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 UNIT MMH 733
ETHICS FOR MANAGERS
TRIMESTER 2, 2017

UNIT CHAIR
Dr. Bruce Mitchell

STUDENT NAME
Davinder Kaur Gill (Jot)
Student ID - 216035474

ASSIGNMENT 2
Submission Date 24th September 2017

Word Count 3138

Abstract- 103
Body- 3033
Reference- 354

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 ABSTRACT
The responsibilities and duties executed by the company over the years are examined in this
report. With the support of evidences collected, companys relationship with its stakeholders
and codes of conduct are elaborated.
Further, the way IKEA utilized CSR structure and ethical obligations to be most sustainable
competitor is investigated. Undoubtedly, companys efforts in the direction of making peoples
life better by fulfilling their needs and wants while being environment friendly and cost
effective, are appreciable. IKEA has remarkably focused on achieving its mission by adhering
to the laws and making policies that fits into corporate culture of specific country it operates
in.

INTRODUCTION
The company IKEA is the one which is looked upon by many for quality products at low
price. The stores of IKEA are designed in a way that customers enjoy their visit as it
includes furniture, cabinetry, household goods, appliances, food, dcor and so on. The
Company has 163.600 employees in 389 stores worldwide (as on 2016) (Statista,2017).
The aim of the report is to analyze IKEAs vision and practices along with its Corporate
social responsibility. It owns high reputation in the market for its sustainability practices-
which will be discussed in the report. Also, how company is moving towards achieving its
goals while being ethically right, will be elaborated.

CASE STUDY ANALYSIS

o ETHICAL ISSUES FACED AND SOLVED

Although IKEA was one among the worlds most ethical company in 2009 by a research
based global think tank, the Ethisphere Institute (Schuringa et al., 2011). It is the third
year in a row that IKEA received this honor but still here are some ethical issues that
company is trying to resolve. These issues will now be discussed further in the report.
IKEA has always been in the limelight for variety of negative issues. one such issue was:
Human Rights - IKEA always feels proud on its strong employee base and all the
employees are equally named as co-workers. Yet it faced an issue of using political
prisoners from East German as labor to build some furniture components. The good thing

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is that the company accepted its mistake and revised its values regarding the matter
(Ebnother, Rivera and Sawayda, 2014).
The company was also accused of using child labor to manufacture its products in India.
However, it argues that only four suppliers supply hand woven carpets from India and
they all adhere to the IWAY standards (Ebnother, Rivera and Sawayda, 2014).
Secondly, Keeping Eye on Employees - IKEA was also accused of keeping eye on its
employees, misconduct of employees and complaints of consumers in France.
In France, it is a serious offence to violate employee privacy rules as the privacy rules
here are stricter than United States. IKEA kept quiet in public regarding the matter
however it fired some of the executives who were found guilty in the internal investigation
and it also paid penalty of 500,000 euros to French court (Ft.com, 2013).
Thirdly, Corporate Governance Although IKEA claims that it considers every employee
a co-worker, some critics do not agree to it. In critics opinion, IKEAs corporate framework
is highly complicated and hierarchical. The owner (Kamprad) himself has very strong
power and influence over the decisions taken throughout the time till now. The internal
functions are in control of non-government company which further is in hands of non-profit
Dutch organisation. The non-profit organizations are not liable to pay taxes; therefore,
Kamprad is very smartly saving a company from taxes in a way which keeps IKEA as a
highly competitive company (the Guardian, 2016). This also helps IKEA to keep costs as
low as possible.
Moreover, although IKEA stopped investing in Russia for a while to protest corruption and
fired its executives for allowing the bribes, it should also carefully keep eye on things done
by company itself, which are ethically wrong.
Lastly, Product Quality In Europe IKEA was blamed for selling horsemeat in the
meatballs. IKEA investigated the issue and found that one of its Swedish supplier is selling
these meatballs. The accused supplier acknowledged and discovered that slaughter
houses from Poland delivered these meatballs. Further, IKEA declared that it will not
accept ingredients which are not described in the recipe and assured the customers that
horsemeat itself is not bad for humans (Theaustralian.com.au, 2013).
Moreover, it lodged complaint in police against the supplier who was blamed for this. For
customers satisfaction IKEA enabled temporary DNA testing as well.
Therefore, through these incidents we come to know that IKEA faced multiple ethical
issues and always understood its responsibility and solved the issues in best way

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 possible. For multinational companies like IKEA it sometimes become hard to cop-up with
diverse cultures and it takes a while to organize itself and fit into ethical norms of that
environment.

o CODE OF PRACTICES, VISION, AND MISSION

Vision for any business means to have an image of the business or a company one wants it
to be. To make company successful there comes a need of some specific Mission which
includes goals to be achieved in near future to enjoy competitive advantage. Furthermore, to
be competitive ethically an organisation needs to have Code of Conduct which guides the
employees, stakeholders, vendors to be responsible and perform their duties ethically.
IKEAs vision is to provide better everyday life to as many people a company can reach by
selling quality products at low costs. Its goal is to do everything little better, little simple, more
efficient and with effective cost. IKEA highly value its culture of working together with
enthusiasm which supports is vision and mission.
Moreover, to satisfy customer needs IKEA use to visit at customers home, which enable
IKEA to have better understanding of their needs and wants. Keeping costs and better quality
in todays competitive world is very challenging. Therefore, IKEAs product developer,
designer, technicians, manufactures and specialists all work together which assists in finding
latest best techniques and keeping cost low (Businesscasestudies.co.uk, 2017).
Everyone in IKEA works hand in hand and respect each others work which enables the
company to be more efficient from ethical point of view.
To achieve what it says, IKEA introduced a strategy called IWAY, which guides IKEA in line
with the United Nations Universal Declaration of Human Rights (1948), the Rio Declaration
on Environment and Development (1992) and the International Labor Organisation
Declaration on Fundamental Principles and Rights at Work (1998) based provisions. IWAY
protects children from child labor, working conditions, environment, forests and more
(Ikea.com).
As per the IWAY, the supplier is responsible to follow every code of conduct established by
IKEA in this strategy. It also asks distributors to appoint a person who will be responsible to
keep an eye on supplier and see whether the supplier comply with set standards or not. The
sub-contractors of dealers also must sign document and follow IWAY. The sellers also should
agree for annual internal audits.

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IWAY also states boundaries for workers hours to work that should not exceed 60hours a
week. IWAY also sets standards for wood to be used in its products. In its approach for
sustainable growth, IKEA is also expected to invest 1 billion euros to buy forests and some
of the companies which have a focus on renewable source utilization (Butler, 2016).
Furthermore, IKEA not only wish to make peoples life better, it also has a partnership with
UNICEF (United Nations International Childrens Emergency Fund), which helps to build
schools, provides fund for education and educational material to solve issues of child labor
and empower the women. IKEA also organize fundraisers every year to support UNICEF. It
also supports Business Principles and children rights set by UNICEF.
As mentioned above, the company is doing a lot to make peoples life better, there are many
other examples such as investments in solar panels, wind farms and using recycled,
renewable and recyclable products. In the next section, IKEAs Corporate Social
Responsibility model will be discussed with reference to the Carrolls four-part CSR model.
o IKEAS CSR MODEL
Corporate Social Responsibility pyramid by Carroll refers to the obligations that firm has
towards the society. The structure includes Economic responsibility (required by society) at
the bottom which builds a sturdy base to fulfil all other responsibilities. It has legal
responsibility (required by society) above economic and below ethical responsibility
(expected by society). The top most responsibility is the philanthropic (desired by society)
(Crane and Matten, 2010, pp.53-54).
1. Economic Responsibility: Companies which perform at global level need to have
critical thought process while making policies to satisfy its different stakeholders
(Customers, Employees, Investors) in different parts of the world. For instance, in
United states focus majorly on earning profit which thus refers to earning benefit for
and attracting more investors. In India, the core expectation is the investment on local
community growth. The company is responsible for the growth of its employee and for
their upliftment it needs to offer multiple opportunities (Crane and Matten, 2010, pp.
55). In this case, IKEA is performing its economic responsibility very well. For example:
it established new hourly based wage structure as per the needs of employees.
Furthermore, the company operates 314 wind turbines and installed 7 hundred thousand
solar panels on its stores to become energy efficient. It is also expected that because of
all these efforts the company will be able to save electricity which equals to the needs of
energy uses annually by households of London and Paris by the year 2020 (Howard,

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2016). IKEA invested to train cotton farmers which will make 5 million farmers better cotton
producers with production of around 8.2mt by 2020 (Kumar, 2016).
2. Legal Responsibility: This refers to the firms responsibility to perform its tasks while
adhering to the laws (Crane and Matten, 2010, pp.53-54). IKEA, in its IWAY
framework, has stressed upon abiding the laws. It asks the suppliers to take care of
human rights, not to use child labor to lower production costs etcetera (Ikea.com). The
company always take actions if somebody does not adhere to stated laws. As in recent
BBC report a driver is interviewed and he tells his story about how the transport
company missuses its drivers. In this regard IKEA said that although these drivers are
not employed by IKEA but a company will consider the matter and will do best to make
their life happy and enjoyable (Hodgson, 2017).
3. Ethical Responsibility: Ethical responsibility comes into play when there is no
specific law do define right and wrong activity. Moral and social values define ethics.
The best example could be a climate change and to save earth each person is equally
responsible (Crane and Matten, 2010, pp.53-54). IKEA has taken initiative in this
direction by starting the use of renewable sources to manufacture its products. In
2013, Forest Stewardship Council certified most of the wood used for IKEA products
and paper used at IKEA. Around 87% of the waste generated by the firm is recycled.
Near about 98% of the recycled, renewed, or renewable material is used in its
manufacturing (Ebnother, Rivera and Sawayda, 2014).
4. Philanthropic Responsibility: This responsibility can be fulfilled by providing
donations, building schools, helping society in tough times and so on (Crane and
Matten, 2010, pp.53-54). The company does regular donations to combat child labor,
girl and women empowerment via education and business progressions, helping
communities at times of disaster and providing shelters to refugee families and
children (Shipps, 2014). It has Stichting Ikea Foundation to improve life of children in
the poorest countries throughout the world (UNICEF, 2016).
Therefore, by looking at above mentioned approaches it can be said that the organisation
is not only interested in producing value internally but for the stakeholders also, who are
involved in its internal and external functions. To fulfil what is desired or expected or
required by the society, company has made policies and efforts which are ethical and
sustainable.

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o IKEA STAKEHOLDERS
The stakeholder key relationship attributes defined by Mitchell et als are power,
legitimacy, and urgency. The stakeholders can be divided according to these three
categories. Power means influence power of stakeholder, legitimacy as legitimacy of their
demands and urgency as urgency of the complaints filed by the stakeholder (Crane and
Matten, 2010, pp. 202).
Stakeholders can be divided into categories of internal and external. The internal
stakeholder potentially is- Employees, Managers, Owners, Shareholders and external
are- Suppliers, Customers and Regulatory bodies. Stakeholders with large power can
break or enhance core values of the company. However, some do not have that big power
but because they have legal claims they try to exercise control over the firm. Some, being
legitimate and powerful may not be influential while their demands are recognized but not
filled because of lack of urgency (Figure1(Stakeholdermap.com)).

Figure 1

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 Thus, stakeholder salience confronts multiple bodies of legitimacy, urgency and power
and the bases for a typology of stakeholders as gathered in the table below (Table 1).

Table 1- Analysis of Main Stakeholders at IKEA

CLASSIFICATION OF STAKEHOLDERS BY MITCHELL ET AL. (1997)

Stakeholder Stakeholder Features Key Stakeholders Stakeholders
Type Importance at IKEA Subclass
Retailers and local Facultative
Hidden Legitimacy community stakeholder
stakeholders Low Logistics and supply Influential
with one trait Power chain partners stakeholder
Official partnerships Rigorous
Urgency and cooperation stakeholders
Optimistic Legitimacy NGOs with Influential
stakeholder and Power collaboration and stakeholders
with two Moderate power
traits Legitimacy Trade unions and Dependent
and public authorities stakeholders
Urgency
Power and CEO, manager and Rigorous
Urgency shareholders stakeholders
Explicit Legitimacy, Employees Influential
stakeholders High Power and Customers stakeholder
with all traits Urgency

The above analysis shows that the major stakeholders are staff and customers. The
employees perform as mediators. It indicates that mediators should not be jumbled up with
the focused group. For this reason, IKEA staff shows and defines the firms image which
means they can put an impact on focused market if they have image of the company.
Moreover, to keep its stakeholders happy IKEA has performed different duties at certain
levels. For instance: for its customers IKEAs aim has always been low cost products. For

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the accomplishment of this aim IKEA adopted practices which are ethically right. It used
renewed sources, solar energy, also wood from certified forests that can be used
commercially. To keep investors happy by bringing more profit it focuses on low production
costs. For its employees, it provides regular bonuses as in 2016 company announced to pay
108 million euros to all the co-workers in pension funds for their contribution and loyalty
(Indiacsr.in, 2016). To treat its suppliers ethically IKEA has made framework called IWAY
that guides the suppliers to be efficient in all aspects.
To sum up, it can be said that yes IKEA treats is stakeholders ethically. The firms efforts are
evident from its policies and pathways it has established for each person associated to it.

o RECOMMENDATIONS FOR IKEA

In the world today, companies such as IKEA are confronting lot of challenges than before to
compete with competitors in the market. The best way of doing so is to make policies that
adhere to laws and ethics in combination with Corporate Social Responsibility structure.
Initially, CSR structure shows that practices and communication are meant to engage more
commitments and relations both internally and externally. For example, at IKEA everybody
who works in the organisation is considered as co-worker with no hierarchy. The managers
and other employees have equal facilities and have right to say and share ideas with top
management directly.
Additionally, in recent decades several policies were made for the administrative benefits
which matched with the expectations and needs of the individual. To do so surveys were run
through the organisation asking questions about coworker needs and hopes. A program
called EXPRESS YOURSELF was launched by which workers were enabled to share their
ideas or issues and complaints directly with management at top. Consequently, when
managers reply back, employees felt special. The company also has internal network system
which lead to effective communication and question openly in any concern like management
decision or ideas and so on. Since 1980.s IKEA was targeted by NGOs for child labor,
working conditions in Europe and wood from Indonesian forests. Therefore, it started
publishing CSR report annually which tells the reader about different stakeholders and
importance that is given to them by the company.
Finally, modern organizations should have transparent conversation with stakeholders. IKEA
had a high pressure from its stakeholders as its business model is formed with effectiveness
of cost and centers in developing countries.

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In conclusion, undoubtedly at IKEA stakeholders have important role to play on its CSR
communications and policies which means it should engage its stakeholders to have fruitful
communication. Firstly, to acknowledge that the CSR policy unifies with the ongoing process
of the company, a firm can run feedback loop to know what stakeholders think about the
company. Secondly, the framework should give central role to the stakeholders for better
understanding of internal and external environment. Thirdly, there should be a constructive
and transparent discussion between stakeholders and IKEA.
Lastly, the stakeholders are unable to understand clearly that how the providers are audited.
Consistently IKEA is criticized for setting local businesses out of work and also lowering down
the local economy. Although stakeholders agree to the fact that IKEA provides jobs and way
to commercial network but they are also worried about its labor contracts which mostly
provides work only when required by the company. Some recommendations are stated in the
table below (Table2).

Table 2 Recommendations

PERSPECTIVE SITUATION RECOMMENDATIONS

In relation to CSR
External communication of the
Stakeholders company NGOs and trade
unions feel lack of
transparency
Formalized IKEA puts local business
partnership and out of work and destroy
collaboration local economy
Consumers IKEAs CSR achievements
and information is not
received by most of the
surveyed customers
It should invite stakeholders to monitor
and audit regardless of their category
Should boost auditing as out of CSR
they are trying to create win-win
situation
Should not miss any opportunity to
make CSR policies better and should
engage more external stakeholders
while implementing them

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 CONCLUSION
IKEA, now a day, has become first choice for the customers for low price quality products.
The design innovation makes it tough market competitor for other players. IKEA performs its
legal, ethical, economic and philanthropic duties towards society very well. Time to time it
confronts ethical issues and solves them. The firm needs to be little more critical in setting its
policies.
Moreover, although lot of material in regard to ethical issues faced by company is available
through different websites but their authenticity could not be guaranteed. The data about
company performance, stakeholders and CSR model is little unclear. Through this report it
can be concluded that IKEA is doing a lot to make life better for people and planet earth to
be safer place by adopting ecofriendly resources.

Page 13 of 15
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