On March 1, 2016, IKEA and Newlight Technologies announced that they entered into a supply, collaboration, and technology license agreement. Under the agreement, IKEA will purchase 50% of the material from Newlight’s planned 23,000 MT/yr PHA plant. In addition, IKEA secured exclusive rights in the home furnishings industry to use Newlight’s technology to convert biogas, its ﬁrst target feedstock, or later, carbon dioxide into polyhydroxyalkanoates (PHAs) for its home furnishing products. According to the release, both the companies will work together to identify and select the carbon sources and develop the technology to use a range of renewable substrates, with a long term goal to develop capacities up to 453,000 MT/yr.
IKEA’s announcement with Newlight is, in some ways, not all that surprising. IKEA established a sustainability goal that in August 2020, all plastic material used in its home furnishing products (which excludes polyurethane foams and constitutes a reported 40% of the total plastic volume used by IKEA) will be 100% renewable and/or recycled. According to the company’s 2015 sustainability report, IKEA sourced 23% of the plastics in its plastics category of products from renewable or recycled sources in FY 2015. Though the press release did mention that IKEA will license Newlight’s production technology, the company clariﬁed in a follow up that IKEA “[has] no plans to produce [its] own resins and to move up in the supply chain. [IKEA’s] approach is to have long-term cooperation with [its] suppliers for mutual beneﬁt.” Again, not a signiﬁcant deviation from the company’s typical position in the value chain or industry trends.
However, what does distinguish IKEA is the kind of product they selected: PHA. In selecting PHA, IKEA bucks a consistent trend in the industry towards drop-in replacements or biomass-enabled improvement products. Recent bio-based offtaker announcements include:
- Elopak’s announcement in March 2015 that it will offer beverage cartons coated with SABIC’s second-generation PE coating to the European market
- Mitsubishi Chemical Corporation’s June announcement that it and Suzuki Motor Corporation jointly developed a new grade of polycarbonate resin, dubbed DURABIO™, which was used in the interior resin color panels of Suzuki’s new Alto Lapin and claims to offer higher resistance to impact, heat, and weather
- Mitsubishi Chemical Corporation’s July press release announcing that Sharp Corporation chose its bio-based polycarbonate, DURABIO™, for the front panel of its new smartphone, the AQUOS CRYSTAL 2, again citing the higher resistance to impact, heat, and weather
- Suntory Products, also in July, announced it adopted a renewable heat transfer ﬂuid based on DuPont Tate & Lyle’s Susterra® 1,3-propanediol in its Tennensui Hakushu plant in Japan that improved pumping efficiency
In the case of PHA, its different properties do not yield a clear argument that the company is gaining an equal or better material. In comparing pure polypropylene (PP) to pure PHA, there are a number of performance tradeoffs (see the below table). The evaluation of potential value gets even more muddled when taking into account that Newlight, like others in the PHA space, blends PHA with other polymers (see the report, “Comparing the Performance and Addressable Markets for Biopolymers“) (client registration required) to focus on providing compounded resins, at speciﬁcation. Without knowing the exact material speciﬁcations and intended purposes, it’s hard to say if the AirCarbon material brings IKEA any performance value or if it simply results in tradeoffs or lost performance. Still, some potentially interesting use cases could arise when looking at the potential options PHA provides through the lens of a furniture manufacturer. For example, Metabolix’s high modulus grade of PHA offers a noteworthy increase in tensile modulus, while having a lower tensile strength and higher density. For a use case such as a table leg, the argument could be made that the increase in tensile modulus would be a boon and any weight increase may not be noteworthy for the consumer since tables tend not to be moved often (and depending on the design, this extra weight hypothetically could provide some stabilization from tipping).
Comparison of the speciﬁcations for three injection molding resins:
In addition to performance being one motivation, IKEA may have a second: cost. In the case of Newlight, Mark Herrema, the company’s co-founder and CEO, claimed in October 2015 that Newlight’s AirCarbon can “out-compete” current commodity polyoleﬁns on price, which at that time were roughly $1,250/MT for polyethylene and $1,100/MT for polypropylene. Considering many in the biopolymer space, including Biome Bioplastics and TIPA, report resin price tags two to three times more than conventional materials (client registration required), a company that beats conventional materials on cost, without signiﬁcantly sacriﬁcing performance, would provide a strategic advantage. If Newlight’s claims of performance and cost competitiveness hold true, IKEA picked up a product that meets speciﬁcation, while driving the company towards its corporate sustainability goals. Bio-based may still be a “nice to have” in many circles, but in this case it was enough to win Newlight an offtaker for its material. Other producers in the space should take note, as the bio-based offtake market – and its drivers – continues to evolve.
By: Julia Allen