BUS 1053 Assignment: An In-Depth Analysis of IKEA's CSR Practices

This report provides a comprehensive analysis of IKEA's Corporate Social Responsibility (CSR) practices. It begins with an introduction to IKEA, its global presence, and its business model. The report then identifies and analyzes key stakeholders, including employees, shareholders, customers, government, and competitors. It delves into specific CSR issues faced by IKEA, such as employee spying, underpayment of workers, and product quality concerns. The analysis highlights the ethical failures and their impact on the company's reputation and customer satisfaction. The report further explores the issues in detail, presenting the ethical failures and their impact on the company’s reputation and customer satisfaction. The report concludes with recommendations for addressing the identified problems, including minimizing employee spying, improving worker wages and conditions, and enhancing product quality control. The recommendations aim to improve the company's social responsibility and ethical standing. The report is based on the provided assignment brief which requires a social audit of a company within a specific industry. The assignment required the selection of a Canadian company in the retail sector, and IKEA was chosen.

Assignment on the CSR of IKEA
Assignment on the CSR of IKEA
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Assignment on the CSR of IKEA
Introduction
IKEA is a furniture company head quartered in Sweden, it has more than 340 outlets in
28 different countries. It is the most valuable brand as estimated by FORBES. It is the largest
furniture retailer in the world. IKEA believes in customizing its product to the tastes of its
customers. The IKEA customers are young and low to middle income family. IKEA Canada has
generated revenue of 2.39 billions in 2018 marking a rise of 8 % from previous year. IKEA grew
to 14 stores in Canada from highly-anticipated openings in Halifax and Quebec City. IKEA
increased in-store visitation to 30 million customers in the year 2018. It is transforming its
business model, optimizing its distribution networks and improving its digital tools. In 2018,
IKEA opened CDC Vancouver, its first distribution facility in Western Canada. To give a better
shopping experience, IKEA introduced a new 365-day return policy (IKEA Group, 2018).
IKEA follows strict ethical policies and tries to provide equal opportunities at all levels of
the work place. Although IKEA spends millions of dollar on CSR it has faced many charges of
misuse of power. The issues were related to product quality, environmental issues and human
rights. Some of the problems have been addressed but majorly some of them are still under audit.
Some of the problems faced by the company are fluctuating customer demand, increasing cost,
changing financial policies of the state (Arnold, 2017).
The major social responsibility issues faced by the company are:
 It was found that the company was spying its employees by use of technology. The cell
phone given to the employees were enabled with software which collected all the data of
the sites used and other confidential things done by the employees.
 The issue of under pay to the workers. It has been claimed by the employees that the
company is becoming profit oriented organization by overlooking the basic needs of the
employees. The accommodation provided and the salary given is considered of low
quality.
 The material that the company procures and uses in the product is of low quality. The
complaint has been received from the customers and it’s now a major problem for the
company. To maintain the cost the company procures material at low cost thus affecting
the quality.

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Assignment on the CSR of IKEA
Stakeholders:
IKEA has huge line of stakeholders. Those associated stakeholder ranges from
employees, customers to suppliers to society. For the sustainability of the organization it is very
important to have a range of stakeholders. There are dormant stakeholders who have power to
instruct what they want from IKEA but due to legitimacy their power remains inactive. Then
there is a latent stakeholder who holds legitimacy power. They are advocates, legal advisors and
chartered accountants. They are very helpful to the organization. Top level management and
directors of the organization are the dominant and demanding stockholders. They have power
and legitimacy to exercise any order. They are needed to be informed about every change in the
organization.
Employees: They are the most important stakeholders as they are the pillars of the organization.
They are responsible for the all the functioning of the organization. They are in the high power as
they deserve a share in the company’s profit in terms of promotion or incentives.
Shareholders: These are the external forces of stakeholders who do the investment in the
company. The investment can be small or large by buying shares of the company. They
influence the decisions and operation of the company. They are considered as high power and
high interest.
Government: IKEA is operational in many nations. They have to follow certain rules and
regulations of the country. Government is a big stakeholder of the company as it also benefits
from the growth of the organization in terms of taxes. These companies provide employment to
many nationals thus government is directly benefiting from these companies.
Competitors: These are high power stakeholder who lacks urgency and legitimacy. They are
benefiting the organization to be updating to stand out in the competitive market.
Customers: they are the most important stakeholders. They are the buyer of the product and
services of the company. They have interest in the quality, price and service of the company.
They have high power but lack legitimacy and urgency. They are focused by the company to
increase loyalty in them.

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Assignment on the CSR of IKEA
All the stakeholders are very important for perfect functioning of the company. IKEA is
known to treat its stakeholders ethically but there are some cases where the company fails in
completing its responsibilities. IKEA is known to provide monetary help by raising funds for
UNICEF.
Issues explained
 There has been observed some ethic failure at IKEA. The above discussed issues are very
important to be addressed by the company, for a better customer base. In the recent news
`it was discovered that IKEA is becoming very possessive about its employees. It has
started to spy every working personal. The spying was technology based and also by
hiring external security agents to record the activities of the employees and also to check
their police records. It was considered as the human rights infringement. This will affect
the goodwill of the company.
 The poorly paid employees and its plight are also a major concern. Company is
progressing and making 8% growth annually. The 2018 revenue stands at 2.39 billion.
The number of employees it hired is quite high. Thus the obligation to pay everyone
adequately is also the responsibility of the company. Many employees have complained
about the low pay structure. The company is paying very low to its worker as it has been
found that they are not able to manage a standard living with that pay. They are forced to
stay at cheap unhygienic places, sleep in car due to no accommodation, and eat unhealthy
foods. This will affect the work of the company and may incur loss (Wangsirilert &
Simon, 2017).
 The other issue that is affecting the customer base of the company is the quality of the
products. To maintain the cost the company is compromising on the quality of the
products. This has led to low customer satisfaction resulting in high end customers to
choose a better company instead of IKAE for quality. This way it is losing the market to
other competitors.

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Assignment on the CSR of IKEA
Addressing the problems
 The company needs to take action to minimize its human infringement by minimizing the
spying activities. There are circumstances when the company needs to verify the
credential of its employee so that can be done by informing the employees and taking
proper action. They can make the employees sign a proper agreement to be allowed to
inquiry their personal information. This will increase the confidence of the employees in
the company. Such act makes the employees more responsible as they will never submit
incorrect documents and will reveal only truth to the organization.
 The issue of adequate wages to the workers is under scrutiny by the top management and
they are working on it. It is important for any organization to care their employees by
providing some basis amenities to them. The management has to allocate accommodation
and fuel compensation along with medical facilities to all the employees. It is suggested
to the management to secure their employees life with insurance. There are certain rules
and regulation that it needs to follow as per the Canada labor act. To built loyal work
force these are only some few responsibilities that a company needs to fulfill. IKEA is
known for its world class service and product. It also needs to improve in the employees’
life quality (Morsing & Roepstorff, 2015).
 IKEA is known for its slick designs, affordable products and after sales services. But in
some cases complaints has been recorded against the quality of the products sold by
IKEA. Many customers complained that it is using products which are not of good
quality. The company has to talk to its procurement team for quality check. New team
can be made who will inspect the woods and other furnishing items before it is used in
manufacturing. This will not incur any cost as the team can be formed from the already
existing procurement department. They should be trained before starting the work. The
supplier is also responsible for such mistakes so it’s the duty of the team to talk to the
suppliers to change the quality as per the need. The product should be of zero defect with
no safety hazard problems. This will save the goodwill of the company and increase the
customer satisfaction.

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Assignment on the CSR of IKEA
Conclusion
To compete in the market is important to do business ethically to win over the
competitors. Here the ethically issues faced by its stakeholder has been addressed so that the
company can improve its operation. This will in turn improve social responsibility of the
company. The recommendations are based on the present environment of the business and some
possibility which the company can consider.
References:
Arnold, M. F. (2017). Competitive advantage from CSR programmes. In Innovative CSR (pp.
102-130). Routledge.
IKEA Group (2018) Sustainability report FY18. [Online]. Available at:
https://www.ikea.com/ms/en_US/img/ad_content/IKEA_Group_Sustainability_Report_F
Y18.pf.
Morsing, M., & Roepstorff, A. (2015). CSR as corporate political activity: Observations on
IKEA’s CSR identity–image dynamics. Journal of Business Ethics, 128(2), 395-409.
Wangsirilert, C., & Simon, L. (2017). How large-scale companies and social enterprises improve
the sustainability of their partnership?: The case study of IKEA and Doi Tung social
enterprise in Thailand.