The Signal Interview
For the second consecutive year, IKEA’s largest franchisee is seeing consumer spending in its biggest markets flatten out or fall. Against a backdrop of inflation, elevated interest rates, and “uncertainty in general,” Ingka Group’s Chief Jesper Brodin says sentiment won’t change quickly. So he has told his team to focus on cutting prices to maintain market share, even if that hits profits as it did last year.
On one of the last occasions he met Ingvar Kamprad, Brodin asked the man who put the “I” and “K” into IKEA how he should think about the furniture retailer’s future. “You should think long-term, that is all,” the frugal Swedish founder replied over coffee on his porch.
How long? “200 years.”
“I simply can’t get that out of my head when I see some of the turbulence now,” Brodin said this week. “It gives you a very interesting dimension of what really are the things you should be concerned about, and what things you can leave.”
The Gothenburg-born industrial engineer has run Ingka Group, the franchisee that operates 90% of the world’s IKEA stores, through a pandemic, conflicts, stubborn inflation, and a looming trade war. But the tariffs convulsing the European giant’s home market are “not the highest on my agenda,” he shrugs.
He has “no clue” whether US President Donald Trump will shock Europe into unleashing the economic dynamism that it has found so elusive, he admits. “The world has left one world order. We have not yet fully established a new world order. Between such periods, historically, there is a bit of chaos. So that’s what we’re experiencing,” he says.
‘Time is not a luxury we have’
What preoccupies him far more is the challenge of curtailing his company’s environmental impact and encouraging his fellow CEOs to do the same when more politicians are pushing in the opposite direction.
“We used to say that politics is slow and companies are fast,” Brodin reflects. Now, companies are struggling to respond to the pace of political change. But it’s a leader’s job to see the wider perspective on “what is turbulence, and what is trajectory,” he says. “And the biggest trajectory transformation that we’re seeing right now is that the world is speeding up towards the climate-smart economy.”
What he means by “climate-smart” is lowering greenhouse gas emissions, using — and reusing — resources more efficiently, and building resilience to a climate delivering more frequent and costly disruptions to business. Six climate events, including floods in Spain and Dubai, left a serious financial mark on IKEA last year, he says. “All the data around the impact of climate change tells us that time is not a luxury we have at the moment. We have to act.”
Ingka, which under Brodin has retired its famous print catalogs, committed billions of euros to renewable energy sources, started reselling secondhand Billy bookcases, and developed corn-based glue to help cut fossil fuel use, has earned a reputation as one of the leading corporate sustainability actors.
Brodin says there are still two distinct categories of companies in this emerging economy — “those on the platform and those on the train.” The ones on board for adapting to the Paris Agreement’s goal of limiting global temperature rises to 1.5°C above pre-industrial levels are finding the ride bumpy, he concedes. And, given the fear of political pushback, “you will hear maybe a little bit less noise around it. Some people have consciously decided not to stick their necks out,” he adds.
Saving money by slashing emissions
The co-chair of the World Economic Forum’s Alliance of CEO Climate Leaders is increasingly concerned about those businesses that have stayed on the platform, likening them to horse dealers vainly resisting the advance of the automobile. But he sees “an avalanche of companies” buying into the financial case for climate action.
Ingka itself has managed to cut emissions by 30% since 2016, even as revenues have grown by 24%. It is on track to hit its 2030 net zero goal, Brodin says, “and we have saved so much money.”
Similar transformations will happen across leading businesses “with or without governments, because it makes economic sense,” he predicts, but he is concerned that governmental collaboration is not happening fast enough. Some of the action he wants to see from political leaders is high-level, like an end to subsidies for fossil fuels, or simpler climate reporting rules that are aligned across borders. (Unlike the EU reporting regime, which was so complex that “few of us, even the best ones, could understand how to even comply.”)
But some of it is more mundane. A mattress-recycling program IKEA has expanded from its Netherlands headquarters to a handful of European countries couldn’t have happened without governments banning incineration, Brodin notes. It is not a charitable initiative, he is quick to stress. IKEA is making a profit on turning discarded mattresses back into raw materials, while managing to lower prices on new Valevågs and Vesteröys.
The investment case for cutting prices
IKEA has a Walmart-like obsession with cutting prices, which has guided Brodin’s strategy through a period where many companies have looked to charge premiums for greener products. When it polls its customers, more than two-thirds cite climate change as their biggest concern. But just 6% say they would pay extra for climate-friendly products.
“Our customers are the ordinary people [with] thin wallets,” he says. They expect companies and governments to find ways to address their concerns without further straining their cost of living. “It’s not a political point of view, it’s economic.”
Ingka cheerfully reported that its sales and profits had both fallen in 2024 because it had decided to “invest” in cutting prices on thousands of products rather than chase top- and bottom-line growth. The fact that operating income had dropped from €2 billion to €1.3 billion, and revenues fell below €42 billion, was a testament to a unique ownership structure that lets it think in decades, not quarters, it said.
Under that arrangement, 85% of Ingka’s net profits must be reinvested in its operations, with the rest paid as dividends to its philanthropic owner, the Stichting INGKA Foundation. Few CEOs have the luxury of reporting to shareholders who do not flinch when profits fall, Brodin admits, and he talks of long-termism in terms of not letting “headwinds” blow him off the strategic course he has set.
‘No, we want the meatballs’
But he also sees risks in focusing on too distant a horizon, saying he tries to couple a long-term view with being “very ambitious about the here and now.” One lesson he has learned, he adds, is that “if you want to make change successful, make it profitable.”
Brodin worked early in his career as Kamprad’s assistant, and absorbed the IKEA founder’s maxim that the fear of making mistakes can stand in the way of progress. IKEA’s past success became an “enemy to change,” he says, adding that he would have moved 10 years earlier to make IKEA an omnichannel retailer had he known how its ecommerce capabilities “saved the company” when the pandemic shuttered its brick-and-mortar stores.
As CEO, he says, he has chosen to be “consciously naive” and not let the knowledge of what could go wrong stop the company from pursuing new ideas. It made plenty of mistakes when it was planning smaller stores to enter city centers, Brodin says, recalling how he approved two years of proposed alterations to the familiar IKEA format until customers rejected them. (“We tried open layouts. No, we can’t find anything. Should we do only bedrooms? No, we want everything. Skip the food? No, we want the meatballs.”)
The lesson was that “sometimes you have to stretch yourself to get back to home,” he says, adding that the process helped the organization understand that it had better listen to customers because “change is coming to us, whether we like it or not.”
A hoped-for return to Russia
Some of those changes have been more fraught than others. Ingka was one of the multinationals forced to put long-established operations in Russia on ice after Moscow’s full invasion of Ukraine. It managed to sell the last of its assets in Russia last November.
“We spent 25 years of homework to make it work, and it was very emotionally difficult for us to step out. Russia was one of the markets where our founder felt IKEA is needed the most,” Brodin says, adding that he still hopes to resume decorating the homes of its 144 million-strong population.
“It would be a day of joy when I could push the button to start planning everything [for a reopening], because IKEA wants to be where there are many people, and there are a lot of people in Russia,” he says, but “it’s not on the menu at the moment.”
For all his admiration of IKEA’s founder, Brodin says today’s business leaders face a broader array of pressures. In the founder’s era, the CEO’s task was about serving up a familiar recipe. Today, “you have to play the recipe, but you also have to create new recipes, and you have to be agile enough to respond to pandemics, wars [and] inflation,” he says.
It helps to have a way “to recharge your batteries and find other sources of inspiration,” he says, calling his daily guitar-playing “one of the things that keeps me sane.”
Brodin and some friends just released a vinyl double album, Critically Endangered Species, under the pseudonym of Lord Beaverbrook, the Daily Express publisher who served as Winston Churchill’s minister of aircraft production during World War II.
It was a name picked blindly from a book over pizzas and beers after recording the album’s first song. “Absolutely random!” Brodin laughs. But the name stuck. “We didn’t want to challenge fate.”