IKEA's Social Responsibility: A Review Based on ISO26000 Standard

This report evaluates IKEA's social responsibility based on ISO26000 standard. It covers the company's organisational governance, human rights, environmental responsibility, and community engagement. The report also highlights the risks associated with the business and how IKEA manages them.

BSC ACCOUNTING AND FINANCE
MODULE ACCOUNTANT IN
BUSINESS

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
MAIN BODY..................................................................................................................................1
Organisational governance..........................................................................................................1
Human right.................................................................................................................................3
The Environment.........................................................................................................................5
Community engagement..............................................................................................................6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................9

INTRODUCTION
Social responsibility is an ethical framework that emphasis on whether the individuals is
fully accountable toward its action, and undertake activities that are beneficial for the society.
Thus, as per the social responsibility, company needs to maintained balance between economic
growth, environment and welfare of the society. Moreover, in recent scenario, individuals living
in society are enforcing companies to take step toward social responsibility while operating its
business to sustain it for longer time frame. Companies that are highly committed and
determined to take steps toward social responsibilities can easily attract talented employees as
well as maximum customers within the firm. Thereby, it can be stated that CSR activities lead in
fostering positive working environment and productivity in the organisation (Moratis, 2018). In
another words, company through CSR activities is able to developed and retained strong brand
image in mind and hearts of customers and investors.
This report is about IKEA that has been established on 28 July, 1943 having 476 stores
among which one of them is online. It designs and sells kitchen appliances, ready to assemble
furniture, home accessories and other goods and services to customers. Furthermore, this report
will be presented to the investors that are interested to know or evaluate whether the company is
socially responsible or not. So, in order to know whether IKEA is social responsible, ISO26000
corporate social responsibility framework has been applied. Therefore, the report will solely
focus on the way IKEA contribute in growth and development of society so that investors can
take right decision to invest in socially responsible investment.
MAIN BODY
Organisational governance
ABOUT IKEA
IKEA is an international retailer that offers home products such as furniture packs, kitchen
accessories and bathroom in different parts of the world so that wants of customers can be
fulfilled in effective manner. Ingvar Kamprad is the individuals that have started IKEA in 1943,
17 years ago when he was an child. Company is well known for selling designer furniture at
affordable prices so that more and more customers are motivated to be part of organisation.
Likewise, there are around 155,000 employees that are working together so that company can
earn revenue of €32.7 billion. IKEA has emphasis on effective governance with a motivate that
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all task as well as activities can be completed in limited time (Zhao, 2018). Company is most
famous among its customers in terms of selling well designed products at low price thus having
its largest market in Germany, France and United States. In addition to it, IKEA is well known
for taking eco-friendly initiatives and having a friendly and supportive environment where
employees can easily work.
ORGANISATION GOVERNANCE
It has hierarchy organisation structure that helps in completing all task in sequential
manner so that the end objectives are fulfilled. Such as the information flow from top to bottom
in the hierarchy order i.e, the subordinate must have to follow order to superior while
completing its task. Therefore, each superior monitor and control the action and performance of
employees so that firm can achieve and retained competitive advantages in external
environment. Company have global operation, so it has maintained the standard of policies,
procedure and process that has lead in delivery of qualitative services to customers in limited
time frame (Talib, Josaiman and Faisal, 2020). IKEA has emphasis on creating better life for all
the stakeholders of the company such as its employees, customers, community and suppliers so
that they can feel happy and satisfied. Thereby, the firm in order to be socially responsible has
implemented 10 core values, code of conduct related to suppliers and a strong vision statement.
Such as leaders by example, constant desire for renewal, cost-consciousness, striving to meet
reality, humbleness and willpower, daring to be different, togetherness and enthusiasm. Along
with it, there are more values that has been abided by IKEA like, constantly being “on the way,
accept and delegate responsibility and simplicity.
IKEA has also tried to avoid conflict between employees so that they are motivated to
work together as team rather than individuals for achievements of common objectives. It has
also ensured fair and honest relationship with its partners through honesty, transparently,
respectfully sharing all information of the company to them. So that they can take right decision
to be part of the firm or invest in particular organization (Chakroun and et.al., 2019).
RISK MANAGEMENT
IKEA to retained its operation in global environment has taken steps to identify risk
associated with the business and the manner in which they can be mitigated for its betterment.
Company have tried to manage risk through continuously monitoring changes that are happening
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in external environment such as new policies, technology or any social changes thus it has
adapted itself as per them. So, it has helped firm in effectively expanding its business operation
as IKEA has make considerable efforts to identify and mitigate risk. Such as with use of
technology advancement it is able to identified risk that company would not able to sustain
through its offline operation (Cooperative, 2018). Therefore, it has started making use of digital
and online platform to attract customers and delivered effective services thus it has contributed
in growth and expansion of firm. Moreover, IKEA has followed all government rules such as
health and safety, data protection act and other while performing its different task so that end
objectives can be achieved. So, all these are set of actions, activities performed by the IKEA has
contributed in management of risk and achievements of company goals.
ISO26000 standard is standard that every public or private company needs to follow
while taking steps related to social responsibilities. These standard include reflection on 7
central issue such as organisational governance- human rights and labour practices and in
context of environmental responsibility- fairness of organisation practice, evolving and
developing community and consumer protection issue. In addition to this, ISO26000 standard
which is mainly based on three basic pillars such as environmental, social and economic (Tyc,
2020). So, with more and more companies established or grown in external environment, people
have enforced them to undertake reasonable business practices. Such as good working condition
provided to employees, fair wages and try to avoid fraudulent practices to retained maximum
customers within the organisation. Therefore, in order to present report to investors related to
whether the IKEA undertake social responsibility or not, ISO26000 standard framework has
been used which can be illustrated in detailed as follows:
Human right
It is one of the particular aspects of clause 6, which specify whether the IKEA has
focused on human right or not while operating its business. Human rights are basic right and
freedom of every individual that lives in the world or society and they are regardless from where
they are form or have particular live to life. Likewise, it has provided equal opportunities to all
individuals for growth and development so that their skills, knowledge and capabilities can
enhance and they can effectively work for organisation. IKEA treat its co-workers or staff
member equal or does not discriminate among them on basis of age, gender, sexual orientated,
nationality, religion and other basis (Lebarič, 2020). The company does not tolerate any type of
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harassment which is in form of discrimination, racism or sexual harassment or may be other
form of bulling and violence. Moreover, the company have given right of freedom to employees
to share their opinion, set of idea and views that can be used by it to gain competitive
advantages. Freedom of speech has contributed in bringing new and innovative ideas that could
be used by the firm to gain differentiate positioning from others. IKEA has also avoided any
type of force labour or child labour in the organisation thus it ensures that child should study
rather than doing work in firm (Rutkowska and Pakulska, 2021). No work under alcohol abuse is
accepted by the company so that the individuals can effectively performed its roles and
responsibilities or given task. Thereby, from all these it can be summarised that IKEA has
actively taken steps to protect and promote human rights in the firm so that each employees are
highly motivated to work hard and determinedly.
The global equality, diversity and inclusion manager stated that” the company highly
believe in fundamental human rights” i.e, the men as well as the women must be treated fairly
and should be given equal chance and opportunities to grow and expand. Organisation is far near
to approaching the equality in all location or stores but there are many functions of IKEA in
which the company has been still male dominated while other have been female (Leipziger,
2017). For examples: It has been identified that there are more males in logistic department and
female in human resources management. Therefore, IKEA in order to become socially
responsible has to make strict policies and procedure to bring equality, along with it recruit and
select men and women at every position and for different functions to be socially accountable.
Despite of all these fact, there are certain information which specified that company
have not ensure human right such as in article of 2019, IKEA has been accused for age
discrimination repeatedly as there are around 5 lawsuits during a year in US courts. So, as per
the perspective of workers, company refused discrimination, promotion in terms of pay based on
age. So, it has been criticised for excessive working hour, inadequate pay and dangerous
working environment provided to employees to work (Zhao, 2018). In 2017, company has also
been accused for exploiting the truck drivers of Eastern European in its supply chain as the
drivers have been living in the cabs for more time with an average salary of less than £3 per
hour. All these were against the law which have negatively impacted on brand image of the firm.
It is difficult for the organisation to monitor the entire global supply chain but it has tried to put
best efforts so that optimum outcome can be enjoyed by the firm. Thereby, company in order to
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sustain its position and retained its brand image has tried to make stricter procedure and policies
or abided to human rights (Lu and et.al., 2021). So, that employees of IKEA are motivated to
work for growth and expansion of enterprise in retail sector for achievements of its end goals.
The Environment
With increase in pollution and wastage of resources in external environment, the
government as well as people living in society are forcing company to take steps to protect
resources and environment. The IKEA has formulated strategy related to people and planet
positive in 2012 that has motivated company to take responsibility related to social and
environment. Company has been committed to range of activities related to chemicals, plastic,
greenhouse gas emission and energy use and efficiency that has contributed in protecting the
environment and natural resources to some extent (Lee and Schniederjans, 2017). Moreover, the
Firm has put efforts to provide training and guidance to employees related to the way task needs
to be completed thus it has helped in reducing wastage and delivery of maximum value to
customers. Likewise, in japan that company has provide buy back services to customers for its
furniture that are in good condition but not needed much.
Manager of IKEA have taken active parts or role in preserving and protecting the natural
resources and environment through monitoring and controlling the key actions of employees. In
addition to this, as per the report of 2017, IKEA has been highest scoring company that have
actively taken steps to make use of sustainable cotton, Pesticide action network UK and
produced by WWF. At the same time, the company also have best rating for its palm policy thus
it only adds chemical if necessary. IKEA have get four rating related to taking approach related
to sustainability or reducing the negative impact caused on environment. Thereby, increasing
more commitment and dedication among employees related to taking steps to preserve natural
resources so that they can be available for existing and future generation (Hardiana, 2020). Firm
has also maintained standard codified in its I way supplier code of conduct which helps in
attracting potential suppliers. As company ensure that child must not be force child labour and
proper working condition needs to be provided to employees so that they can effectively work. It
has been determined that 68% of suppliers of IKEA are either approved or being phased out and
does who not adhere to the standard are drop out. For examples, in 2013, there are nine suppliers
that has been dropped out because of not following the above standard. At last it can be stated
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that IKEA has developed Supplier sustainability index that states 95% of supplier’s
participations.
On the other hand, it has been identified that, as per 2019, IKEA is one of the largest
buyer of wood on the planet that consume around 21 million cubic meters of wood in order to
make furniture and other products. The company was also found selling products that are made
from wood illegally felled in the forest that has lead endangered for bear and lynx. Along with it,
it has been identified that company has been involved in selling of products that contained
feathers and no assurance has also been provided (Puspitasari and Sari, 2021). Furthermore,
there had been no policy made by the company pertaining to whether the meat was organic or
free range.
Community engagement
People living in society or community are most important parts of any organisation as
they are the individuals that make purchase of products as well as services that helps company in
earning high profit margin. IKEA has focused on creating better life for not only its customers
but also other people that are living in different parts of the world. Company has also make
partnership with other firm such likewise UNICEF and save children that has contributed in
building of school and education that could be fruitful in resolving the causes of child labor and
empowering the women. In addition to this, IKEA has also put efforts to support program of
UNICEF held in India and it is strong supporter of children education across worldwide (Bonsu,
2020). The company have also spent around 1.35 million Euros ($1.84 million USD) in order to
help cotton farmer to enhance their overall income and reduce intake of water and pesticide
while growing crops. Moreover, the company have set sustainability goals that it wants to
achieve so it has shown main concern in sourcing the wood and paper material. IKEA is making
having investment of capital in solar panels and wind farms such as it has installed around
550000 solar panels on its building that are operating in different parts of the world. In order to
gain maximum community or customers engagement, company has provided discounts to
customers that install solar panel at their homes.
It has also helped in understanding the IKEA has make partnership with other
organisation such as IKEA green TECH a firm that is invest in start-up company which have
potential to make use of new and innovative technology. Along with it, the firm also worked
with non-profit organisation to ensure that suppliers of animal products are making use of
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human practices while performing their respective task and activities. In order to enhance
community engagement, the company has put efforts to generate awareness among people about
the company, its sustainability concept and many more (Lee and Schniederjans, 2017). Thus it
has inspired them to put their best efforts and time towards making optimum use of resources,
reducing amount of wastage and protecting environment from several dangers.
While it has been analysed that company make use of wood for production of 60% of
IKEA products so it has highly dependency on wood thus it has to find sustainable source. There
are wide range of people in society with different perspective and viewpoints therefore the IKEA
is facing problem related to promoting the concept of sustainability. Or encouraging people to
take active part in the sustainability or optimum utilisation of available resource, protecting
environment. So that the resources can be available for existing as well as future generation and
their needs can be fulfilled.
CONCLUSION
From the above report it can be concluded that social responsibility is one of the crucial
elements of the company as it helps in creating strong brand image and reputation in mind and
hearts of millions of customers. Company has been famous for selling its products and services
at reasonable price so that each they can easily motivated to purchase for fulfilment of their
respective desire. In recent scenario, the IKEA is facing challenges related to ethics, moral
principle and taking steps towards social responsibility. But with its global expansion and
growth or increase in competition, the company has lays emphasis on social responsibilities,
abiding to all laws and regulation and ensuring health and safety of people. Moreover, it strong
ethical values, commitment and determination has contributed in making people happy and
satisfied and contributed in growth of organisation in retail sector (Rutkowska and Pakulska,
2021). Likewise, the company is loyal with its customers and employees that has helped in
improving overall performance, productivity and market share of firm. Thereby the IKEA
through maintaining and promoting social responsibility can able to gain competitive advantages
and achieve high growth in future scenario.
Along with it, the IKEA will also need to lay emphasis on making strong and effective
management of supply chain, improving the working condition so that employees can
effectively complete their respective task in the firm. Company have contributed or make lot of
investment in society in order to enhance community engagement that has lead in influencing
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people to take active part in sustainability or social responsibility for welfare of individuals that
are living in society. Therefore, at last it can be summarised that IKEA has effective taken steps
to become social responsible company in retail industry that has helped it in earning high profit
margin and market share.
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REFERENCES
Books and Journals
Bonsu, S., 2020. Deceptive Advertising: A Corporate Social Responsibility
Perspective. International Journal of Health and Economic Development, 6(2). pp.1-
15.
Chakroun, S and et.al., 2019. The impact of ISO 26000 social responsibility standard adoption
on firm financial performance: Evidence from France. Management Research Review.
Cooperative, C., 2018. Anticipating and Assessing Corporate Social Responsibility Within ISO
26000 Implementation: The Experience of. ISO 26000-A Standardized View on
Corporate Social Responsibility: Practices, Cases and Controversies, p.115.
Hardiana, N., 2020, May. Social Responsibility in ISO 26000 and Social Innovation. In 2nd
International Seminar on Business, Economics, Social Science and Technology
(ISBEST 2019) (pp. 41-45). Atlantis Press.
Lebarič, J., Contemporary approach to adding value to corporate responsibility toward fair
business functions.
Lee, D. and Schniederjans, M .J., 2017. How corporate social responsibility commitment
influences sustainable supply chain management performance within the social capital
framework: a propositional framework. International Journal of Corporate Strategy
and Social Responsibility, 1(3). pp.208-233.
Leipziger, D., 2017. ISO 26000 and SA8000. In SA8000 The First Decade (pp. 166-171).
Routledge.
Lu, J and et.al., 2021. Assessment of corporate social responsibility by addressing sustainable
development goals. Corporate Social Responsibility and Environmental
Management, 28(2). pp.686-703.
Moratis, L., 2018. Signalling responsibility? Applying signalling theory to the ISO 26000
standard for social responsibility. Sustainability, 10(11). p.4172.
Puspitasari, N. F. D. and Sari, N .N., 2021. HOW CORPORATE SOCIAL RESPONSIBILITY
EFFECTS COMPANY’S FINANCIAL PERFORMANCES. SCIENTIFIC JOURNAL
OF REFLECTION: Economic, Accounting, Management and Business, 4(3). pp.662-
671.
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Rutkowska, M. and Pakulska, J., 2021. The Corporate Social Responsibility (CSR) as the
Modern Trend in Management and Sustainable Economy. European Research
Studies, 24(2). pp.346-357.
Talib, F., Josaiman, S. K. and Faisal, M. N., 2020. An integrated AHP and ISO14000, ISO26000
based approach for improving sustainability in supply chains. International Journal of
Quality & Reliability Management.
Tyc, A., 2020. Corporate social responsibility instruments and their impact on labour
rights. Acta Iuris Stetinensis, (29 (1)). pp.177-191.
Zhao, W. W., 2018, May. Research on social responsibility of artificial intelligence based on
ISO 26000. In International Conference on Mechatronics and Intelligent
Robotics (pp. 130-137). Springer, Cham.
Zhao, W. W., 2018, September. Improving social responsibility of artificial intelligence by using
ISO 26000. In IOP Conference Series: Materials Science and Engineering (Vol. 428,
No. 1, p. 012049). IOP Publishing.
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