2. Environment Stewardship
2.1 Forestry
According to IKEA Sustainability Report 2010, wood has always been one of the most important raw materials for them. Their IWAY Forestry requirements demand the legality and traceability of the timber used in their products, which means that the IKEA standard is applied throughout the supply chain. In addition to these minimum requirements, their certified wood volumes increased substantially in FY10. The decision has also been taken to apply IWAY Forestry requirements to suppliers of board materials.
2.1.1 Substantial increase of certified wood volumes
The share of certified solid wood increased substantially in FY10 to 23.6 percent, from 16.2 percent the year before. IKEA has actively supported certification efforts in some of their key wood sourcing areas, notably Russia and also China, in cooperation with WWF (World Wildlife Fund) and the national FSC (Federal Science Council) organization. (IKEA, 2011)
2.1.2 IKEA Forestry Requirements for Board Materials
“As of September 1, 2010, the IKEA forestry requirements for wood also apply to board materials. It means that IKEA suppliers must implement systems to ensure IKEA requirements, including legality of the wood used in the board, are met. Board product suppliers have been consulted, and practical trials have performed as part of preparations during FY10. IKEA purchasing teams have been trained by IKEA forestry specialists on the requirements and how to provide support to suppliers.” (IKEA, 2011)
2.1.3 Extra Efforts to Secure Legal Wood Sourcing in China
During the year, IKEA purchasing teams and forestry specialists have focused efforts on helping Chinese suppliers to improve their procedures to secure that the wood they use for IKEA products comes from legal source
“All business dialogues in IKEA have systematically included discussions around illegal logging, and they have conducted a large number of wood supply chain audits in China. In addition, IKEA has helped several suppliers identify controversial wood sources and supported their efforts to replace them with safer alternatives.” (IKEA, 2011)
2.2 Cotton
2.2.1 Increasing the share of more sustainable cotton in the range.
“More and more farmers join IKEA-supported projects in India Pakistan aimed at making conventional cotton production more sustainable. Our engagement has continued to generate very encouraging results, despite devastating floods in Pakistan, and the share of more sustainable cotton in the IKEA range has increased. We now aim to reach 100 percent by the end of FY15.”(IKEA, 2011)
2.2.2 Increased share of more sustainable cotton in the range.
IKEA purchased 25,500 tonnes of more sustainable cotton from project farmers during the 2009/2010 season, more than twice as much as the year before. This means that the share of more sustainable cotton in the IKEA range jumped to around 13.4 percent of our total cotton use.
IKEA will continue to buy only parts of the volumes created with more sustainable management practices in order to avoid creating premium prices and to speed up the process of making this cotton a tradable commodity available to all.
“Tapu Kehar Rangapara in Gujarat, India, suffered from serious health problems triggered by the chemicals used on his cotton farm. When he joined the IKEA-funded cotton farming project, things soon started to improve. I used to be exhausted all the time .I had bad rashes to my skin, and my wife and I both had constant headaches. Now we are much healthier and life is better.”(Sina, 2008)
2.2.3 Expanding farming projects
IKEA and WWF started working together to support cotton farmers by a number of organizations in order to reach a larger number of farmers. In FY10, an additional three cotton farming projects with local partners were initiated in India, bringing the current total to 15 projects in six states.
On average, participating farmers in all our projects have halved their water consumption and chemical pesticide use, while the use of chemical fertilizers has been cut by 30 percent.
“The 2009/2010 harvest of this more sustainable cotton reached 160,000 tones with around 62,000 farmers using better management practices. Harvested volumes as well as the number of farmers using the new practices are expected to increase rapidly over the nest few years as successful project farmers spread their knowledge and inspire others. During the 2010/2011 season, we expect the harvest of more sustainable cotton to reach 254,000 tonnes, involving some 80,000 farmers.” (CNKI, 2010)
3. Stakeholders
3.1 Co-workers
IKEA is committed to being a good employer that offers a safe and healthy work environment together with development opportunities for each individual. The economic downturn has meant slightly reduced co-worker numbers, but has not slowed our efforts to grow together with our co-workers.
3.1.1 Safe & healthy working conditions
All co-workers within retail and distribution undergo safety-training before starting to work at IKEA. This includes training on how to use equipment and machinery, fire and evacuation training, routines to prevent and handle workplace accidents, ergonomics etc.
“Each country has its own safety committee with co-worker representatives, working actively to secure a safe working environment. Each IKEA unit also has a risk manager, responsible for local safety routines and drills based on the IKEA Group Risk Manual. Safety work is evaluated annually through the “SEC Check”.”(Haan, 2006)
3.1.2 Striving for diversity and equal opportunities
They are convinced that IKEA becomes more creative and dynamic with a diverse work force, and strive to recruit coworkers of different backgrounds and experiences. IKEA managers around the world represent 50 different nationalities, and their overall ambition is to have a workforce that mirrors the diverse IKEA customer base.
“For instance, the IKEA store in Brent Park, UK, has coworkers of 20 different nationalities, while the US tracks representation by ethnic groups to reflect the local market. This means that that the co-worker mix varies not only from state to state but from store to store.”(Jungbluth, 2007)
3.1.3 Better working condition
“The check-out area is the second biggest department in IKEA stores, and the one with the highest staff turnover. Cashiers are exposed to continuous physical and psychological stress during their shifts—they service large numbers of visitors, they manage big sums of money and they handle ones of products. So an e-learning module about ergonomics at the check-out has been made available to all cashiers, and self-service check-outs have been installed in 180 IKEA stores so far. These check-outs virtually eliminate heavy lifts and repetitive strain at the same time as the cashier role becomes more of a hosting role.”(Rushworth, 2009)
IKEA is also introducing various means to eliminate stress related to money handling. For example, closed cash handling systems have been tested in France and Norway and are expected to be installed in 13 countries by November 2010. The cash register automatically calculates and gives change, reducing the personal responsibility for the cashier.
3.2 Customer
3.2.1 Ensure quality and customer safety
Customers always feel confident that products bought at IKEA are of good quality and safe and healthy to use. This is why IKEA have increased the number of tests on finished products, and strengthened their testing capacity with a new facility in China.
- Obey regulations on product safety
IKEA works proactively to meet and comply with legislation and standards on product safety. More than 60 new or updated legislations and standards that affect IKEA home furnishing products are expected to come into force during the coming three years.
- IKEA and the new EU legislation on chemicals, REACH
- “To our knowledge there is no IKEA product containing any SVHC identified on the proposal for “REACH candidate list” (October 2008), except for phthalates in PVC in some lighting cables. Possible alternative materials for cables have been identified and will, after evaluation of safety matters, be introduced.
- IKEA applies the strictest health, safety and environmental requirements in any specific retail market to all our retail markets. For chemicals used in our products, restrictions are outlined in an internal company specification called “Chemical compounds and substances”. Together with other material and product specifications and requirements, this specification comprises the binding contract between suppliers and IKEA. To follow-up on fulfillment of requirements they carry out random checks, tested by a third party.”(IKEA, 2011)
- Quality testing since 1960
“IKEA started to test product quality at the IKEA Test laboratory in Älmhult, Sweden, in the 1960s. Today, this laboratory alone conducts 6,000-7,000 tests annually on fire resistance, durability, emissions and much more. Tests are based on various European and international safety and quality standards as well as IKEA-unique criteria that look at how customers might use the products.”(IKEA, 2011)
- Each year thousands of tests are carried out on IKEA products during the development stage. Even more tests are conducted during production. Once a product is approved for production, any proposed changes to the product or to the production method are reviewed by IKEA to decide whether additional risk assessment testing is required.
- IKEA has a third-party accredited test laboratory that is certified each year by external auditors and third-party accredited test laboratories perform random tests. IKEA requires suppliers to order certified products testing by third party auditors.
3.2.2 A generous return policy and strict follow-up routines
- IKEA has a generous return policy, and customers have at least 30 days to bring back purchased products for a full refund regardless of the reason for the return.
- Every return is systematically documented so that IKEA can analyze reasons for returns and take action when needed.
There are routines in place for returns related to quality problems, so that measures can be investigated by IKEA and the supplier in question.
Analysis of the effects
1. Social
1.1 Charity
There are several effects on IKEA’s development, In terms of implementing charity’s action by Social Initiative
1.1.1 Saving cost—Minimizing Tax
There is a question asked by a great amount of people that why IKEA are operated by a charity. The overall set-up of IKEA is to minimize tax.
The parent for all IKEA companies—the operator of 207 of the 235 worldwide IKEA stores—is Ingka Holding, a private Dutch-registered company. Ingka Holding, in turn, belongs entirely to Stichting Ingka Foundation. This is a Dutch-registered, tax-exempt, non-profit-making legal entity, which was given the shares of Mr Kamprad, who is the founder of IKEA, in 1982. Stichtingen, or foundations, are the most common form of not-for-profit organisation in the Netherland.
“In the UK (and other EU countries), a charity donation can be tax deductible, which means you can make a smaller donation and the charity can top-up with the tax you originally paid when collecting your salary. The EU has now ruled that governments cannot limit tax deductions to donations made to charities within the same country as the resident. Simply, if people buy IKEA’s furniture in Europe, both customers and IKEA get tax deductions as a result of their manner of charity.” (Mike ,2011)
1.1.2 Supporting research and development (R&D)
Apart from the money of IKEA is used for charitable purposes, the fund is also used for “for investing long-term in order to build a reserve for securing the IKEA group, in case of any future capital requirements.”
Stichting Ingka Foundation has net worth of at least $36 billion. It is the world's wealthiest charity. Its value easily exceeds the $26.9 billion shown in the latest published accounts of the Bill & Melinda Gates Foundation.
“The innovative concept for IKEA is the way of manufacturing and selling methods. It has been marketing most furniture in flat-pack form. The IKEA’s billions are dedicated to “innovation in the field of architectural and interior design”. The articles of association of Stichting Ingka Foundation, a public record in the Netherlands, state that this object cannot be amended.” (Andre, 2009)
1.2 Community
As mentioned above, IKEA has done a host of things aiming at becoming a good neighbor to earn the trust and respect of the communities and customers they serve. Such as fighting for women’s rights and participating local activities. Although the benefits that IKEA’s contributions to the communities bring to IKEA can not be measured or evaluated by criteria, the influences are indirect and enormous.
1.2.1 Gain reputation
Through making contributions on helping the women’s fight for their rights, IKEA does not only support the action of protecting children’s benefits indirectly, but also successfully moulds a unique “Civilian Route” which is popularly accepted by customers. That is to say the efforts IKEA made do not only help it win the trust of their customers but improved the value of the brand as well. For example, IKEA always stays in the top 50 brands in the world.
1.2.2 The synthesis of IKEA culture and local culture
The harmony relationship between IKEA and the communities has become an operation philosophy of IKEA that IKEA contributes to the communities and the communities promote IKEA’s brand value. In the communities’ views, brand – IKEA is always related to eco-friendly, excellent quality and responsibility. This should be contributed to efforts IKEA has made on building a better community for the world.
Through participating the local community activities, the employees in IKEA gain the respect from the local residents which is good for the synthesis and integration of IKEA culture and the local culture. Therefore, the potential conflicts between IKEA and the local residents during the entering stage are addressed smoothly.
1.2.3 Reasonable tax avoidance
Expenditure on some non-profit associations is a spread used method for many entities to avoid tax. For IKEA, its expenses on donating or supporting on the non-profit community organizations helps IKEA reduce its tax expenses reasonably and improves IKEA’s reputation. Therefore, those actions were actually “one stone two birds” for IKEA.
2. Environment stewardship
2.1 Forestry
2.1.1 Cooperating with WWF
IKEA cooperates with WWF to support responsible forestry, and to increase the availability of certified wood. For example, there are joint WWF projects aiming to ensure responsible forest management practices and to curb illegal logging in the cross-border trade between China and Russia, etc.
“Moreover, IKEA is also a member of the Global Forest & Trade Network (GFTN), which is a WWF initiative to eliminate illegal logging and drive improvements in forest management. Participants are committed to promoting responsible forestry and credible certification.” (IKEA, 2011)
2.1.2 IKEA Forestry Requirements
All IKEA solid wood and board product suppliers must live up to the IKEA code of conduct IWAY as well as the IKEA forestry requirements. IKEA do not accept wood from forests where high conservation values are threatened. In sensitive areas they require the forest manager to have a certified management plan that respects the conservation values. IKEA requires their suppliers to document the origin of their wood.
Suppliers must deliver a wood procurement plan and demonstrate that they have systems to ensure that IKEA minimum requirements are met before they are allowed to start deliveries to IKEA. Their forestry specialists assess the wood procurement plan and the evidence provided.
2.1.3 Special Focus On Logging In Russia and China
IKEA is engaged in a number of projects together with WWF to address the challenges of illegal logging and unsustainable forestry in Russia and China, which are two of IKEA’s most important wood sourcing countries. They have also chosen to concentrate most of their own resources here by dedicating two-thirds of their forestry specialists to the area. Some of these specialists focus entirely on cross-border trade as approximately one-third of the wood IKEA suppliers source in Russia is processed in China.
“IKEA also encourages suppliers to participate in the WWF initiative Global Forest & Trade Network (GFTN) to strengthen their commitment to eliminate illegal logging and promoting responsible forestry.” (IKEA, 2011)
There are two tables which can prove the above analysis: Table 2-1 and 2-2.
(Source: Fiscal 2010 Annual Report. IKEA Sustainability Report 10 [2011-05-10])
(Source: Fiscal 2010 Annual Report. IKEA Sustainability Report 10 [2011-05-10])
2.2 Cotton
2.2.1 Towards "better cotton" in the IKEA range by FY15
IKEA wants all cotton used for IKEA products to be produced according to the social and environmental criteria developed by the Better Cotton Initiative (BCI) by the end of FY15.
BCI started testing its draft criteria in 2009-2010 in regional pilot projects in West Africa, Brazil. The first cotton to be produced according to the draft BCI criteria was harvested in October 2010 in Africa, in an area that was initially part of the IKEA and WWF project. IKEA aims to buy some of this first Better Cotton harvest.
2.2.2 New initiative to help speed up capacity building
IKEA, the Rabo bank Foundation, BCI, the Dutch Sustainable Trade Initiative (IDH), WWF, Solidaridad and a number of international retailers have developed a joint strategy to speed up the implementation of Beeter Cotton as a tradable commodity.
To support this strategy ,the Better Cotton Fast Track Programmed(BCFTP) and a related fund have been established .The fund will initially be used to run 10 Solidaridad cotton projects in India and two WWF projects in Pakistan. The goal is to reach a production of one million tonnes of Better Cotton by 2015.
2.2.3 Project farmers affected by floods
Heavy monsoon rains from July 2010 onwards have left many millions of people in Pakistan injured or homeless, and around 15 percent of the nation’s cotton crops were lost due to flooding. Heavy rains have also hit parts of India and China, causing harvest delays and contributing to all-time high prices for cotton on the world market.
Farmers working on IKEA-supported projects in southern Punjab, Pakistan, have had some damage to their crops, while largely escaping significant losses.
To help UNICEF and Save the Children alleviate the most urgent needs in Pakistan, the IKEA Foundation donated more than one million IKEA products, including 700,000 buckets, 200,000 blankets and 10,000 SUNNAN lamps.
The above IKEA has done in the environment respect of social responsibility; through the facts and analysis we can see that IKEA has done in the environment respect social responsibility is really perfect.
3. Stakeholders
3.1 Co-workers
3.1.1 Decrease staff turnover
Total staff turnover decreased to 16 percent from 24 percent. This is partly due to a generally less mobile workforce during the economic downturn, but also a result of persistent efforts to increase the retention rate at Ikea. Today, 55 percent of co-workers stay with us for three years or longer.
They want their co-workers to stay and grow with Ikea. This is why the recruitment strategy has become more clearly focused on hiring co-workers who not only have the right competencies, but who will also feel at home with Ikea because they have a keen interest in home furnishing and share Ikea’s values.
“For example, Ikea stores in the US have drastically improved the retention rate in recent years, and staff turnover has dropped from 55.3 percent in FY07 and 47.7 percent in FY08 to 31.9 percent in FY09.”(IKEA, 2011)
3.1.2 High employee satisfaction
IKEA uses a company-wide survey called “VOICE” to monitor how co-workers view various aspects of their employment at IKEA. Each year, they ask their co-workers to fill in the survey anonymously to highlight what motivates them and what they are dissatisfied with. Results from the survey help define areas to develop at Ikea.
“In 2007 an Ikea employee satisfaction survey was deployed in 36 States and three languages, resulting in an 85% response rate and a 99% Confidence Level. It could be certain that the results of the employee survey truly represented the thinking of the employee population. The results showed significant high level of employee satisfaction scores of Ikea (above the 75th percentile of the normative database).” (ICMRINDIA, 2005)
3.2 Customer
AS described above, IKEA has done a lot of things such as focusing on implement new EU legislation on chemicals, increased the number of tests on finished products, and implemented a generous return policy and strict follow-up routines as a strategy for making customers satisfaction on its services. From its company’s mission and code of conduct, it makes sure that the company has strong values for creating value to customers and making sure that they get high quality products that will to respond their needs and satisfaction.
3.2.1 Build reputation
The IKEA Philosophy is to deliver extraordinary customer experiences by increasing customer perceived value through reducing perceived sacrifice for the customer. IKEA strictly implement the strict chemical legislations shows that they really care about customers’ safety and how the IKEA products influence customers’ lives. In this way IKEA not only avoid break the law, but also win the trust of customers. “In 2009, IKEA was honored as one of “Top thirty Foreign Reassurance Brand” by China Consumers Association. The green image helps IKEA to get popularity in China’s furniture industry.” (China Consumers’ Association, 2009)
3.2.2 Increase market share
IKEA offer customers a generous return policy, the customers have at least 30 days to bring back purchased products for a full refund regardless of the reason for the return. This policy protects the legitimate rights and interests of consumers, and let customers feel that they are fully respected.
Because its excellent customer services, Ikea’s market share increased rapidly. “In fiscal 2008, Ikea’s sales revenue in China increased 17 percent, almost 23million customers visited IKEA, which rose by 18 percent year-on-year, and the total membership of Ikea breakthrough 3.5 million in China.”(Economic Newspaper, 2009) This shows that Ikea’s customer oriented policy and its Responsible enterprise image helps the company gain more market shares and finally increase its total revenue.
3.2.3 Reduce defect cost
Ikea’s strict quality testing helps the company reduce the defect and waste costs. IKEA has increased the number of controls of manufactured products to ensure that they maintain the same strict safety standards they showed in laboratory testing before being included in the range.
In 2008, IKEA invested 150 million dollars in building its first overseas product testing center in china. Since the center began to operation in 2008, the crap rate reduced by 50%, and about 3.5 million defect expenses has been save until 2010. Low defect cost can better support its low price policy, so that IKEA can attract more low-income customers.
Conclusion
The article has referred to the IKEA CSR on three aspects, social, environment and stakeholders. And it has listed many facts to prove IKEA’s CSR. For example, it supported a UNICEF project to prevent and eliminate child labor in the “carpet belt” in Uttar Pradesh, India, by addressing root causes, its share of certified solid wood increased substantially in FY10 to 23.6 percent, from 16.2 percent the year before, and so on.
In the social part, IKEA avoid hiring the children and participating the local community activities. All of these actions can incarnate IKEA attention social.
In the environment part, IKEA has talked about the raw material. From its purchasing, can know IKEA pay more attention on the environment sustainability.
In the stakeholder part, has talked about the co-work and customer, from these part, can know IKEA try its best to satisfied their co-work and customer. And improve its services continually.
IKEA has a good job on CSR. This research has provided some knowledge within the term CSR. However, we think that there are many other interesting areas to study regarding this subject.
Recommendation
IKEA, the Sweden the household retail enterprise, is often known as example of corporate social responsibility in the industry, especially on the environment and charity.
- Monitoring suppliers to avoid hire children.
As we know, IKEA Social Initiative has chosen UNICEF and Save the Children as its main partners. Both organizations are specialized in helping children and promoting their rights. So it does not hire children.
After doing research, suggest that IKEA should be audited suppliers. The suppliers are obliged to provide the production sites to IKEA. And IKEA has the right of unannounced visits.
- Purchasing raw material sustainable or find the substitute material to avoid resources consumed.
“Wood and cotton are the most important raw materials for IKEA. IKEA had better pay more attention on the purchasing sustainability and decrease the material demand. Also, IKEA can find the substitute material to avoid resources consumed.” (TIANYA, 2003)
- Increase product test times ensure the quality.
“IKEA can monitor the internal control to ensure the quality of products. And test based on the standard strictly.” (SINA, 2010)
- Ensure employee information flow.
Obtain information and build a strong bond with employees, and help them at work to obtain a perceived value and belonging.
Because the research methods limit, these recommendations are not completed. However, wish these suggestions can help IKEA do better on CSR.
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