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IKEA's Global Sourcing Challenge: Indian Rugs and Child Labor

The power of storytelling.
by

Mohamed Shallo

on 11 May 2013

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Transcript of IKEA's Global Sourcing Challenge: Indian Rugs and Child Labor

IKEA& Should it step back and allow Rugmark to monitor 
the use of child labor on its behalf Or should 
it recognize that the problem was too deeply 
embedded in the culture of these countries for it 
to have any real impact and simply withdraw History;

In 1943
Founded by Ingvar Kamprad.
Products include
○ Pens
○ Watches
○ Picture frames
○ Table runners

In 1948
Sold goods from home and by mail-order;
○Added furniture to his newsletter
○Gave up small items How should the company deal with the ongoing 
issue of child labor in the supply chain? Crtitical Issues!! What really happened? What is this good for?
•Coaching your ability to allow stories
to float to the surface without thinking to much.
•Practicing decision-making.
•Fast adaptation to your present audience.
•Self-observation. Problems;
1995 German documentary Rangan Exports
Business area manager for carpets Marianne Barner
What to do? Should the company continue to try to deal with  the issue through its own relationships with its  suppliers www.corporatestoryteller.be There is hope! Good regulation and responsibility goes a long way! What really happenedl

IKEA does not tolerate child labor and works actively to prevent it.

The IKEA Way on Preventing Child Labor.

Third party auditors

UNICEF

Fix the root of the child labor problem by fixing debt poverty lack of access to education and ill health. Child Labour In 1951
Opened a display store
Stopped accepting mail-orders

In 1953
Introduced self-assembled furniture in newsletter
Lowered prices

Between 1953 1958
Sales doubled from 3 million Swedish krona to 6 million Swedish krona
Large furniture retailers in Sweden felt threatened Forced to look abroad for new sources

In 1961;
IKEA contracted with several furniture factories in Poland;
To assure quality IKEA
Brought its know-how
Taught its processes
Provided machinery to new suppliers

In 1965;
Kamprad self-financed a showroom
Located in the suburbs of Stockholm Expanding abroad

1963;
Oslo, Norway

1973;
Zurich, Switzerland

1974;
Germany
Became IKEA's largest market Child labour policy Child labour policy

Convention #138:
International labour standards defines the scope of work in influence and reflecting practice.

Current Situation of forced (Bonded) Labor in India

India’s compliance with ILO (International Labor Organization). Expanding abroad

Became a larger more complex company
Servicing customers with many features
Playroom for children
Low-priced restaurant
Sweden Shop

Carried more products
Textiles
Kitchen utensils
Flooring
Rugs Carpets
Lamps
Plants Expanding abroad

Became a larger more complex company
Servicing customers with many features
Playroom for children
Low-priced restaurant
Sweden Shop

Carried more products
Textiles
Kitchen utensils
Flooring
Rugs Carpets
Lamps
Plants Forced Labor & Minors

Minors face major roadblocks when trying to leave forced labor conditions.

Even if the minor is able to refrain from the pressure of returning to work, the family of the minor will often still be held accountable for the debt – which often is passed on to another sibling. Forced Labor and Caste;

Social layers in India are largely based on caste hierarchy.

The Indian Constitution and Compliance with ILO Forced Labor Conventions;

One of the overarching reasons why the Indian Supreme Court and National Legislation do not fully comply with the ILO Core Conventions No. 29 and No. 105 is due to the lack of clarity with regards to the definition of forced labour. ...nothing New!

Not a new phenomenon…


The Industrial Revolution


Population and education increase Child Labour, a black and white Issue? Monitoring and compliance

“The IKEA Way on Preventing Child Labour” Supplier cooperation Monitoring and Auditing

IKEA Compliance and Monitoring group (CMG)
standardizing audit-judgment and follow-up
training and calibration activities
verifying compliance audits

The auditing numbers
Suppliers decreased => total audits decreased
Substantial increase in unannounced audits
More audits in high risk regions and industries 10 year anniversary for IWAY
Extend deeper into supply chain (risk-based)
Flexible solutions (situation based)
Increase supplier responsibility for sub-suppliers

Support and develop suppliers
Ikea co-workers on cite to promote IWAY
Assistance maintaining IWAY at sub-suppliers Local and global partnerships

South Asia - work with other retailers to increase wages and compensations
China – work with other multinationals via business for Social Responsibility (bSR)
Vietnam – work with Save the Children to educate 1500 adults about home-based CL
Better Cotton Initiative – multi-stakeholder effort with international companies and NGOs
UNICEF – global and local cooperation
UTZ Certified coffee Companies facing child labour challenges

246 million children worldwide are working to survive
11 million under the age of 15 years old work in hazardous conditions

Where are they working?
Agriculture
Gemstone extraction and finishing
Sporting goods
Textile 1. Cocoa Industry
Ivory Coast - 70% of global production
10,000 victims of trafficking or enslavement
109,000 children under the worst form of child labour

Media reaction:
International media exposure in 2001
“Cocoa Industry Protocol”
Promised to certify cocoa “child labour free” by July 2005
Few pilot programs

Why does it still exist?
Complexity of global supply chains
Lack of education and poverty
No improvements on infra-structure 2. Cotton industry

Where?
Tajikistan, Benin, Egypt, India and Uzbekistan
Thousands of children are forced to pick cotton around the world
Why?
In India debt bondage problems
In Uzbekistan - government-imposed quotas
Media reaction:
2007 - ILRF report focused on recent trends in employment of child labour on cottonseed farms in India 3. Rubber Industry
World's biggest rubber plantations in Liberia
Children carry two 70 pound buckets of rubber on their shoulders for miles
Factors:
Pressure to meet company quotas
Incentive to support the family financially
Lack of access to basic education
Media reaction:
2006 - United Nations released report
Lawsuit accusing Firestone of employing children and slave labour Firestone denies the charges 4.Tobacco Industry
•In Malawi 78% of children (10-14 years)
55% of 7 to 9 year olds work full or part-time
with their parents on tobacco farms

•This violates not only international standards but
also ILO convention 138 that sets a minimum working
age of 18, which Malawi signed.

•ECLT spent around US$ 2.3 million over four years
Media criticism:
•Support the company’s ‘‘corporate social responsibility
agenda’’ rather than eradicating child labour 5. Soccer ball industry
Pakistan - 75% of total world production
Thousands of children works 10h/day
Nike is the main accused company

Media reaction:
1996 - ILRF called attention to the issue
2010 - ILRF released a ground breaking report highlighting labor rights violations

Goal requested by ILRF:
Fair pricing for suppliers
Complete transparency throughout the supply chain
Independent monitoring Marianne Barner in India 1995: Documentary Germany Television
Children working at Rangan Export

IKEA is invited to participate in a live discussion
IKEA is refuced to see preview of video
Aggressive approach aimed directly at IKEA

Discussion in groups
what would you do if you were Marianne?”
What long term strategy would you suggest she takes regarding IKEA's continued operation in India? 
What else would you suggest her to do?
What should IKEA about Rangan Supplier?
Short term
Long term New crisis - Child Labour She didn’t go to the Germany TV show
IKEA wrote a public note about the issue
Marianne Barnner immediately fires the Indian Company
IKEA demands opinions to experts in the domain:
Unions, ILO, UNICEF
Ikea’s reputation suffers a serious setback

Middle term/ Long Term
A child labour code of conduct, "The IKEA Way On Preventing Child Labour
IKEA joined forces with UNICEF and Save the Children in a massive bid to prevent and eliminate child labour in 'the carpet belt'
The IKEA Social Initiative : focused on children's right to a healthy and secure childhood with access to quality education IKEA's Response 1994: Swedish documentary blames IKEA on child labor in Pakistani factories
Marianne Barnner : Business area manager for carpets
Ikea was caught completely aware
Apologize and acknowledge that they were not in control of this problem

Ikea’s response:
Advise from ILO
Black and white clause to all supply contracts: no child labor
Third part-agent to monitor child labor practices
Traveled to India, Nepal and Pakistan The social Wake-up: Child Labor Marianne Barner in India In case of child labor;

Implement corrective action plan (2 weeks)
“the child’s best interest” => viable alternatives
Assistance and follow up from IKEA
IWAY incompliance
= immediate delivery stop
= when resolved 6 month intense monitoring
Other non-compliance = 90 days to correct
Actions not implemented = terminate business
Repeat violations = terminate business In case of child labor;

Implement corrective action plan (2 weeks)
“the child’s best interest” => viable alternatives
Assistance and follow up from IKEA
IWAY incompliance
= immediate delivery stop
= when resolved 6 month intense monitoring
Other non-compliance = 90 days to correct
Actions not implemented = terminate business
Repeat violations = terminate business How IKEA incorporated issue into their CSR report?

IWAY - improvements in Supply Chain
Working conditions and the environment
Supplier Development Programme

IWAY on preventing Child Labour
General principle
Labour force register
Monitoring IKEA's Values

'We shall offer a wide range of home furnishing itemss of good design & function at low prices so people can afford' IKEA's Values

Principle 'To create a better everyday life for many people, the IKEA spirit is founded on our enthusiasm, our constant will to renew, on our cost consciousness, on our willingness to assume responsibility and to help, on our humbleness before the task, and on the simplicity of our behaviour'.
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