IKEA is present in different international markets which have made the company phase the risks/challenges of expanding internationally. It is important to note that IKEA does not manufacture most of its products and it has had to partner with suppliers internationally. One of the biggest problems the company has had to face in recent years was the accusations that the company used child labor in its factories in Pakistan. Management acknowledged that the situation was not handled correctly. In order to ensure that they have quality suppliers that comply with their company philosophy, IKEA developed a code of conduct expressing the minimum requirements that are expected of all IKEA providers in relation social and labor conditions, labor below the age allowed by law, environment, and forestry. IKEA guarantees that suppliers apply and comply with the requirements established in the Code of Conduct. IKEA encourages its suppliers to institute environmental management systems in their operations and many suppliers have already met the requirements. To be able to successfully expand internationally companies must adapt to the culture, comply with the law and continuously work on their corporate social responsibility.
IKEA’s relationship with its suppliers should expand to cover social and environmental issues. Until relatively recently, it was assumed that the responsibility of companies was only generating profits. Currently, this conception is not enough nor acceptable. In addition to generating profits for its shareholders, the company must take responsibility for how their activities affect, positively or negatively, the quality of life of their employees and the communities in which it conducts its operations. While economic and social development continues to improve in some countries, there is still considerable work to be done to achieve conditions favorable in the economic, social and environmental fields that benefit all of society. With privatization increasing throughout the hemisphere, the power and influence of companies continue to grow. It is increasingly evident that building a fair society and more sustainable economy depends, in large part, on the influence large companies such as IKEA have in implementing actions to help the environment and social issues.
Furthermore, by covering social and environmental issues IKEA gains tangible benefits for the company. Some benefits may be loyalty from consumers, improvement of relations with suppliers, good company image, contribution to the development of communities and the common good, increased visibility among the business community, access to capital, by increasing the value of your investments and your profitability long-term and better-informed business decisions. A social and environmental stance can be used as a differentiating element and as a competitive advantage, with positive financial results. The adoption of this strategy is a path that implies difficult leadership decisions in the company in order overcome problems such as low civic culture, corruption, insufficient legal frameworks, and others that have prevented the company from fully developing as a responsible citizen.
In the case of IKEA and as seen throughout the analysis, there are two major factors to consider: Labor exploitation and environmental care, so developing a global policy of zero tolerance to practices that lead to these problems should be of full importance. Then these policies must be spread by all the various stakeholders, both inside and outside the company, in order to make them a cultural part of it. In order to have the security that these policies are being correctly applied, independent companies should be hired. These companies should be dedicated to inspecting suppliers, setting, implementing, and enforcing regulations. This will create a sense of belonging and pride with the company, as well as a good image to the perception of consumers.
Barner should decline the offer to participate in the documentary. The refusal of the filmmaker to let the company see the footage will allow an IKEA representative to be ambushed with the information he was not aware of. IKEA’s stance could be manipulated and the company could end up being represented in a negative light. In the long run, going on record in the documentary could cause harm to the image and reputation of the company and its other suppliers. IKEA should investigate the allegations on its own to present its side of the story in the best light and prevent as much negative backlash as it is able to. A public statement on the matter should be issued as soon as possible, in which the company states that the issue is being taken seriously and action is being taken.
The fact that Rangan Exports did not comply with the contract and employed children would originally cause the revocation of the contract. However, this would not really be a solution to the problem, and in the same way, it would not be considered an ethical or moral response on the part of the company taking into consideration that steps had already been taken in previous years to minimize child labor. However, putting myself in Barner’s shoes, I would know that an ethical commitment should not be based on finding ‘the least worse’ but really looking for a good solution to the problem. IKEA is an example of a socially committed company, given the principles with which it was founded. Having this background culture rooted in the company, being in the place of Barner while raising a scandal of this magnitude is not an easy task.
To be able to face this situation, the simplest answer would be to stop selling carpets or pass their production to a country with fewer problems in their labor policies. However, this would be a decision with a short-term perspective and would have no impact, other than just ignoring the problem. In parallel, as general manager in the area of carpets, Barner had the responsibility to protect not only the economic part but more than anything, the brand, image, and reputation of the company. However, Barner was at a disadvantage, given that India, Pakistan, and Nepal refused to sign an international agreement against child labor exploitation, which stipulated that children under 15 should not work. This denoting the little interest that these three nations had in abolishing this problem, which could be due both to the acceptance and cultural naturalization that existed on the basis of this problem, as well as to several other issues, taking as an example the great interest rates which they generated unpayable debts and passed from generation to generation, thus contributing to the need that existed in families for their children to work.
In conclusion based on a greater understanding of what child labor exploitation means in these countries and why it originated, I would suggest for Barner to take the opportunity to create a charity foundation, which helps families pay the loans they have been carrying for generations, help parents generate more income and looking for a better alternative to working in IKEA and other companies. Barner can regularize the purchase of carpets certifying them with a quality control where it is found that there were no children involved in the manufacture of the same, as an endpoint would help children involved in labor exploitation remain in a classroom and not in a factory. In parallel, the only way in which all this could materialize and really have a great impact and generate a change in society would be to implement the culture that IKEA has developed based on its ethics and morality so that its suppliers, such as Rangan Exports, adopt in the same way.
In my point of view, I would recommend IKEA to maintain its current focus on child labor with his suppliers. IKEA has responsibly interfered in this problem, having a positive impact on society, generating and following new initiatives against the use of minors in the manufacturing sector. The fact that IKEA follows this path, conserving its policy and culture based on ethical and moral values, has made the company know how to act in times of social crisis, taking care of the environment and respecting human rights. Which has been an intelligent movement, since acting ethically can bring great benefits to companies, such as the development of competitive advantage to be perceived as a socially responsible company, the preference of consumers, better perception in the quality of the products, etc. However, there are other stakeholders which generate pressure for companies to be socially responsible, these being investors, governments, organizations, and the media, from newspapers to social networks. Therefore, the pressure exerted on companies in terms of the obligation to render accounts to the various stakeholders is increasing, not to mention the growing social concern that is spreading in the new generations. If IKEA decided to change its current approach, it would find itself embezzled in many different problems, the biggest being lost total credibility by its customers, investors, and employees, since they would not be acting based on their fundamentals as a company, this generating a decrease in the sense of belonging of the workers given the change of the business culture.
However, for there to be a truly remarkable impact, IKEA must work in cooperation with other organizations, companies, and even governments, since child labor exploitation is such a big problem, very proactive participation of the company could lead to a disadvantage which would break with their business model. For these reasons, there must be a balance between the level of participation that a company has in the various problems and the implementation of its business strategy.