Ikea's road to corporate social responsibility.
Being a socially responsible organisation seems like a necessary criterion to do business in the twenty-first century (1). Together with the emergence of concepts such as sustainable development and global business citizenship (2), pressure from and demands by various stakeholders help explain the key role of CSR during the past decade. As consumers increasingly adhere to certain ethical values or even a particular cause, they search for applicable information about the organisation, its products, and its services, including employee, social, and environmental issues. Consumption thus expresses not only product preference but also whether consumers feel they can relate to the organisation's values or cause (3). Pressure to become a better corporate citizen also stems from business customers who purchase components and raw materials from suppliers and want them act in environmentally correct and ethically sound manners.
Carroll conceptualises CSR as different obligations, which underlines the central role that stakeholders play (4). That is, "CSR represents societal expectations of corporate behaviour; a behaviour that is alleged by a stakeholder to be expected by society or morally required and is therefore justifiably demanded of a business" (5). A stakeholder-oriented approach to CSR emphasises that organisations exist within large networks of stakeholders, all of which stake claims on organisations. Within the organisation, managers must integrate stakeholders into the decision-making process, convince them to support the corporate strategic course, and facilitate multipartite participation (6).
However, it remains difficult to understand fully how organisations design their CSR policies and communicate them to different stakeholders. Also difficult is determining different stakeholders' complex perceptions of and attitudes toward the organisation, which means managerial that guidelines are virtually nonexistent. Prior work fails to consider several potentially important stakeholders. Furthermore, previous studies generally address one type of stakeholder (7), which prevents them from offering an overall analysis of the value of commitment and communication in CSR.
We contribute to the literature by reporting on IKEA's CSR commitments and communications and relating them to different stakeholders. IKEA offers a remarkably fertile case for examining CSR. IKEA, the world's largest multinational, flat-pack furniture retail chain, has enjoyed high-profile marketing successes. The organisation's retail turnover has increased by 400 percent during the past decade. Its business model is based on gaining control over strategic resources, particularly through logistical coordination of a network comprising 1,500 suppliers in 50 (often developing and emerging) countries. These suppliers ignore mediators and deliver directly to IKEA, which minimises the retailer's costs so that IKEA can offer low-priced furniture. However, the seeming eradication of the world's forests has resulted in increasing pressure on IKEA from environmental activists, and its worldwide perspective has made it a target of anti-globalisation protesters. Therefore, IKEA includes issues of sustainability specifically in its CSR policies.
Although IKEA's objective historically has been cost effectiveness, the organisation has now added the element of altruism, so that its guiding philosophy is to "create a better everyday life for the many people [...] and to offer a wide range of home furnishings with good design and function at prices so low that as many people as possible will be able to afford them" (8) IKEA's stated ambition is to consider and integrate social and environmental considerations into its daily operations to "make products which have minimum impact on the environment and [...] manufacture them in a socially responsible way" (9). These CSR policies, which IKEA established for itself, derive from prevailing norms and institutional relationships common in Nordic countries, which culturally tend to think of ethical values, politics, and economics as constituents of a virtuous circle (10). Through this virtuous circle, IKEA believes it can reduce the conflict between CSR and profit functions.
STAKEHOLDERS IN THE CSR DEVELOPMENT PROCESS
IKEA receives pressure from various external stakeholders. To a large extent, this pressure exists because IKEA's business is modelled on cost effectiveness and the organisation engages in activities in developing countries. Since the end of the 1980s, these policies have resulted in criticism from NGOs in particular. For example, IKEA has come under scrutiny with regard to child labour in Asia, working conditions in eastern Europe and Asia, and wood from questionable forests in Indonesia and Russia.
Regarding the impact of various external stakeholders on the development of IKEA's CSR policies, three elements are apparent:
- the role of external stakeholders in developing socially and environmentally responsible business practices and codes of conduct (11);
- the role of NGOs in implementing and enforcing CSR agreements and codes of conduct (12) and
- the mix of reactive and proactive actions taken by IKEA.
We consider each element next.
ROLE OF EXTERNAL STAKEHOLDERS
External stakeholders play a key part in developing IKEA's CSR policies. For example, the International Federation of Building and Wood Workers (IFBWW) prompted changes to its code of conduct in 1998, based on an agreement reached in 1996 between IKEA and IFBWW through negotiations among representatives from Greenpeace, Save the Children, and the World Wildlife Fund (WWF). To gain knowledge about developments in the CSR field and facilitate its CSR commitments, IKEA has established relationships with various NGOs. For example, because wood represents 70 percent of IKEA's raw materials, environmental issues related to forestry rank among the organisation's major concerns, as evidenced by its certification efforts, planning operations, and collaborations with Global Forest Watch, Greenpeace, a Swedish university, and the WWF. In the area of child labour, IKEA works with UNICEF and Save the Children and, as part of this process, has created a position within its organisation that deals specifically with this issue.
ROLE OF NGOS
IKEA's local purchasing departments monitor the implementation of their CSR agreements and codes of conduct (the IKEA Way or 'IWAY'), such as whether suppliers adhere to IKEA's requirements, while its internal compliance and monitoring group follows-up with developments on a global basis. Monitoring is verified by independent auditing companies that simultaneously play consultancy roles for implementing codes of conduct (13). Third-party verification represents an important element of the internal audit process. In bi-annual meetings, IKEA communicates these audit results to the IFBWW and, in a reduced version, to the wider public through its annual social and environmental report. Independent organisations continuously assess and challenge the social and environmental measures implemented by IKEA. For example, Greenpeace, Robin Wood (a German environmental protection NGO) and SOMO (a Dutch research foundation) have repeatedly attacked IKEA for not respecting its environmental, social, and human rights responsibilities. As recently as 2006, studies identified serious problems in the way that IKEA implemented its codes of conduct, such as in terms of freedom of association and collective bargaining, salary levels, work conditions, and worker rights (14).
REACTIVE AND PROACTIVE ACTIONS TAKEN BY IKEA
As a result of these external pressures, IKEA has integrated its CSR objectives more systematically into its management philosophy and business operations. For example, IKEA decided to adapt in a response to social demands from public regulators (e.g. in Denmark and Germany), trade unions (e.g. IFBWW, FNV), the media, and NGOs (e.g. Greenpeace, Robin Wood, Save the Children). Our findings demonstrate that IKEA reacts quickly when its image or reputation is challenged. For example, at the beginning of the 1980s, a high proportion of poisonous substances was found in IKEA particleboards sold in Denmark. The same year, IKEA's management established large-scale testing of its products and introduced new requirements for its suppliers. Because of its success in responding to such external criticism, IKEA has been nicknamed the "Teflon company" (15).
However, IKEA also proactively seeks to anticipate stakeholder demands. At the beginning of the 1990s, to transform its environmental policy into an efficient plan of action with concrete business practices, IKEA initiated a collaboration with Natural Step, an international, not-for-profit, research, educational, and advisory organisation that uses scientifically developed system frameworks to help individuals, organisations, and communities take meaningful steps toward sustainability. IKEA also is a member of various business networks, including Business for Social Responsibility and Global Compact.
Our analysis of IKEA's advertising to the general public through the media indicates that the organisation seldom includes direct references to its CSR commitments. There is, for example, no mention of CSR in the nine key messages IKEA conveys to its customers: the IKEA concept; the IKEA product range; home furnishing specialist; low price; function; the right quality; convenient shopping; a day out for the whole family; and Swedish (16). Instead, IKEA stresses its emphasis on the family and the environment, its Swedish roots, and, in turn, the solidarity and egalitarianism traditionally associated with Sweden. Explains Jean-Louis Baillot, CEO of IKEA France, "people consider that IKEA has an environmental behaviour" because of its Scandinavian roots, which means that "it is ultimately not inevitably necessary to speak about it"(17).
TRADITIONAL MEANS OF COMMUNICATION
Prior to 2005, IKEA used its stores, product catalogues and product packaging to communicate its CSR policies to the public. For example, the store brochures contained information relating to the environmental impact of various products, and the 2004 catalogue included two pages that centred on CSR themes. Inside stores, customers could also read about IKEA's cause-related marketing campaigns and cooperative actions with Save the Children and UNICEF, as well as review 'green panels' that advised them about good consumption practices. Since 2005 though, such descriptions of IKEA's environmental and social efforts no longer appear in catalogues. In most countries, the only ways to find information about the organisation's CSR polices, codes of conduct, brochures, and annual reports are through the national IKEA websites.
SPECIFIC MEANS OF COMMUNICATION
IKEA's first social and environmental responsibility report was published in 2004 (for the year 2003). This report described how IKEA had incorporated CSR into its entire supply chain and its collaboration with various NGOs. Anders Dahlvig, CEO of IKEA, declared that IKEA's partners "have been eager to start working seriously with these issues and have progressed step by step, but it is only now, when we have accomplished a little more, that it seems right to start telling the rest of the world about it". The CEO also stressed that it was best to remain humble about what the organisation had accomplished so far, "because there is so much more that still remains to be done" (18). Overall, this first report provided transparent communication about IKEA's CSR.
However, the report lists few numerical objectives and virtually no performance indicators. The 2005 and 2006 reports contain such information, though both objectives and indicators remain very general, which makes it difficult to judge the extent to which IKEA truly integrates CSR considerations into its business models. For example, its IWAY code of conduct contains several different performance levels, the first of which details the minimum requirements a supplier must meet to work with IKEA. But published reports do not clearly indicate the level of responsibility the organisation and its suppliers have achieved in different areas. Approximations appear to be the rule rather than the exception in these reports.
When it comes to solutions it has implemented, IKEA remains vague in its descriptions, though it claims to have set up more CSR objectives and employ additional CSR indicators to guide its internal operations. On the basis of this description, the reports might best be regarded as a specific means of communicating with the general public.
Why has IKEA been so reluctant to place social and environmental labels on its products, even though the products meet criteria for products made of tropical wood materials? Our findings suggest the rationale is not rooted in cost and administrative considerations but rather in the organisation's consciousness that the IKEA brand itself should "be a guarantee of environmental consideration and social responsibility". Another reason IKEA has chosen to be cautious in communicating about its CSR is to avoid promoting "itself as a target for anti-globalisation organisations which focus on big brand names like ours despite our many community-and environment-friendly policies and contributions" (19).
The next logical question pertains to perceptions of IKEA's communication. We find that the organisation has not developed a particularly structured dialogue with its external stakeholders. Although IKEA states it collaborates with various external stakeholders throughout the world, NGOs and trade unions (except IFBWW) are not invited to participate in monitoring and auditing IKEA's CSR policies. Instead, these organisations receive completed audits and reports containing CSR information.
Thus, these stakeholders (but not consumers) generally perceive a lack of transparency or clarity in relation to IKEA's CSR communication and consider it unsystematic, overly general, and imprecise. In contrast, IKEA's communication with international partners or formal or legal partners, such as city councils and governmental organisations, is more transparent and comprehensive. Finally, though 40 percent of the surveyed consumers claim they have received information relating to IKEA and its CSR achievements, and 77 percent say they do not know much about IKEA's CSR, these stakeholders rarely ask for additional CSR communication.
IMPACT OF CSR COMMITMENTS AND COMMUNICATION ON DIVERSE STAKEHOLDERS
Although generally appreciated, IKEA's efforts to reduce the negative environmental impact of itself and its products seem too slow for many stakeholders. Greenpeace, Robin Wood, and other NGOs specifically assert that IKEA could be clearer and more transparent in communicating its CSR commitments. A member of a German organisation that advocates forest protection and has criticised IKEA's environmental practices, characterises the organisation's communication as "A lot of words, but not very concrete!".
With regard to the supply chain, most stakeholders perceive IKEA positively but criticise those involved in auditing and reporting. Many of our interviewees consider the inclusion of trade unions and NGOs highly important. Finally, the manner in which suppliers are monitored seems not fully clear or evident to IKEA's stakeholders.
Frequently, IKEA receives criticism that its stores destroy the local economy and put local businesses out of work. However, stakeholders also recognise that IKEA stores offer employment and access to a commercial network. These stakeholders remain concerned though about IKEA's labour contracts, which often offer work only when there is an actual need for it. On a general level, our investigation suggests stakeholders want to support IKEA in its CSR implementation efforts, even though most of them remain sceptical about its CSR commitments and communications.
Although they feel they have little knowledge of IKEA's CSR commitments, consumers consider those commitments somewhat positively, and only 5.4 percent had formed unfavourable perceptions of IKEA's CSR initiatives. Our survey also identifies that consumers exposed to communication from IKEA about its CSR initiatives hold a more favourable opinion of IKEA's CSR than do other consumers (t-test, sig.:.017), in support of the importance of communicating CSR.
Our analysis also shows that consumers who most associate social equity, ecology, responsibility, and ethics with the image of Sweden (n = 68) have a more favourable opinion of IKEA's CSR than do consumers (n = 60) who least associate these terms with Sweden (t-test, sig.:.0009). This difference appears crucial, in that 95 percent of the surveyed consumers actually named Sweden as the country of origin for IKEA in a multiple choice question. Also, although 40.6 percent of the surveyed customers indicated they would boycott IKEA if the organisation performed badly on the CSR indicators they considered important, a positive impression about CSR initiatives was not sufficient reason for these consumers to buy IKEA's products.
We cannot establish any significant relationship between appreciation for IKEA's CSR policies and behavioural intentions toward the brand, which supports the proposition that socially ethical consumption is more a matter of principles than actual practice.
Those NGOs and other organisations that collaborate, often internationally and formally, with IKEA on social, socioeconomic, and environmental matters have some access to privileged information that is unavailable to the general public. Therefore, these partners maintain a positive view of IKEA's CSR commitments and regard it as a proactive organisation that does not want to exploit its image as a responsible corporate citizen.
Although IKEA has not realised its CSR policies fully, these partners believe the organisation is on the right track, and they "expect more openness about how they are managing their suppliers in terms of working times, work conditions, salary, etc".
Partners also support IKEA's attitude toward CSR but simultaneously stress that they continue to observe the organisation's CSR commitment and communication.
ORGANISATIONS OTHER THAN PARTNERS
In the past, organisations such as Oxfam Belgium, Robin Wood, and Somo with which IKEA has no partnerships, have criticised IKEA regarding its CSR commitments. Believing that much work still needs to be accomplished, these organisations blame IKEA's CSR guidelines for being unclear and its implementation for being too slow. More importantly, they regard the slow implementation of CSR policies as a sign of IKEA's lack of determination. In contrast with long-term partners, most of these other organisations regard IKEA as reacting more than acting when it comes to CSR. However, similar to long-term partners, other organisations are sceptical about IKEA's CSR communication, especially when it comes to transparency.
Because of its socioeconomic impact, most city councils favour IKEA setting up stores in their neighbourhood; any potential loss for the traditional socioeconomic network gets compensated for by the creation of economic clusters around IKEA's massive stores. As one member of a Belgian economic affairs committed summarised it, "at the social and socioeconomic levels, they first bring employment, which is valuable".
IKEA's presence affects not only the level of employment (particularly among unskilled workers) but also regional visibility and commercial activities. Furthermore, city councils consider IKEA superior to other large organisations in terms of how it deals with social and environmental issues.
Trade union representatives working with IKEA regard the organisation's CSR policies as more developed than those of other organisations. But they also consider IKEA's communication about its CSR policies insufficient. These stakeholders want IKEA to develop their CSR policies further as well. Overall, the trade union representatives support and encourage IKEA in its CSR commitments, though they maintain their somewhat critical attitude.
ORGANISATIONS SPECIALISING IN CSR
Many organisations that specialise in CSR consulting, promotion, and monitoring indicate a positive view of IKEA. They share the feeling that, when it comes to CSR, IKEA is more proactive than reactive, though they challenge the organisation for focusing on very specific CSR issues, such as child labour and environmental concerns, at the expense of other issues, such as human resource management and worker rights in developing countries. Similar to other stakeholders, these organisations also see weaknesses in IKEA's communication efforts: "They have much to develop when it comes to the interface with the consumers, on the marketing side, because they almost don't speak".
These organisations also regret that IKEA rarely takes part in local programmes designed to share best practices in CSR. Although IKEA plays an active part in large, international, CSR-oriented networks, the organisation still is perceived as weak in this area. Even despite these complaints, these organisations generally respect IKEA for its CSR commitments.
CONTRAST IN STAKEHOLDER VIEWS
This contrast among different stakeholders clearly demonstrates that, on the one hand, NGOs, city councils, and trade unions maintain positive attitudes toward IKEA and its CSR commitments, largely because they stay in regular and direct contact with IKEA regarding social or environmental issues. On the other hand, other organisations, which have publicly criticised IKEA about CSR-related issues, express relatively serious worries and doubts about its implementation of its CSR commitments. Some (former) partners share this view as well. Quite a few stakeholder groups express a critical view of IKEA's CSR communication and the transparency of this communication. This critique results in a sceptical attitude, especially if the stakeholder does not engage in direct dialogue with IKEA.
This study examines how IKEA commits itself to CSR and how it communicates its policies to multiple stakeholders. In particular, we identify the important role that stakeholders play in IKEA's CSR policies and the added-value associated with CSR commitment and communication. We also note that IKEA often develops its CSR policies in response to criticism. On the basis of the case study findings and our analysis of these findings, we draw several key managerial implications.
ANALYSING CHANGES IN THE ORGANISATION'S EXTERNAL ENVIRONMENT, IDENTIFYING KEY STAKEHOLDERS, AND REGARDING CSR AS A PROMISING PATH
Their increasing dependence on financial investor expectations about their performance and public opinion means that organisations must demonstrate their thorough understanding of the changes in their external environments. In particular, organisations must be aware of who their stakeholders are and what expectations they hold. Our case study reveals that IKEA has faced many potential crises, including those related to work safety, wood from certified sustainable forests, and CO2 emission levels, which prompted it to engage in discussions and negotiations with trade unions, its supplier network, NGOs, and the media. In dealing with these different crises, IKEA has found that its CSR can deliver promising solutions and ultimately lead to better corporate performance.
INCLUDING, ENGAGING, AND INTEGRATING EXTERNAL STAKEHOLDERS IN CSR POLICIES
By letting IKEA know how they perceive the organisation, whether by criticising it publicly or entering into a collaborative, constructive relationship with it, external stakeholders have influenced IKEA's CSR policies significantly at various times. In response to external stakeholders' expectations or requirements, IKEA has changed its business practices. In some cases, IKEA has been quick to anticipate demands that external stakeholders may place on the organisation, whereas in other cases, it has resolved a situation or a problem successfully after the crisis occurred and used communication to inform concerned stakeholders how it was dealing with the problem.
IKEA's strategy thus involves carefully managing its CSR commitments in a strategic manner. Initially reactive to CSR complaints, the organisation has gradually increased its proactive policies and coupled them with reactive responses when needed. This dual strategy partially explains why IKEA experiences crises but never has had to endure them for a prolonged period.
COMMUNICATING WITH EXTERNAL STAKEHOLDERS USING APPROPRIATE TOOLS
IKEA has not felt the need to advertise its CSR commitments. Rather than relying on advertising rhetoric, IKEA trusts in factual information. In addition, IKEA uses appealing elements, such as family, cultural, and ethical values, to portray its CSR commitments. Furthermore, IKEA carefully and efficiently maintains its image, and then selects some specific CSR commitments, such as children's rights and reduced environmental impact, to communicate.
With regard to organisational and institutional stakeholders, IKEA uses specifically adapted communication means, such as its annual CSR report. Our findings highlight the complexity associated with reaching decisions about the nature and level of communication. For example, the need to communicate varies depending on the type of stakeholder and the importance that the stakeholder places on CSR, as well as the stakeholder's potential influence. In the case of IKEA, NGOs and trade unions have been more influential than consumers, so communication with these external stakeholders adds more value.
TRANSPARENT COMMUNICATIONS WITH EXTERNAL STAKEHOLDERS
Scepticism takes a central role in stakeholder perceptions of and attitudes toward an organisation. Therefore, modern organisations absolutely must engage in transparent dialogue with their stakeholders. When they do so, according to our findings, stakeholders become less sceptical about and exhibit a more positive attitude toward the organisation.
MODEST APPROACH: INVOLVING EXTERNAL STAKEHOLDERS IN MONITORING AND COMMUNICATING ACHIEVEMENTS
Although its commitment to CSR and attempts to communicate that commitment positively influence IKEA's image in the most cases, its decision to keep surveys confidential and exclude most external stakeholders from implementing and monitoring different CSR initiatives means it has missed some opportunities to improve its CSR policies. Organisations must realise that engaging with stakeholders in a constructive manner requires both time and effort.
In the case of IKEA, for example, the organisation paid considerable attention to its relationships with WWF and UNICEF. The parties entered into an ongoing dialogue, trusted each other, and made compromises along the way, resulting in highly successful relationships. This example demonstrates the importance of involving external stakeholders in the monitoring process, which indicates the organisation is willing to change its CSR policies and thereby signals its credibility to the outside world.
Similarly important is the organisation's voluntary communication of its progress, and what remains to be achieved, as it implements its CSR policies. Organisations should avoid being overly modest in their communication, as IKEA often has been in the past, because such coyness could be considered an attempt to fool external stakeholders, which only generates suspicion and unwanted scrutiny.
CONTINUOUSLY DEVELOPING CSR POLICIES
The developments that have taken place in IKEA's external environment highlight the need to reconsider CSR policies regularly and through dialogue with the organisation's various stakeholders, who want to be kept informed on how its commitments to CSR are being honoured or improved. If such adaptations do not occur, organisations risk significant criticism. To achieve successful communication, organisations should integrate external stakeholders in the way we depict in the accompanying figure. First, by including a feedback loop for stakeholder perceptions of the organisation, organisations acknowledge that their CSR policy involves a continuous process. Second, the framework awards a central role to external stakeholders whenever organisations revisit their CSR policies or communicate with the external environment. Third, the dialogue between the organisation and its stakeholders must be transparent and constructive.
CONCLUSIONS AND DISCUSSIONS
Drawing from our development of the case, we outline some key strategic implications for IKEA and organisations interested in CSR in general. The effective influence of stakeholders in the CSR development process and the variability of their perceptions about CSR activities and communication should prompt researchers to analyse CSR development issues and conduct impact analyses in a more comprehensive manner than currently exists. The crucial role of stakeholders' differential perceptions about the transparency and credibility of information about an organisation's CSR commitments should remain central to any research effort; thus, our identification of different stakeholders' unique attitudes toward IKEA represents an important contribution.
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This study examines how different stakeholders perceive, react to, and influence IKEA's corporate social responsibility (CSR) commitment and communication. Different types of stakeholders vary in their perceptions of the organisation's CSR: Therefore, IKEA must be transparent in its commitments and credible in its communication. Overall, this study recommends the development of more comprehensive CSR models that can be tailored to different stakeholders.
The authors contributed equally to this article. They offer sincere thanks to the organisations that participated in the study. They also thank Martin Hingley and Joelle Vanhamme for critical comments to an earlier version of this chapter.
BY FRANCOIS MAON, IESEG SCHOOL OF MANAGEMENT, ADAM LINDGREEN, CARDIFF BUSINESS SCHOOL AND VALERIE SWAEN, UNIVERSITE CATHOLIQUE DE LOUVAIN
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|Title Annotation:||RETAIL IN PRACTICE|
|Publication:||The Retail Digest|
|Date:||Jun 22, 2010|
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