IMPORT PATHWAY BIOSECURITY MANAGMENT

1. A little about IKEA. 2. Sustainability 3. Fumigation 4. IKEA and Australian Department of Agriculture working together for a better future. 2

Inter IKEA systems B.V. 2012 Our business idea: Is creating a better everyday life for the many people, by offering a wide range of well designed, functional home furnishing products at prices so low that as many people as possible will be able to afford them. 3

Where we come from The IKEA Concept was born in southern Sweden, in the barren landscape of Småland. Our values of e.g. togetherness, humbleness and thriftiness grew out from this background. IKEA values: Ten key expressions summarizing the IKEA culture Leadership by example Simplicity Striving to meet reality Constantly being on the way Cost-consciousness Constant desire for renewal Humbleness and willpower Daring to be different Togetherness and enthusiasm Accept and delegate responsibility 4 IKEA Supply AG 2012

Ingvar Kamprad Elmtaryd Agunnaryd

A short historical tour 1920s 1940-50s 2000s 1980-90s 1960-70s

PEOPLE S CHALLENGES People living together in small spaces Function People demand value for money People want beautiful things People care about the planet People have limited means Quality Form Sustainability Low price We call it Democratic Design! 7 IKEA Supply AG 2012

Everyday performance Everyday product quality: well-designed, functional, customer-friendly, durable and safe to use High social & environmental responsibility, a foundation for our business Products always available, a prerequisite for sales We reduce cost to ensure affordable products for the many people We develop these qualities in synergy. 8

2013 Facts & Figures Inter IKEA Systems B.V. 2013

1. A little about us 2. Sustainability 3. Fumigation 4. IKEA and Australian Department of Agriculture working together for a better future. 11 IKEA Supply AG 2012

at IKEA

7 billion people growing to 9.3 billion in 2050

One and a half planets Source: World Economic Forum, Scaling Sustainable Consumption, A Wave of New Growth, 2011.

Inspire and enable millions of customers to live a more 1 sustainable life at home People & Planet Positive 2 Strive for resource and energy independence 3 Take the lead in creating a better life for people and communities 15

Certified wood We used around 2.2 million cubic meters of FSC certified wood/year. Including also recycled, this represents 38% of our total wood. 99,8% of our wood is traced and secured for legality. Better Cotton The share of more sustainable cotton used in IKEA products is currently 74% of our total cotton use.

Lightweight constructions reduces raw-material consumption and transportation

75 000 tonnes of CO 2 saved through using paper pallets

Our 11 criteria to evaluate products 1 More from less Have we used a lightweight construction in the product? 2 3 4 5 6 Renewable materials How much of the product is made from renewable materials? Recycled materials How much of the product is made from recycled materials? Materials from preferred sources How much of the material in the product comes from well managed sources or has a proven lower environmental impact than the normal material? Separable and recyclable Is the product separable and recyclable at end of life? Quality How low is the COPQ? 7 8 9 10 11 Transport efficient Is the product more transport efficient than the predecessor, i.e. can we fit more in to the container? Energy efficient production Are the suppliers producing this product more energy efficient than comparable suppliers in the category? Renewable energy in production Do the suppliers producing this product use energy from renewable sources? Raw-material utilization How is the raw-material utilization (yield) at the suppliers producing this product compared to other suppliers on the market? Sustainable life at home Does this product help our customers to reduce energy, water or waste in their homes?

Responsible use of chemicals Substance, material etc. Phase out Decision PVC 1991 Formaldehyde in textiles 1991 Acid-curing lacquers 1993 Azocolours in textiles 1995 Organic solvents in textile printing 1998 Brominated flame retardants 1998 Organotins (MAT-0010) 2002 Chromium 6 in surface treatment 2004 Formaldehyde ½ E1 in woodbased mtrl 2008 Organic solvent in wood coatings 2009 Lead in components and mirrors 2009 SVHC 2009 CMR, PBT, vpvb 2009 Polycarbonates in food contact & children 2009 products (Bisphenol A) Fumigation of natural fibres 2010 Mercury in CFL 1/3 of legal limit 2010 Lead in alloys 2011

1. A little about us 2. Sustainability 3. Fumigation 4. IKEA and Australian Department of Agriculture working together for a better future. 21 IKEA Supply AG 2012

Fumigation November 2009 IKEA Group banned the use of Methyl Bromide and Ethylene Oxide as fumigants. 22 IKEA Supply AG 2012

Exceptions In some countries (e.g. Australia ) where legislation requires fumigation with chemical substances, fumigation is conducted at the port in that country. Fumigation Volume 2013 a total of 2625 IKEA containers were fumigated with Methyl Bromide accounting for 33.6% of import volume.

Alternatives HEAT- many trials and test have been conducted and many products are not suitable for heat treatment. Other treatments E.g. ECO2 is and alternative treatment that may be considered which is environmentally friendly. Capacity- there are no facilities in Australia that can accommodate the volume required for heat treatment. ECO2- is not an approved by the Authority in Australia and there is no facility available in AU currently. 24

IKEA does not compromise on product safety, the products must be safe, both for the environment and for human health, and free from hazardous substances. Our goal is to refrain from the use of harmful substances. How can we do this? 25

1. A little about us 2. Sustainability 3. Fumigation 4. IKEA and Australian Department of Agriculture working together for a better future. 26

Import Pathway Control, Supplier Management. 27

A. Regulatory acceptance of Quality Assurance Controls B. Supplier Management and Materials Managment C. ITTC- IKEA Test Lab and Training Centre D. Industry arrangement WAP. 28

AIM - is to demonstrate that IKEA Quality Assurance based compliance systems in manufacturing adequately addresses Australia s biosecurity standards. Goal - is that IKEA will be able to operate across the scope of biosecurity without Department of Agriculture interception i.e. Fumigation. 29

Assurance of Compliance Demonstrate full details of auditing processes on the quality assurance systems and monitoring regimes within IKEA that are in place to ensure compliance frequency of audits, auditors competence, and scope and any international standards or accreditations that apply to these audits. IKEA demonstrates a Quality Assurance system in place that covers Government biosecurity compliance from origin supplier/manufacturer to final destination. 30

Current Process Quality Assurance manufacture of Jokkmokk Table. Bio security Risk mitigated QA Check Manufacturer Pre Border Timber kiln dried 80degrees for 10 days. Moisture ratio 8% Bio security documents provided to AU broker. IKEA Quality Control check ISQAP Timber sanded holes filed dust removed. Quality check of documents by exporter. IKEA Quality Control check Articles packed into FCL container Timber pre heated 18-20 c 15-20mins Quality Inspection and packing for shipping. Timber Stained Stain Dried 25-35c Sealed Topcoat dried at 25-35c Sanded dust removed,topcoat applied. Sealer Dried 25-35c Post Border AU Biosecurity docs accessed by AEP accredited broker. Declaration data lodged in ICS DAFF access data Article is solid wood direction for Fumigation issued. Fumigation undertaken at AU Port. Goods Released. 31

Proposed Future Process. QA System approval IKEA demonstrates QA systems applied globally for all Suppliers DAFF accept QA and Audit systems globally Compliance arrangment entered into between IKEA and DA. Manufacturer Pre Border Timber kiln dried 80degrees for 10 days. Moisture ratio 8% IKEA Quality Control check ISQAP Bio security documents provided to AU broker. Timber sanded holes filed dust removed. Quality check of documents by exporter. IKEA Quality Control check Articles packed into FCL container Timber pre heated 18-20 c 15-20mins Quality Inspection and packing for shipping. Timber Stained Topcoat dried at 25-35c Stain Dried 25-35c Sanded dust removed,topcoat applied. Sealed Sealer Dried 25-35c Post Border AU Future Biosecurity docs accessed by AEP accredited broker. Declaration data lodged in ICS DAFF access data DA recognise QA processes in manufacturing minimize biosecurity risks. Goods Released. 32

A. Regulatory acceptance of Quality Assurance Controls B. Supplier and Materials Management C. ITTC- IKEA Test Lab and Training Center D. Industry Arrangement WAP 33 IKEA Supply AG 2012

IWAY Minimum Requirements for Environment, Social & Working Conditions when Purchasing Products, Materials and Services In the best interest of...the child......the worker......the environment...

IWAY is the IKEA Code of Conduct for suppliers of products, materials and services to IKEA. It describes the IKEA minimum expectations on the suppliers in the fields of Environment, Social & Working Conditions and Forestry. In specific areas, e.g. energy, there might be additional expectations going beyond the minimum that are expressed in the IWAY Standard. 35

IWAY Around 1,200 audits every year to verify compliance and develop further together with our suppliers. 200.000 improvements at our suppliers Changing the conditions in the best interest of the workers and the environment. Deadline for IWAY compliance at all existing suppliers was in the end of August 2012.

Trading Offices Trading offices are responsible for the purchasing, management and training of our suppliers to ensure compliance and quality is adhered too. Trading is responsible for the audits and implementing improvements in processes. 37 IKEA Supply AG 2012

Approach for every day Product Quality ZERO TOLERANCE methodology. Testing to international laws and standards. IKEA has a good network and relations with authorities and leading consumer organisations. Established documentation and learning processes. 38 IKEA Supply AG 2012

IKEA Supplier Quality Standard Trading is responsible for IKEA Quality Standard to assure that our supplier base has met the pre conditions to produce products according to the set of demands. The standard is built like a staircase where we have a minimum demand that needs to be achieved to be able to deliver products to IKEA. All of our suppliers are assessed by specially approved assessors prior to start up of business. Regular re assessments are done to assure compliance and to identify gaps in order to develop the suppliers. 39

Securing Product Quality Risk assessments are done during product development for all new products. Production Risk Assessments are done during production set up for all new products and follows product life cycle. Production risk level. Article risk level. Material and Chemical risk Level. Secure compliance of all requirements- onsite checking, IKEA representative visits supplier 2-4 times a month. All news reviewed by specialist before start up to ensure safety and health. 40

Storage of Raw Material. Trading work with suppliers to ensure storage of the raw materials are kept in secure dry pest free environment prior to the use in manufacture. Timber used for manufacture is kilned dried to 60-80 degrees to remove moisture content for 15-21 days. Wood moisture after drying is 6%. Pest Control It is a requirement of all manufacturers to maintain a pest control program to ensure the raw materials and products are kept free from pests. 41

Wood is IKEA identity

Integration of ALL legal requirements IKEA s due diligence system

IKEA forestry approach IKEA minimum Integration requirements of ALL legal requirements 1) known origin of wood 2) not from any of the following: IKEA s due diligence system Illegal logging, Social conflicts, Geographically identified HCVF, Conversion, GMO IKEA preferred sources forests verified as responsibly managed according to a system recognized by IKEA currently, only FSC FM & CoC certified wood and recycled wood meet IKEA requirements for preferred sources

Start-up of new IKEA supplier Initial IWAY assessment IWAY MUST approval First delivery Approved: a) Wood Procurement Plan or b) FSC chain of Custody (chp 15) Within 90 days to comply with applicable IWAY Forestry Standard procedures (chp.16, 17 or 18)

IKEA Forestry Tools (1) Forest Tracing Survey (FTS) regular report from suppliers on wood material that could have been used in IKEA articles

IKEA Forestry Tools Wood Tracing System (WTS) web based system for managing, visualizing, analyzing data from suppliers and storing data from audits.

IKEA Forestry Tools (4) IKEA Risk List for identifying high risk wood sources that may be present in IKEA wood supply chains

Auditing Wood Supply Chain Audits IKEA IKEA Supplier IKEA Sub-supplier Logging site

A. Regulatory acceptance of Quality Assurance Controls B. Supplier and Materials Management C. ITTC - IKEA Test Lab and Training Centre D. Industry Arrangement WAP 50

IKEA has two test laboratories one in Almhult Sweden and Shanghai. 51

A. Regulatory acceptance of Quality Assurance Controls B. Supplier and Materials Management C. ITTC- IKEA Test lab and Training Centre D. Industry Arrangement 59

Industry Arrangement IKEA and the Australian Department of Agriculture are looking to engage in a future alternative arrangement. Government recognition of Quality Controls,Supplier Management, Audit, processes. Eliminating intervention and fumigation at the border. 60

Responsibility IKEA will be held responsible for compliance. Department of Agriculture will manage by risk assessment approach. IKEA will be responsible to notify the department of any changes that occur to our processes. 61

Benefits - IKEA Eliminating the use of Methyl Bromide on our products that are used in our homes. Benefits - Department of Agriculture Placing more responsibility on the importer not the department. Management by risk assessment streamlines clearances processes. Less manual processing at the border using less man power so resources can be better utilized. Cost Savings. No longer harming the environment or exposing co workers and suppliers to harmful gases. Less intervention at the border. Reduced delays in the logistics chain by eliminating Fumigation. Cost Savings. Working in partnership with Government. Working in partnership with industry. 62

and our future is filled with more opportunities