Lessons in Sustainability: IKEA Case- How Businesses can Respond to Social Issues
IKEA’s vision is to “To create a better everyday life for the many people”. It does that by making its operations cost effective and making frugality a major value at workplace. It enables its values by building long term supplier relationships and promotes their learning in operations.
Let’s look at the child labour controversy at IKEA:
In 1994–95 the news of Ikea’s rugs business’ suppliers in India, Pakistan, Nepal employing child labour surfaced via a Swedish documentary. IKEA’s stance went all against child labour and it fixed the problem by enforcing the “black and white” clause wherein, if the supplier employed children under legal working age, the contract would be stand null and void. IKEA even appointed a third party Scandinavian company to audit its suppliers’ operations.
When IKEA’s CEO dug deeper into the issue of child labour, it found out many, otherwise ignored problems about child labour, especially in third world countries:
- Children were bonded in jobs to pay off debts of their parents and earn a living for their families
- While Indian government prohibited child labour in hazardous factories, it permitted children to work in craft industry so that the art could pass along to generations.
- Child labour was too deeply entrenched a problem and the enforcement of law could not help much.
At this point, Ikea got an invite to participate in a live discussion on a German TV in response to documentary on children working in factories like Rangan Exports who were a major supplier to IKEA. To be aired in Germany, a major market for IKEA, the film would have had far reaching consequences.
What should have IKEA’s CEO done? Say yes to the invite? Was she prepared enough? For the preparation should she have cancelled the contract with the supplier? How should she have defended Ikea’s position? Here’s a pictorial depiction of the choices:
Or Should Ikea have moved out of the rug business together?
As we had seen in a previous blog, how deep the issue of child labour ran and how a blanket ban on child labour can sometimes lead to counter productive results. IKEA recognized that, and in collaboration with UNICEF started the Alternate Learning Centers at these factories so as to attack the root cause of the problem of child labour— lack of accessibility to schools.
Reiterating, sometimes what’s legal may not always be ethical. Companies today need to view their businesses not from the point of view of the production based view of suppliers-customers, but from the point of view of stakeholders — the ones who are affected by your business and the ones who affect your business. Only then can the structural issues, involving stakeholders with differing needs, sometimes conflicting with the law or the business interest be addressed optimally.
The blog is the part of series ‘Lessons in Sustainability’ and comprises of class discussions and key insights from readings, at IIML. The next blog in continuation is going to be on stakeholder management.
Sources and Credits:
- BSEM Elective class discussions led by Prof Sushil
- IKEA Website