6.98%

Non-supervisory 40 93.02%

Table 1. Sample characteristics questionnaire

3.2.3 Secondary data

Secondary data concerning the organizational context was collected through academic literature and IKEA’s disclosure of publically available sustainability-related information. The first source of data was sustainability reports, ranging from 2004-2016 regarding IKEA’s accomplishments and objectives in the area of sustainability. These reports were analyzed to provide information about IKEA’s environmental performance that could be used in structuring the primary data collection. Secondly, archival records regarding environmental performance aimed to put primary data into context.

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3.3 Data analysis

The relation between integrating sustainability in strategic management and sustainability leadership will be analyzed at the individual level of analysis. The data analysis process will follow a similar approach as Attride-Stirling (2001: p. 390-394), who identifies six steps that need to be followed: 1) coding the material, 2) identifying themes, 3) constructing thematic networks, 4) describing and exploring thematic networks, 5) summarizing thematic networks, and 6) interpreting patterns. The goal of the data analysis is to produce a narrative of the case based on the analysis and connection of the primary themes within this study.

The interview transcripts will first be analyzed by labeling and classifying features and issues through open coding in order to highlight interesting themes and prepare the data for the actual analysis (Eriksson and Kovalainen, 2011: p. 129). Afterwards, the highlighted transcripts will be compared in an attempt to discover the underlying patterns and identify thematic networks that arise. The intention is to find relationships between the coded categories that will provide an explanation regarding the impact of relevant concepts and the way they are managed within its specific context (Saunders et al., 2016: p. 599). Finally, the underlying patterns in the content will be interpreted and explored to summarize and link the findings to relevant theory.

3.4 Data quality and limitations

In order to carry out ethical research, all participants knew that the interviews and questionnaire were being conducted as part of a master thesis’ research. Although the subject of sustainability was clearly stated, the specific research question was not shared with the participants beforehand in order to preserve them from bias. In addition, all participants gave their consent to participate in the study. They were also informed that the data collected during the interviews/questionnaire would remain confidential, where only the author would process it. Lastly, all the information was made anonymous in order to avoid doing harm.

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represented a different viewpoint of leadership within IKEA, which in turn could enhance their understanding of IKEA’s work on sustainability issues and the role managers play in diffusing sustainability within the company.

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4. EMPIRICAL RESULTS

This chapter will present the empirical findings and discuss IKEA’s sustainability transition after the appointment of Steve Howard as the CSO in the Group Management. The first section will examine how sustainability became integrated in the organization’s existing infrastructure and mechanisms to create organizational conditions that would facilitate the implementation of sustainability throughout IKEA. Subsequently, it will be demonstrated how IKEA started to diffuse sustainability in a more informal way by relying on sustainability leaders to engage and involve employees with environmental initiatives. Thereafter, the employees’ perspective on the development of sustainability leadership will be nuanced by analyzing the results of the questionnaire. The final section will provide an answer to this paper’s research question and conclude this chapter.

4.1 Formal approach – Creating organizational conditions

According to its employees, IKEA’s sustainability strategy was “technically sound, but did not connect with the business” (The Guardian, 2013). After being appointed CSO, Steve Howard reviewed IKEA’s approach to sustainability and concluded that it was not visionary enough nor did it clearly connect back to the company’s core business (Miller and Serafeim, 2014). Therefore, a central them in the P&PP strategy was the integration of sustainability into core aspects and supporting processes of IKEA, diffusing sustainability from the top downwards following its existing organizational structure and mechanisms.

4.1.1 Vision and mission

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to be’ sustainable, holding its employees accountable for their actions in order to encourage them to take sustainability into account in their decision-making (Strandberg, 2009).

4.1.2 Organizational values

Going a step further, IKEA reformulated its organizational values that define its organizational culture and placed more emphasis on sustainability (IKEA, 2012). Interviewee 1 argues: “Our values make our culture and, since January, one of these values has become ‘caring for people and planet’”. The organizational values represent the beliefs about the types of goals that organizational members should pursue, as well as the ideas regarding standards of behavior they should use to achieve these goals (Schein, 2010). Integrating sustainability into the organization’s values facilitates the alignment of employee motivation with the organization’s sustainability agenda (Hargett and Williams, 2009). Moreover, it aligns decision-making and behavior with the organization’s sustainability efforts and determines the ‘fit’ between employees and the organization (Ibid).

4.1.3 Recruitment process

Having integrated sustainability into the organization’s values enabled IKEA to integrate sustainability in the recruitment process. Galpin et al. (2015) argue that human resources (HR) practices are an important aspect of implementing sustainability, as they support the organization’s sustainability objectives by creating an infrastructure that turns its strategic intent into tangible actions and outcomes. Interviewee 2 believes that recruiting new employees based on their environmental values sends out a very clear message regarding how the company takes sustainability serious: “If you work at IKEA, you have to work with sustainability and, preferably, be interested in it as well. If this is not the case, then IKEA is also not really a place for you. I personally appreciate this clear, black-and-white stance [...] that clarity of: ‘we are behind sustainability and we want all our employees to be behind it as well’”.

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shared values, because employees who “fit” the organization’s values tend to become more committed to the organization and the ideals it believes in.

4.1.4 Product development

Interviewee 2 argues that IKEA wanted to emphasize that sustainability had become central to its business concept by officially integrating sustainability into the product development. Although sustainability had already been implemented in the product design, Interviewee 2 explains: “Sustainability became an actual criterion, the 5th

‘point’ of product development and, thereby, taken into account for 20% in all major decisions regarding IKEA’s product range, so to say. This ensured that sustainability was taken a lot more serious organizational, regarding communication and action, operational, at all levels. [...] ’Framing’ sustainability in such a way has made it a lot easier for employees to ‘carry it out, providing a framework to refer to.”. Interviewee 2 refers to IKEA’s “Democratic Design” that consist of five equally important principles – form, low price, sustainability, quality, and function – to ‘making the right product’ (IKEA, 2016). Integrating sustainability into the product design and life cycle institutionalizes environmental behavior, as it sends out an important signal that the organization is able to deliver on its effort to simultaneously pursue profitability and sustainability (Smith and Brown, 2003).

4.1.5 Existing functions

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environmental initiatives, as it clarifies the organization’s intentions and expectations (Jenkins, 2006).

4.1.6 Environmental performance measurement

Interviewee 2 refers to the metrics IKEA developed sustainability metrics to be able to determine where the organization stands regarding its environmental performance and accurately measure the progress toward sustainability: “Nowadays we have an annual review specifically for sustainability. The idea behind this is to A) safeguard, strategically and conceptually, what we want to initiate, B) learn what each store could do better, and C) establish ‘best practices’. [...] This is the strength of A) being a large company and B) having strong norms, awareness, and orientation toward sustainability: ‘sustainability lives during the day, but it is also seriously assessed’. It is important that IKEA says within the company: ‘sustainability is important to us, so we will tackle and assess it on all levels, through the entire organization’.”. Developing sustainability indicators is considered a method to operationalize sustainability by refining collective understandings, setting goals, and define priorities to translate the abstract concept of sustainability into more concrete terms (Blackstock et al., 2008).

Interviewee 3 adds: “Because of the introduction of sustainability reviews, you notice that more attention is being paid to sustainability. This really helps to wake up a store and prepare it for sustainability: ‘where do we stand now, what do we need to work on, where are we running behind, etc.’.”. Auditing signals an organization’s readiness and commitment to meeting its obligations and demonstrates the quality of performance against stated objectives (Hagen, 2008). Official assessments of the organization’s environmental performance develop an awareness of its capability for change and an understanding of how much change is required (Blackstock et al., 2008).

4.1.7 Discussion

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term bureaucracy used in this context relates to the establishment of formalized organizational structures to effectively drive performances following stated objectives (Weber, 1978).

Formal practices – Clarifying expectations

Integrate Formal integration of sustainability into the organization’s core and way it currently operations in order to truly commit to its transformation

• Vision and mission statements to send out a clear message • Strategy and business plans for coordination

• Product design and life cycle as core business concept • Existing roles to target the individual

Assign responsibility

Allocation of responsibility for sustainability to new or existing roles within the organization in order to signal that sustainability is a priority

• Involve senior leaders to signal priority • Create roles to signal determination

Manage talent Recruitment and allocation of employees with the passion, attitude, and competence to deal with sustainability issues in their daily work

• Recruitment process based on values and skills

• Allocation of employees placing right people to key roles

Assess and audit Implementation of sustainability into the organization’s auditing to drive improvements and signal readiness and commitment to meeting its obligations

• Measurement metrics to gain scrutiny

• Review Key Performance Indicators to operationalize

Table 2. Formal approach: organize and guide environmental behavior through rules, systems, and procedures

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Interviewee 1 argues that this lack of involvement relates to employees not being aware of the actual sustainability strategy: “If employees are not fully interested in sustainability [...] then they will not notice it altogether. If sustainability is purely communicated as ‘this is the strategy’, then I do not believe employees will become aware. This is a crucial ‘bottleneck’: ‘how can we make sure that employees do become aware and, even more, not only become aware, but also think: ‘what can I do with it myself?”. Interviewee 4 agrees and emphasizes that: “If you would walk up to an employee and ask if he/she knows what the strategy entails, I do not think that anyone would be able to tell. [...] Top management would, store managers, etc., but the others will not”. Thus, the integration of sustainability into strategic management came hand in hand with diffusing sustainability from the top to bottom, however it was insufficient to engage employees with sustainability. For this reason, informal processes must be taken into account.

4.2 Informal approach – Fostering commitment

The interviewees argue that sustainability was present within the organization, and had always been, but not in such a dominant way so that all employees were engaged. Interviewee 3 argues: “Sustainability was present, but it was almost always at the bottom of a lot of things [...] it did not have a real stamp”.

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manager ensured that sustainability was in fact present within IKEA: “Sustainability only started to become a priority [...] and receive the first serious attention [...] within IKEA the Netherlands, after the appointment of a full-time sustainability manager. In a way, the sustainability manager wanted to lift sustainability to a higher level, actually ‘put it on the agenda’ [...] and make it a real topic”. Assigning full-time responsibility is found to demonstrate management’s commitment and priority to sustainability (Smith and Brown, 2003). Taking direct responsibility transfers this commitment down toward lower organizational levels and make more employees feel responsible for the organization’s environmental performance (Holton et al., 2010).

To make sustainability relevant at a local level, the sustainability manager appointed an ambassador for sustainability in every store within the Netherlands. Interviewee 1 affirms that the sustainability ambassador was key to ensure the diffusion of sustainability to and from individual employees: “The main objective of these sustainability ambassadors was to create awareness and involvement among all other co-workers within the store. [...] This tends to be easier when it involves people around you, compared to talking about waste and what that possibly could do in the next 100 years”. This decision was based on the notion: “Before we even started with sustainability, before the appointment of the sustainability manager, and even before we started to communicate about these strategies, you could already see which people naturally, out of themselves, did something with sustainability and related to it. [...] If you could ‘recruit’ these people, to act as some sort of ‘exemplary function’, then you would have a win-win situation”. Organizations that create specific roles related to sustainability are found to legitimize sustainability, as it signals that management is prepared to invest and allocate time and resources (Ángel del Brío et al., 2008).

4.2.2 Communicating sustainability

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organization (Harris and Crane, 2002). Additionally, lower-level managers with in-depth understanding and passion for sustainability are also found to be able to inspire and recruit others (Howard-Grenville and Hoffman, 2003).

Interviewee 1 adds: “The sustainability ambassador is able to lead employees in a different way [...] by involving co-workers and realize that domino-effect: ‘that the average employee knows what we are doing and for what we stand’.”

Speaking to Interviewee 3, among the original sustainability ambassadors, one of the first things that he brings up is the complex nature of sustainability: “Being an ambassador for sustainability, you realize how broad sustainability is and how difficult it is having to tell 400-500 people ‘what IKEA is doing’. [...] Every ambassador struggled in the beginning, having to ‘pull’ all of these people to ‘do’ something with sustainability. [...] Sustainability is so large, so wide, you had to do way too much on your own”. Having discussed this issue with the store-manager, Interviewee 3 received the opportunity to establish a sustainability group with representatives from each discipline (e.g. Sales, Logistics, etc.) that would support him in his role: “The group allowed me to divide the tasks in such a way that sustainability became accessible. [...] You just noticed that it functions very well when you do it with a group, you can carry sustainability a lot more than on your own.”.

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4.2.3 Modeling for sustainability

Giving the right example and, thereby, modelling environmental behavior is a central theme within all interviews. Being the head of the store, Interviewee 4 emphasizes the importance of his exemplary function: “If not even the store-manager separates his garbage, then who should? [...] You can say something in a formal way, and even do something formally, but if you do not truly act like it, then it is doomed to fail. [...] However, if you give the right example, then it will be followed in a right way. This is why I consider myself to be an important role model for the rest [...] and this is why I also really need the others [sustainability ambassadors] to fulfill a role in sustainability [...] because, to the rest, they are role models. These people volunteered to become part of sustainability at IKEA and were involved with sustainability before IKEA asked them to be, which gives them a lot of credibility. [...] We look at what role someone can play within the whole, informally and formally [...] and this informal aspect is really important.”. Especially practitioners emphasize that modelling the organization’s support toward sustainability is one of the key success factors for embedding sustainability throughout all operational levels (e.g. Epstein, 2008). People are far more willing to enact ‘new’ behavior if they are modeled by others who they respect and admire (Wirtenberg et al., 2008). Indeed, showing interest in sustainability initiatives and participate in the ongoing dialogue around sustainability reinforces the substitution of sustainable behaviors for unsustainable ones (Doppelt, 2003).

Interviewee 1 adds: “If you give the right example yourself, then that will be followed. [...] It is the combination of doing something with sustainability from your position but also very practical things that everyone can do, that have nothing to do with your function. [...] It is mainly about giving the right example and ‘practicing what you preach’ [...] from which a ‘fire’ will spread. [...] If you involve the right people and you can use the energy of all the people that relate to sustainability and are willing to do something with it, then sustainability will start rolling”. Managers and supervisors who “practice what they preach” provide credibility to the goals being pursued by the organization and, hence, exemplify the relevance of employee participation for overall environmental performance (Epstein, 2008).

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trainings about sustainability. [...] This ensures that the average employee sees the larger picture and understands that, if everyone does his/her part, everything is possible”.

The appointment of the ambassadors reflects how IKEA now relies more on an informal channel to diffuse sustainability throughout the organization by raising awareness and involving other employees with sustainability in their everyday work. The sustainability ambassadors were recruited to signal the importance of environmental behavior and engage employees with sustainability. Through their informal relation to employees, these ambassadors established and reinforced shared ways of doing things in a sustainable way that aligned employees with the organization’s transition to sustainability. These informal practices to foster commitment toward sustainability are summarized in table 3 below.

Informal practices - Fostering commitment

Signal Communicate importance of sustainability to employees in informal ways through the organization’s sustainability-related actions and gestures

• Model to gain legitimacy • Champion to engage

• Invest to signal commitment

Engage Generate interest, encourage active participation, and motivate employees to act sustainable in order to raise the level of employee engagement in sustainability initiatives

• Communicate (inform), educate, and train to clarify expectations and create consistency

• Support to encourage action

• Raise awareness to increase involvement • Experiment and link to align values

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co-workers. Their role is to inform and involve employees with environmental initiatives and stimulate environmental behavior through its own behavior, modeling and championing IKEA’s philosophy regarding sustainability.

4.3 Employee perspective

The questionnaire aimed to improve the understanding of managers’ role in stimulating employees’ environmental behavior. To a large degree, the results8

complement the findings of the interviews.

4.3.1 Awareness

The initial questions were formulated to assess employees’ awareness of the sustainability strategy, CSO, and ambassadors. The results reveal that most employees are aware that sustainability has become an important aspect of IKEA’s corporate strategy (90 percent), which is surprising considering how the interviewees believed that the strategy was too abstract for the average employee. Concerning the CSO, hardly any of the participants were aware about the executive function for sustainability (9 percent) as most believed that every country has one or multiple CSOs (51 percent), whereas the others were not sure altogether (37 percent). This lack of awareness reaffirms that employees primarily perceive sustainability-related changes to their direct environment or everyday work. Finally, as was expected, the sustainability ambassador is well-known among employees (88 percent).

4.3.2 Motivation

The second set of questions focused on employees’ motivation to engage in environmental behavior. The results reveal that almost all employees perceive that IKEA is a sustainable company (90 percent) that motivates them to work in a sustainable way (81 percent). Especially the ambassadors and supervisors seem to contribute to this perception, whereas the sample believed that management and colleagues are not strong motivators to work in a sustainable way. Additionally, the majority of the sample believes that it is important that they themselves (95 percent) as their direct supervisor (86 percent) engage in environmental behavior. Finally, 72 percent of the participants indicated that sustainability is part of their everyday work, which is only slightly above 2012’s benchmark of 70 percent, but far below 2017’s objective of 95 percent. This is remarkable, as IKEA Groningen is currently the most sustainable store in the

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Netherlands9

, from which it was expected that more employees would be involved with sustainability. Although one cannot generalize from this small sample, it does illustrate the challenge IKEA is still facing in involving all employees with sustainability during their day-to-day activities.

4.3.3 Development sustainability leadership

The final section of the questionnaire involved the measurement of how sustainability leadership developed after sustainability was integrated in strategic management. Participants indicated to what degree they believed that sustainability leadership improved or worsened after the appointment of the CSO. The questions formed four constructs that, combined, assess sustainability leadership: the degree to which sustainability leaders used their relationship with others to intentionally influence and encourage them to engage in environmental behavior. Table 4 presents a summary of the results.

Environmentally specific

transformational leadership Improved

a Remained

the same Worsened

b

EII IKEA acts as an environmental role

model 44% 9% 2%

EIM IKEA is passionate about improving the

future state of the natural environment 43% 14% 1% EIS IKEA urges me to think creatively about

improving the organization’s environmental performance

36% 22% 5%

EIC IKEA takes note of my individual contributions to the organization’s

environmental performance

26% 42% 6%

Table 4. Results measurement sustainability leadership a = Averaged results of strongly improved and somewhat improved b = Averaged result of somewhat worsened and strongly worsened

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idealized influence has strongly improved: 44 percent of the employees in the sample believe that IKEA improved in encouraging actions that will benefit the natural environment, whereas only 9 percent and 2 percent believe that this remained the same or worsened respectively. This implies that the importance of role models within IKEA has increased, sharing their environmental values to employees to make it more likely that they will engage in environmental behavior.

The second construct, inspirational motivation (EIM), reflects the degree to which sustainability leaders inspire others through passion and optimism to engage in behavior that benefits the natural environment. There was a strong belief that inspirational motivation has increased within IKEA: 43 percent of the participants indicated that it improved, whereas 14 percent felt ambiguous and only 1 percent believed that it had worsened. Sustainability leaders within IKEA have, therefore, become better in communicating the organization’s vision or in encouraging employees to help develop and carry out environmental practices.

The third construct related to intellectual stimulation (EIS): how sustainability leaders encourage subordinates to think about environmental issues in new and innovative ways, question long-held assumptions about their own and their organization’s environmental practices, and address environmental problems in an innovative manner. Most employees indicated that intellectual stimulation had improved (36 percent), however there was also a considerable part of the sample that perceived nothing had changed (22 percent). This reveals that IKEA has not yet created an atmosphere that encourages and rewards sustainability-related creativity.

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The purpose of the questionnaire was to assess the perception of employees regarding sustainability within the company and improve the understanding of managers’ role in stimulating employees’ environmental behavior. The results reveal that, within IKEA Groningen: 1) the CSO position is not observed by employees; 2) employees believe it is important- and feel motivated to work in a sustainable way, however do not perceive sustainability has become part of their everyday work yet; and 3) sustainability leadership improved after the appointment of the CSO, although the employees do not perceive they are personally involved with environmental issues.

4.4 Providing organizational support

The previous sections revealed that sustainability leadership – the process of providing support and stimulating others to think about the environment – became more evident after IKEA appointed Steve Howard as CSO. Nonetheless, analyzing the what and the why of sustainability leadership is not sufficient to answer the question this paper attempts to answer. Indeed, understanding how integrating sustainability into strategic management fosters sustainability leadership requires us to focus on the role of organizational support.

4.4.1 Affirming significance

Interviewee 4 believes that the appointment of Steve Howard as the CSO within IKEA was a strong signal from the top that sustainability was going to be a priority: “It had become a lot clearer that sustainability had become very important. The CSO position was a very clear signal from the top that said: ‘we have discussed sustainability too little, but now we are truly going to talk about it, we are going to take it serious. [...] This is also one of the reasons that, now, we take sustainability seriously at the local level, in the store”.

Exploring the effect of integrating sustainability into strategic management on sustainability leadership: A case study of IKEA