A Comprehensive Report on IKEA's Ethical Conduct and CSR

This report provides a comprehensive analysis of IKEA's business ethics, focusing on its ethical issues, Corporate Social Responsibility (CSR) actions, and stakeholder management. The report begins with an abstract and introduction, highlighting the significance of ethics in business and its application to IKEA's operations. It delves into significant ethical issues faced by IKEA, including problems related to human rights, product quality, and environmental concerns, drawing from both historical and recent events. The report then explores IKEA's vision, mission, and code of practice, examining how these elements influence the company's actions and guide its ethical decision-making. It applies Carroll's Four-Part Model of Corporate Social Responsibility to analyze IKEA's CSR initiatives, evaluating its economic, legal, ethical, and philanthropic responsibilities. The report also discusses key relationship attributes such as power, legitimacy, and urgency, demonstrating how IKEA manages its relationships with various stakeholders. Finally, the report offers recommendations for IKEA to enhance its ethical performance in the future, providing a conclusion that summarizes the key findings and insights. The report references various sources to support its analysis, including academic journals, industry reports, and news articles.

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Ethics - IKEA
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Abstract
Business ethics are related with what is right as per the morality and values. IKEA has
incorporated ethics as blood in the body of a human being which results to standing in one of the
best ethical practice company. There are problem with every organisation but how they deal with
the problems in ethical manner to maintain the value in the society successfully is proved by
IKEA. Company is also working on renewable energy and recycled products to minimize
environment pollution and several social practices for the help needy. CSR and stakeholders
importance for a business is also inculcated in the project, which evolved as key needs for a
business to survive.
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Table of Contents
Abstract............................................................................................................................................2
Introduction:....................................................................................................................................4
Significant ethical issues faced by IKEA:.......................................................................................5
IKEA’s vision, mission and code of practice influencing its actions:.............................................6
IKEA’s CSR actions from the perspective of Carroll’s Four Part Model of Corporate Social
Responsibility:.................................................................................................................................7
Three key relationship attributes: power, legitimacy and urgency:.................................................9
Recommendations for the organisation to be a more ethical company in the future:...................11
Conclusion:....................................................................................................................................13
References:....................................................................................................................................14
Figure 1: Carroll’s CSR Pyramid- The Four responsibilities Source: (Nalband and Kelabi, 2014)
.........................................................................................................................................................8
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Introduction:
This project focuses on the importance of ethics in the business. It would help in generating
understanding about the need of ethics, its importance and the consequences of unethical
practices with the help of IKEA. It is a multinational company which provides all home and
office needs in the day to day life. Its ethical practices lead it towards one of the largest supplier
of home and office furniture. These issues are also discussed with the help of Carroll’s four part
model of corporate responsibility. It also discusses the key stakeholders and ethical behavior of
the company towards them which also helps in generating understanding about the need and
benefits of ethics in competitive business environment.
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Significant ethical issues faced by IKEA:
IKEA is originated from Sweden, it multinational company which is also having more than 340
outlets present at 28 different countries. It is also ranked 46 in top brands list by Forbes “World’s
Most Valuable Brands”. It is one of the world’s largest furniture retailer providing attractive
designs in low prices due to continuous improvement on product development and materials
(IKEA, 2017). Company is also having a strong base of around 9500 products serving all around
the world.
IKEA is known for the ethical policies and providing equal opportunities at the work place with
facilitating the employees and workers so that it can helps the company to manage. But
companies have to face several ethical issues in the past decade which resulted to criticism in the
media and global market. The issues were related to human rights, product quality and
environmental issues in some of the countries it is functioning (Crane, and Matten, 2016). It also
faced problem of spying the employees and recently on more problem rose relating to living
conditions and problems of basic facilitated due to under paid money. Some other problems
company faced are relating to the material it is using in the product manufacturing. Information
available in sustainability report and actual practices were found different in case of leather and
cotton made products (Ethical consumer, 2017).
Recent ethics failure issue is observed in Eastern Europe where some of the drivers were
working in extremely bad conditions there were some who are so much underpaid that they are
managing to live in the trucks this payment is below the national minimum wages in the county
where they are driving (Conway, 2017). Some of the taxi drivers were even sleeping in the cabs
over 3-4 months time due to scarcity of money.
The other case was related to undercover work behind the employees in this case management
hired external security agency to provide information about the activities of the employees and
checking for the police records of more than 200 employees and customers (Samuel, 2012).
Company fired managers responsible for such issue and paid for the penalty by court of France.
Human right issues in Germany were one of the ethical issues faced by IKEA due to activities
they performed it happened when prisoners were allotted the furniture work as CSR activity.
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During the furniture production some of the convicts were forced to work hard and those refuses
were physically tortured and punished for denying such activity. IKEA management regretted for
such activity performed by its suppliers.
Another scandal damaging ethical practices was in its product, famous meat balls having some
content of horse meat as per the medical test of the product. This also hampered the ethical
practices although company brought back the product from all over the Europe having issue but
it puts negative impression on the customers (Meikle, 2013). Company also assured the
customers for non-happening of such problem again and sued the vendor supplying the meat. It
also assured that horse meat is not harmful to eat.
IKEA’s vision, mission and code of practice influencing its actions:
Company tries to improve life of their stakeholders, especially customers, employees, suppliers
and society. It is implemented through the core value preposition consist of core values 10,
vision statement and suppliers code of conduct. They all together help to direct the various
actions that are performed in IKEA (IKEA GROUP, 2016). It also includes procurement of the
raw material from the sources having least environment loss, rather than taking it from protected
forests. The team which is recruited is also having experience at the training program about the
vision and the practices that are adapted at IKEA to create value in the eyes of the customers. It
works to achieve quality products at affordable price by optimizing the whole supply chain, with
the help of the long term supplier’s contracts and relationships.
Vision and Mission:
IKEA is having vision “To create a better every day life for the many people”. Company is
functioning for the achievement of the vision from starting this is the reason for the wide variety
and designs of the products it is supplying to the various countries. However it lacks specific
contents about the achievements but still company is focused product development, customers
interests and towards long term relationships with the suppliers and customers so it focuses
regularly on the product development and lower cost products. It also introduced some products
which are having maximum use of the recycled material (Aguinis and Glavas, 2012).
Organisation also focuses on women empowerment having equal opportunities for women to
work and have position in the management seat. It also introduced talent program where new
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ideas and creative products are appreciated from the employees and they are given responsibility
to develop the same. Cost efficiency is also considered as another component of core values
which has leads IKEA to grow as one of the giants in the home furnishing industry. It also
accepts ideas and implement change quickly which brings confidence among the employees and
boosts the confidence of the manufacturing team with new products every time (Brammer et al.,
2012). The work place environment and other additional facilities to the employees results to
have diversifies but good place for working with learning, this also leads to growth of both the
organisation and employees.
Code of practice:
Code of practice involves regular improvement in the Products Company is highly focused in
product innovation and new designs which fulfill the specific needs of the clients. This is the
reason it is having more than 9500 types of products available for the customers. The use of
supplier conduct is also empowering the organisation to maintain healthy and transparent
relations (Schirone, and Torkan, 2012). They strictly warns to suppliers against uses of child
labour, forced or bonded labour, discrimination and harassment it has set standards for the
overtime and minimum wages to maintain long lasting relationship.
Company is also strict on unethical practices such as corruption, bribe and any other kind of
fraud it takes strict actions against such cases. Same also applies on the vendors and suppliers if
they found suing any of such practices than they are also terminated from the services and legal
action is taken (Blodgett, et al., 2011). Company also have priority of having customer safety
recently there were some issues with beach chair having problem in re-assembly after wash
result to injury in fingers this product is full refunded by the company without even asking for
receipt of purchase (The Guardian, 2017). On the other side some chocolate products which
caused problem to allergic persons recalled from the markets due absence of proper ingredient
information on the packing.
IKEA’s CSR actions from the perspective of Carroll’s Four Part Model of Corporate
Social Responsibility:
Carroll’s corporate social responsibility pyramid is widely used by top management in various
organisations. IKEA is also functioning as a leader in the field of CSR activities whether it is
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plastic recycling plant or employment to Syrian refugees and other practices with nonprofit
organisations and other social causes. This model helps managers to overcome the various
possible obligations and expectations of the society with the business. Carroll’s model discusses
four major points which are prioritized on the basis of their importance for the growth and
sustainability of the company. Economic, legal, ethics and discretionary responsibilities are key
expectations of the society with an organisation (Yelkikalan, and Kose, 2012). The foundation of
the model is based on the economic responsibility having priority on economic performance, it
means maximizing profits, minimizing costs and planning for good amount of returns for the
stakeholders is the first priority among the four parts. The next part focuses on legal compliances
and following other regulations such as taxation, accounting, pollution emissions and other
requirements necessary for the functioning of the business at a particular place. IKEA is
functioning in several countries its legal compliances are the reason for successfully sustaining in
diversified business places (Ihlen, and von Weltzien Hoivik, 2015). It also binds companies on
employment, health and safety and healthy competition without use of unlawful object to
compete in the market.
Figure 1: Carroll’s CSR Pyramid- The Four responsibilities Source: (Nalband and Kelabi, 2014)
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The next part considers ethical responsibility which includes eliminating the practices which are
disputed it is different from legal boundation but important to follow by business. It is the values
and morals which are acceptable in the society sticking with law. It is also required to inculcate
emerging values and society norms so as to maintain a recognized position in the society. It helps
in maintaining good relation with the society due to actions which are favoring the society. The
practices like health, bonus and other additional services to the employees. Work culture and
healthy environment to the employees, relationship with the suppliers is termed as ethical
responsibility (Fitjar, 2011). The last part in the model is Philanthropic responsibility which
involves the sense of belongingness, so the organisation moves in the direction of returning back
something which it receives from the surroundings. IKEA is working with Red Cross society,
UNIECEF and renewable energy projects for serving the society what it takes from them.
Three key relationship attributes: power, legitimacy and urgency:
This model is useful for the business analysts having need to understand the preference to be
given and the level of attention to a particular stakeholder. It also leads to choosing the
appropriate communication approach for the stakeholder groups. Power is the authority which is
present with each of the stakeholders in the company, legitimacy is related with the need or truth
behind the fact and last urgency is related to the tasks which cannot be delayed they need
immediate response. This technique is related to the stakeholders having different needs and
relationship with the company (Toro, 2014). It distinguishes the stakeholders in to various
groups and then decides the action plans for them to manage relationships in long term. IKEA is
also having different associated stakeholders from employees, customers to suppliers and
society. Depending upon the relationship attributes they are given response for the sustainability
of the organisation. Dormant stakeholders are having power to force what they want from the
organisation but due to lack of legitimacy and urgency their power remains inactive IKEA need
to inform these types of stakeholders about decisions other information. Next category is latent
stakeholders which hold legitimacy, they absence power and urgency but they can be very
helpful in case organisation is facing problems. They are advocates, legal advisors and chartered
accountants or problem solving team of the organisations. Demanding stakeholders are lacking
power and legitimacy but have urgent claim needs so they are required to be communicated
about the facts but it is required to have relatively low focus on them. Dangerous and dominant
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stakeholders are more or less same they are having strong influence on the organisation they
need informed and satisfied they include top level management and directors (Epinearticles,
2016). Dependent is the last category where stakeholders are dependent on the organization for
the information in the absence of balance they leave/ switch to other projects.
Employees: they are the pillars of the organisation responsible for the key functioning of the
organisation. They are interested in the company sue to employment and promotions in case
company perform better (Rothaermel, 2015). So they are also induced in high power and high
interest category.
Shareholders: they are the external persons investing in the company in small part but large in
numbers. They are highly influenced with the decisions and operation of the company. They are
classified as high power and high interest.
Government: IKEA is functioning in various countries so it is required to fulfill the
requirements of that nation. Whereas government is also have benefits from the growth of the
organization in terms of taxes and employment supporting economy. This also helps government
in developing infrastructure and other facilities.
Competitors: they are addressed as high power but lacking urgency and legitimacy but there is
need to have regular scanning of the steps they are taking so that IKEA is able to take response
actions towards competing with rivals.
Customers: they are the parties which are using the products produced by IKEA they are having
interest in the quality, price and after sale service of the company. they also attracts towards
brand value and marketing so it is considered that they are also having high power but lack
legitimacy and urgency but they needs to be focused carefully to gain loyalty.
All the stakeholders are important for IKEA but the most significant position is with the
customers of the organisation. In the absence of customers; Company, business and employees
all are having no reason to operate so it is required to focus on the interests of the customers.
IKEA is treating its stakeholders ethically; it takes views of the employees towards work place, it
also donates handsome amount of money from sales of products towards child education and
stopping child labour. It is also raising funds for UNICEF. It also developed IWAY for the
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suppliers having standards with supplier’s code of conduct for serving the interests of the
suppliers (IKEA Group, 2016).
Recommendations for the organisation to be a more ethical company in the future:
IKEA is having clear focus towards sustainability in ethics, social responsibility and
environmental issues such as green house gas, carbon trading and renewable energy but still it is
facing issues of unethical practices in recent years so the possible recommendations are as
below:
Transparency and sustainability:
IKEA is already focused towards the process of transparency in the operations and other
activities including taxation, accounting and material procurement but it still need more
improvement in the sustainable development which is to focus towards more recycled products
and low carbon emission which will also help to improve ranking of the company in top ethical
companies (Parguel, et al., 2011). It also includes increased use renewable energy resource and
energy efficient process of operations.
Avoiding mistakes:
It is also observed that the products that are introduced in the market are having some problems
although it produces products with utmost safety and testing. The products which are supplied
are also having user manual which contains its assembling process and use of the product but
still some cases are still which are negatively impacting the image of the company so it need to
be focused towards zero defect or we can say that products having least safety hazards (Edward,
2017). Company must take expert comments or survey’s to review any kind of problem in the
product. Recalling product is appreciable but it is required to minimize such chances of product
recall.
Increased awareness:
There is a need to generate more awareness in the organisation towards ethics and corporate
governance which will result to maintain good name in the competitive market. The problems
like fraud, bribery and corruption leads to damage the image of the organisation and customers
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as well as other authorities remember these issues over long period of time (Vollmer, 2014).
Company also requires taking care of the suppliers and product packaging which have issues in
past years of operations.
Independent Academic experts:
Experts are having problem finding and solving skills they are having vast experience of various
issues they have faced during the working environment. They are the external bodies which are
having no interest in the companies so they provide actual advice about issues and products
helping to improve business practice and products.
Disclosure and accounting policies:
IKEA is known for good practices and quality products with innovative designs but it is also
observed that company adjusted its profits in such a manner that it has able to save taxes in
Australia continent with having sales of $1 billion but the taxes paid against this sales is just
$10.7 million. This clearly indicated the internal adjustments and inflating expenses to avoid tax
which is also an unethical practice which may lead to penalties in future (Greenblat, 2016). So it
is required to use fair accounting and paying taxes that will also improve goodwill and
recognition in the society.
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Conclusion:
Ethical practices in the business operations are termed as competitive advantages over the
competitors. This report focused on the significance of stakeholders, ethical practices and the
steps taken by IKEA to overcome from the various issues such as product defect, tax evasion,
human rights etc. Power, legitimacy and urgency attributes were also discussed to understand
stakeholders in ethics. It also discusses the management decisions which resulted to manage
business in various countries due to continuous focus and improvement. At the end some
recommendations are also provided for the improvement in some of the issues still faced by
IKEA.
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References:
Aguinis, H. and Glavas, A., (2012) What we know and don’t know about corporate social
responsibility a review and research agenda, Journal of management, 38(4), pp. 932-968.
Blodgett, M. S., Dumas, C., and Zanzi, A. (2011) Emerging trends in global ethics: A
comparative study of US and international family business values, Journal of Business
Ethics, 99(1), pp. 29-38.
Brammer, S., Jackson, G. and Matten, D., (2012) Corporate social responsibility and institutional
theory: New perspectives on private governance, Socio-Economic Review, 10(1), pp. 3-28.
Conway, Z. (2017) Ikea drivers living in trucks for months. [Online]. Available at:
http://www.bbc.com/news/business-39196056 (Accessed: 13 September 2017).
Crane, A., and Matten, D. (2016) Business ethics: Managing corporate citizenship and
sustainability in the age of globalization. UK: Oxford University Press.
Edward, J. (2017) You might want to check if you own any of these recalled Ikea items. [Online].
Available at: http://www.cosmopolitan.com/uk/worklife/a10395528/ikea-recalled-products/
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Epinearticles, (2016) Who are the stakeholders of IKEA?. [Online]. Available at:
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Fitjar, R. D. (2011) Little big firms? Corporate social responsibility in small businesses that do
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Ihlen, Ø., and von Weltzien Hoivik, H. (2015) Ye olde CSR: The historic roots of corporate
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Schirone, D. A., & Torkan, G. (2012) The integration of environmental responsibility in
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The Guardian, (2017) Ikea issues global recall for deckchair after reports of injuries. [Online].
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