Water Risk Assessment of Agricultural Raw Materials in a Global Supply Chain : A Case Study of IKEA

Abstract: Current mass consumption and production patterns have led to an unsustainable use of natural resources, including freshwater, which is one the most crucial natural resources for people and the planet. Agricultural production systems are alone responsible for 72 percent of all global water withdrawals. Therefore, companies with an agricultural supply chain, such as IKEA, play an important role in minimising the negative impacts on water due to agricultural production. In order to do so, companies need to conduct assessments to become aware of their contribution and thereafter develop water targets and strategies on how to mitigate and minimise the company’s water impacts. Several different guidances, methodologies, and tools aiding companies in how to do this have recently been developed, however there is not yet one common established methodology. Therefore, this research project aimed to test and evaluate a new assessment methodology and tool for IKEA, by conducting a water risk assessment on water availability of the sourcing locations of two of IKEA’s key agricultural raw materials: soy and palm oil, and identifying mitigation possibilities, in order to aid in the company’s further work with achieving a sustainable water management and material sourcing, and developing water targets and strategies. Soy is a prioritised raw material to work with in terms of environmental and social risk, and through the conducted water risk assessment, a high risk for water depletion was identified in many of the company’s most likely sourcing locations. The water risk assessment results for palm oil indicated no significant risk for water depletion in any of the sourcing locations. The high water depletion risk scores of the hotspots were found to most likely be due to several different causes, both climatic conditions and anthropogenic activities, including agriculture. Therefore, it was identified that there are possibilities for a company, such as IKEA, to aid in mitigating the water availability challenge of the hotspots through the company’s agricultural supply chain. For example, a few agricultural management practices for increasing the water use efficiency suitable for the different hotspots could be recommended and incentivised by the company to the local farmers of the hotspot sourcing locations. The WRA methodology used in this research project, following the guidance for setting enterprise water targets by Reig et al. (2021), was assumed suitable for IKEA to use and incorporate into a more comprehensive environmental assessment methodology for agricultural raw materials in order to develop water targets and strategies. The Aqueduct Food tool was assumed to be a robust tool for water risk assessment, and can be a suitable tool for IKEA to use to quickly gain a high-level picture of a material, location or water risk of specific interest. The water risk assessment results will mainly be useful in the future, when more comprehensive environmental assessments of agricultural raw materials have been conducted, and the water use has been assessed to a greater extent. Future research is needed to be conducted in order to confirm the results and recommendations of this research project, as well as to further complement the results for the needs of IKEA. This future research includes conducting field studies of the identified hotspots and the operations of the local farms, and conducting an equivalent water risk assessment of the two materials and sourcing locations on the water quality.