By Helen Reid
LONDON (Reuters) - The investment arm of Ingka Group, the biggest global IKEA retailer, said it will invest 1 billion euros ($1.03 billion) into recycling companies as it aims to better manage the waste created when IKEA furniture, bedding or mattresses are thrown away and end up incinerated or in landfill.
The investment comes as the European Union is developing legislation that would charge retailers a fee for every textile or clothing item sold in the bloc, to raise money for sorting and recycling ever-increasing amounts of discarded textiles that are overwhelming waste management services.
Ingka Investments has earmarked around two-thirds of the money - 667 million euros - for new, as yet unannounced investments into recycling companies, with a particular focus on textiles.
The rest will be spent on further funding for companies Ingka has already invested in, including mattress recycling firm RetourMatras and plastics recycler Morssinkhof Rymoplast.
Ingka is also looking to invest in recycling of wood, a key material for IKEA furniture.
"The high carbon footprint for most of these materials, plus the capacity shortage for recycling, has motivated us to invest in these categories," Lukas Visser, investment director at Ingka Investments, said in an interview. "The circular economy is in the very early stages, so we have to narrow down where we focus."
Ingka, which also invests in forests, solar and wind energy, and real estate, has a goal of recycling as many mattresses, plastics, and textiles as IKEA sells, by 2030.
Peter van der Poel, managing director of Ingka Investments, said the aim was to announce an investment in textile recycling this year.
"We feel it is so needed to create scale and volume, not only for IKEA's needs but also for market needs going beyond that," said van der Poel.
Legislation could help nudge companies to favour recycling over incineration, van der Poel said, and the EU's planned Extended Producer Responsibility legislation could help level the playing field between recycled materials and virgin materials, which are currently cheaper.
Ingka Group is the largest IKEA franchisee, operating IKEA stores in 31 countries and accounting for 90% of global IKEA sales.
($1 = 0.9712 euros)