Corporate Social Responsibility

10 October 2016

Corporate social responsibility is a concept that is becoming increasingly important and these days seems like a necessary condition to do business. There appears to be an infinite number of definitions of CSR across academia, varying from the simplistic to the complex and includes a range of related terms and ideas- including corporate citizenship, corporate sustainability, corporate social investment, socially responsible investment, business sustainability and corporate governance.

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It can be usually agreed upon that CSR consists of taking on more responsibility than just an economical principle and for the purpose of this discussion will be defined as ‘A commitment to improve community well-being through discretionary business practices and contributions of corporate resources’. In other words CSR implies a stakeholder view and that they have moral responsibilities that extend beyond a return for their shareholder.

The Swedish furniture giant IKEA has received much respect from the entire world with regards to its CSR philosophy. The things that makes IKEA stand out is that despite its aggressive focus on cost cutting it has been able to combine this with global CSR issues which most companies find near impossible to do.

The organisation alongside cost effectiveness has added an 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” IKEA’s underlying goal is to consider and integrate social and environmental considerations into its daily operations and to “make products which have minimum impact on the environment and … manufacture them in a socially responsible way” .

These values stem from the fundamental norms common within Sweden and in Nordic countries as a whole, which on a cultural level generally think in terms of ethical values and sustainability. IKEA’s focus on CSR was seen from its humble beginnings mainly due to the social values imbedded in the Swedish culture, however the main developments came out of a series of crises that caused negative impact on IKEA’s brand in the 80’s and 90’s. IKEA receives pressure from various external stakeholders, Non-Government offices (NGOs) in particular. This pressure stems from IKEA’s low cost business model and their active engagement in developing nations.

They have been associated with child labour in Asia, hazardous working conditions in Eastern Europe and Asia, and purchasing wood from questionable sources in Russia and Indonesia. However it is from these crises, that IKEA has emerged as a clear winner in initiating effective CSR strategies to combat these issues. From research it appears that IKEA is able to react quickly to these external pressures especially when its image or reputation is tarnished. The main strategy that IKEA has successfully contributed to its overall effectiveness in CSR is in its alignments with its external stakeholders.

IKEA has several NGO stakeholders and a few partner organizations. They collaborate with three main partners; UNICEF, ‘Save the Children’ and WWF. Through these partnerships, they can develop and strengthen their work in social and environmental issues. They believe that they can achieve more results by co-operating with organisations and share common goals. IKEA is very selective when choosing projects, allowing them to “choose” the right projects to fully engage in. Through these initiatives, IKEA has been able to ensure that it is kept up to date on all relevant issues that affect its social impact.

These alignments ensure their brand is received by their consumers in a positive light with regards to CSR and combines well with their underlying philosophies. The development of a separate organisational function in 2002 to ensure a clear evaluation of CSR strategies demonstrates their seriousness with regards to CSR issues. As IKEA is a manufacturing business, CSR issues within their supply chain were always going to be inevitable. The way IKEA has approached these issues is by changing the perception of their suppliers.

Within the last few years IKEA has adopted a strategy of going from “trading to purchasing”. This entails that instead of only engaging in short-term relationships with many suppliers, they have focused on generating long-term relationships with fewer suppliers. By creating a code of conduct IKEA has been able to influence each supplier with regards to quality, service, price and environmental and social responsibility of its suppliers. By establishing longer term relationships, IKEA has been able to work alongside each supplier to ensure that the “IKEA Way” or “IWAY” is followed through.

The management of IKEA spent a lot of time and resources into the development of this program and it took nearly two years for the final draft to be finalised. IWAY defines what “suppliers can expect from IKEA and what IKEA expects from its suppliers, with regards to working conditions, child labour, and environment and forestry management. IKEA requires its suppliers to comply with national laws and regulations and with international conventions on the protection of the outside environment, working conditions and child labour. ” This was seen to be a major step forward for an organisation with regards to the CSR implications.

IKEA effectively was now able to have control over its global supply chain and through its partnerships with external stakeholders was able to ensure that its suppliers were acting according to world standard ethical values. A lot can be said for IKEA’s strategies on Corporate Social Responsibility. Unlike other companies, they already had a head start due to beginnings within in a culture of extremely high ethical standards. But it was the way that they acted on particular crises that make them stand out from many other companies.

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