CSR Practices at IKEA

Corporate world has evolved from being economic capitalist to the economic environmentalist. Organisations are adapting more sustainable solutions that can generate social, economic and environmental benefits. ‘Corporate Social Responsibility (CSR)’ has become a regular policy in most organisations where they have integrated it in its operational practices. The paper discusses literature sources between 2008 and 2016 to understand strengths and weaknesses of CSR application in an organisation. The study focuses on three-fold approach Strategy, System and People to explore different perspective for CSR implementation.

The CSR is an evolving term that comprehensively create balance between economic targets and social responsibilities. It is applied by making commitment to the society and stakeholders to contribute values for social upliftment. This commitment should go beyond legislation and encouraging corporates to take initiatives to improve the quality of life. Institutional theory allows these to be explored and compared within their national, cultural, and institutional contexts. Moreover, institutional theory brings interdependencies between and interactions among stakeholders into the analysis, which is vital to understanding CSR, given its societal orientation (Matten & Moon, 2008). According to Dahlsrud (2008), there are four components of sustainability; societal influence, environmental impact, organisational culture and finance that contributes to CSR application. On the other hand, studies at the institutional and organizational levels focus more on instrumental motives and theories related to institutional theory, stakeholder theory, and the resource-based view of the firm (Aguinis & Glavas 2012). The application is carried out by developing strategies to manage human resources, risk management and create sustainable brand image.

IKEA as a Sustainable Practice

IKEA is a “living brand” that cultivates ‘living’ aspect that generates how its stores operates innovates store operation by prioritizing consumer need as driving force. IKEA emphasize heavily on its people, planet and profit perspective. The sustainable key indicators and embedded in its operational policy and values. The sustainable policies help in branding the image of corporations as ‘green brands’ that not only wants to optimize its profit but also have social consciousness. Its business model has evolved over time and has become more sustainable. The social approach of IKEA operations is highly motivated to empower its stakeholders. From recruitment to operation, all employs at IKEA are committed to work for their customers. This attitude has developed a close connection with the consumer market.

IKEA’s business idea is principally based on a partnership with customers. The aim is to provide customers with wide range of home furnishing with good design at affordable prices. Secondly, employees are considered as the “IKEA family” and the suppliers are considered as the central actors of the supply chain. Main CSR issues are related to the working conditions at IKEA (like giving people the opportunity to grow as individuals and in their professional career) as well as in the complex and extensive supply chain (like child labour issue). However, due to the different crises faced by IKEA over time, IKEA has discovered the importance of taking into account other key stakeholders such as environmental NGOs (Greenpeace, Robin Wood), that lead IKEA to deal with other emerging issues such as workers’ safety and wellbeing in the sub-suppliers network, or CO2 emissions (Maon, Swaen & Lindgreen, 2010). The company carries out consumer surveys to identify the consumers’ awareness about the CSR practices of IKEA. They have developed key performance indicators to assess the achievement of social objectives and CSR issues.

IKEA is a unique brand because it capitalize on its strategic production model that help it to provide objects at less cost and bring innovation. The IKEA has a simple concept; save transportation cost and mass production for consumers. To create a competitive advantage using environment-friendly building practices, the whole life-cycle of the building should, therefore, be the context under which these practices are carried out (Ojo, Mbohwa & Akinlabi, 2015). The company requires their suppliers of products and services to follow the IKEA code of conduct, called The IKEA Way on Purchasing Products, Materials and Services (IWAY), which was first introduced in 2000. The IWAY states the supplier requirements relating to the environment, child labour, social and working conditions (Green Business Singapore, 2011). IKEA has developed a Sustainability Product Score Card to understand the impact of their designed product. The Score Card includes 11 criteria that have an impact on a product’s sustainability throughout its life cycle, including:

More from less (using less material in the product)

Renewable material

Recycled material

Environmentally better material

Separable and recyclable material

Product quality

Transport efficiency (number of products per container)

Energy efficient production

Renewable energy in production

Raw material utilization at suppliers

Product use (less use of energy and water, and less waste in customers’ homes)

IKEA has developed production centres and use less energy for their products. It mostly uses renewable energy and less raw material. IKEA is working with suppliers in energy projects to help them reduce energy consumption and carbon dioxide emissions, while saving costs. IKEA is also helping customers and co-workers use more sustainable modes of transport to travel to and from IKEA stores. Together, these instruments constitute a part of the binding business contract between IKEA and its suppliers.

IKEA sustainability contribution

IKEA participates in various activities, such as the Forest Stewardship Council and the Roundtable for Sustainable Palm Oil certification (Boström, Gilek, Jönsson & Karlsson, 2013). IKEA is totally aware of its environment responsibilities and take all precautionary measures to be less dependent on environmental resources. It uses renewable energy and low carbon footprint for its production.

IKEA has already established itself as a ‘Green Corporate’ but it is also necessary to integrate social, environmental and economic dimensions in other business related to the company. The following steps could be adopted to in identifying key performance indicators:

Setup independent management review body to assess practises and impact on macro and micro level

It should develop a knowledge sharing system for consumers to understand the company’s practices and implement learnt lessons on their part.

It should encourage direct and indirect stakeholders to come forward and take initiative in establishing sustainable practices and ideas.

 

References:

Aguinis, H., & Glavas, A. (2012). What we know and don’t know about corporate social responsibility a review and research agenda. Journal of management, 38(4), 932-968.

Boström, M., Gilek, M., Jönsson, A. M., & Karlsson, M. (2013). IKEA and the Responsible Governance of Supply Chains: IKEA’s work on chemicals in textiles.

Dahlsrud, A. (2008). How corporate social responsibility is defined: an analysis of 37 definitions. Corporate social responsibility and environmental management, 15(1), 1-13.

Green Business Singapore. (2011). How IKEA Embraces Sustainability Globally and in Singapore | Greenbusiness.sg. Retrieved 6 May 2016, from http://www.greenbusiness.sg/2011/05/24/how-ikea-embraces-sustainability-globally-and-in-singapore/

Maon, F., Swaen, V., & Lindgreen, A. (2010). Impact of CSR commitments and CSR communication on diverse stakeholders: The case of IKEA. Global challenges in responsible business: corporate responsibility and strategy, 161-190.

Matten, D., & Moon, J. (2008). “Implicit” and “explicit” CSR: a conceptual framework for a comparative understanding of corporate social responsibility. Academy of management Review, 33(2), 404-424.

Ojo, E. M., Mbohwa, C., & Akinlabi, E. T., (2015). Sustainability-Competitive advantage?. International Conference on Operations Excellence and Service Engineering, Orlando, Florida, USA.