Case Study: IKEA's Response to the Lacey Act--Due Care Systems for Composite Materials in China
This series of case studies is intended to show commercial buyers of wood and paper-based products how their supply chains can conform with U.S. legal requirements on importing certain types of wood. The case studies, compiled by the Forest Legality Alliance (FLA), draw lessons from emerging best practices for managing risk in high-risk contexts.
In this case, WRI worked with IKEA on a demonstration study focused on the production of a composite product (board materials such as particle board, Medium Density Fiber Board, etc). We looked at the controls needed to procure the raw material for this product’s manufacture. The study reviews how IKEA’s internal systems work to ensure that source materials are purchased with an adequate level of due care.
One of the goals of this report is to initiate a discussion with policy makers and the private sector on implementation of due care systems to ensure that materials are sourced legally. Specifically, we hope to address how the United States can import composite products that are largely made up of waste materials and produced by a number of diverse, small producers within a weak local governance system while still showing a high level of due care. One focus is the level of detail that IKEA is trying to achieve. The report looks at this policy’s applicability in the field and its practicability for Lacey Act’s reporting requirements.
This study focuses on IKEA and the company’s production of composite products (board materials such as particleboard, Medium Density Fiber Board (MDF), etc.) in China. The study describes the internal systems of IKEA and how they work to ensure that the material sourced can be shown to have been purchased with an adequate level of due care to help ensure legality. Specifically, the study looks at how composite products made up of a large percentage of waste material supplied by diverse small producers within a weak governance context can be imported into the USA while showing that a high level of due care was attained.
The study shows how IKEA is adapting its operations to meet the requirements of a challenging procurement situation and the company’s understanding of how they can show adequate levels of due care.
Four main lessons have been identified and are explored in this paper:
Lesson 1: The implementation of the Lacey Act means that responsible procurement is no longer voluntary but is now mandatory.
Lesson 2: Each company must understand the supplying country’s laws and associated risks so that it can define its own level of appropriate traceability.
Lesson 3: A risk assessment can help determine the level of traceability required to ensure confidence in any forest product supply and ensure that a reasonable level of due care can be shown.
Lesson 4: To be able to complete the declaration form, a company needs to understand its supply chain fully. Good information management is key, and a proactive approach to the management of the supply chains is required. It is no longer enough to just rely on trust: a company must now ask questions and back this up with on-the-ground audits.