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IKEA's CSR Journey
Transcript of IKEA's CSR Journey
What strategy would you recommend Ikea to pursue in dealing with the child labor issue?
- Dealing with it directly and its own suppliers
- Leaving control to Rugmark
- Withdraw from contract?
IKEA's CSR Journey
Stage of Ethical Development
"... our willingness to assume responsibility and to help,..."
open-plan office landscape
"anti bureaucrat week"
"Waste of resources is a mortal sin at IKEA".
- Firm focus on engagement in CSR
- Anticipate responsibility
- In CSR perspective, the best firms; - The star companies!
- Accommodate CSR considerations into their decision making processes
- Formal regulations AND informal social and environmental pressure
- Motive behind
- Firm admits, but fights it
- Focus on regulatory compliance
- Passive about CSR
- Deny if anything arise
So which one applies for IKEA before the -94 child labor crisis...?
Plan for addressing Environmental concerns
- Cooperate with WWF and Greenpeace
- Start using the standards set by the Forest Stewardship Council
- Appoint forest managers to carry our random checks
Adapting the product range
Working with suppliers
Transport and Distribution
Ensuring environmentally conscious stores
The Triple Bottom Line
“pursue a more balanced set consisting of economic, social, and environmental performance, by simultaneously satisfying the demands of all stakeholder groups" (Peng, 2012)
competitors and cartels --> complications
"Creating a better life"
"The IKEA spirit"
IKEA foundation (change after 1994)
vulnerable to public attacks by media (1994: Child labour)
not enough control of suppliers; introduction of additional clauses not successful
main areas: Climate; Forest; Cotton; Water; Waste
vulnerable to public attacks by authorities (1980s: Glue)
Ikea's "business model"
Ikea's business model
display stores - inspect products before buying
large suburban stores
"We use a catalog to tempt people to visit an exhibition, which today is our store"
"creating a better life for the many people"
"a wide range of home furnishing items ...at prices so low that the majority of people can afford to buy them"
- contracted factories in Poland
- do not own but support
simplicity + attention to details
constant will to renew
willingness to assume responsibility
- Label certifying and supervision led by bigger institutions
- Good relationship with governments
The child labor crisis
• In 1994 Ikea was named in a film showing child work ---->media spread the work causing a wave of critics inside and outside of Ikea
1. Ikea apologized and promised to do something about it
2. Asked International Labour Organization for help
3. Ikea found third-party company to find information about child labor and to audit Ikea's suppliers for child labor
• Indian government passed laws for child labor protection but those were not enforced sufficiently
• Rugmark, a label to be put on carpets certifying that they were made without child labor (background are NGOs, manufacturer, retailer and importers)
• Rugmark foundation supervises the use of the label
BUT: In 1995, Rangan exports, one of Ikea's major suppliers is involved in child labor
Growth in number of stores, revenue and employees
self-financed expansion strategy by previous success
External Opportunties and Threats
- Rising energy and material costs
- Tendency in smart home energy management
- Standardizing processes
Physical: More than 313 stores
and more than 30 stores
Financial: Cost consciousness
Economize with resources
HRM: Skilled staff/motivation
based on reward system