IKEA’s Ethical Procurement Practices

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Excerpts

When IKEA was founded, Sweden was witnessing a transformation with the creation of a welfare state with generous pensions, health insurance, and child allowance. The company also inherited its culture and vision from its native land. The company’s logo sported blue and yellow, colors from its country’s flag. The fresh and healthy way of life was reflected in IKEA products that ranged from blond woods and natural textiles to untreated surfaces. The retailer while bringing in modernism also carried forward the Swedish home furnishing traditions. Right at the beginning, IKEA developed its vision ‘to create a better everyday life for many people’. The vision was backed by the business idea of offering a wide range of well designed furniture at affordable prices....

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IKEA’s major product development activities were carried out in Älmhult, Sweden. As far as possible, IKEA used renewable and recycled raw materials. However, it took care to maintain the functionality and appearance of the product. The design team of the company considered several aspects of the product like price, quality, function, material, and the technical aspects before designing the product. The team ensured that the products were free from substances that caused allergies or those that were harmful to health and the environment. The designers were encouraged to review the environmental consequences of their designs.......

IKEA’s products were manufactured at the facilities of 1600 suppliers spread across Europe, North America, and Asia. Almost two-thirds of its suppliers were in Europe, one-third in Asia, and about 3% in North America. The products were made by the suppliers according to IKEA’s specifications. In 1998, in order to promote workers’ rights, IKEA entered into an agreement with the IFBWW. It aimed to ensure better working conditions, health and safety for workers at enterprises that manufactured and supplied goods for IKEA......

With the introduction of IWAY in 2000, IKEA had very rigid terms and conditions for its suppliers. IWAY was applicable to all the suppliers of IKEA, and the suppliers were required to communicate the code of conduct to their co-workers and sub-suppliers. It was mandatory for the suppliers to acknowledge and accept the IWAY requirements and sign the IWAY Compliance Commitment document. .....

By 2005, IKEA had evolved into a one-stop store where customers could pick up environmentally sensitive and styled products. Icon, a British design magazine, named the founder of IKEA, Kamprad, as the most influential tastemaker in the world and wrote, “If it wasn't for IKEA, most people would have no access to affordable contemporary design.” By end of 2005, IKEA had become a global middle class shop that offered affordable products like the Billy Bookcase, the Lack sidetable, and the Ivar storage system for US$120, US$13, and US$190 respectively. A manager at IKEA described the company’s strategy as looking at the competition, knowing their prices, and finally slashing them to half......

In 2002, in order to get a general picture of IKEA, the Dutch trade union confederation FNV conducted research on the company. FNV found that IKEA lacked transparency in its IWAY standards and provided very little information to the public. The monitoring process for checking IWAY compliance among its suppliers was also very vague, according to the union confederation. As per the research study, “The case studies in India, Bulgaria, and Vietnam although showing a different situation in each country, make it clear that there are still numerous violations of IKEA’s code of conduct in all three countries in all factories researched.” Thus, the major challenge for IKEA was to ensure successful implementation of IWAY......

Exhibit I: IKEA Sustainability Product Score Card criteria
Exhibit II: IKEA IFBWW AGREEMENT
Exhibit III: IWAY STANDARDS
Exhibit IV: GO/NO GO requirements to be followed by all IKEA Suppliers