IKEA's Social and Environmental Responsibility Initiatives

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Case Details:

Case Code : BECG058
Case Length : 22 Pages
Period : 1997-2005
Pub. Date : 2006
Teaching Note :Not Available
Organization : IKEA
Retail - Furniture
Countries : Sweden, US, China

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"IKEA is a leader in setting high environmental standards for its product. That means employing strict manufacturing methods and supply processes so that materials, technologies and transportation have the least damaging effects on the environment." 1

- Rene Hausler, Partner, IKEA-San Diego Franchisee.

"We consider IKEA to be setting an excellent example for other corporations to follow. IKEA is prepared to go further than just saying 'no' to a supplier who exploits children. The company is showing a genuine interest in bringing about improvement for children by assuming a responsibility for child labour issues." 2

- Ingvar Hjartso, UNICEF Representative.

A Socially Responsible Company

In April 2005, Sweden based Inter IKEA Systems BV (IKEA), the global furniture retail giant, received the Outstanding Sustainable Style Achievement (OSSA)3 Award for eliminating the usage of Polybrominated Diphenyl Ether (PBDE),4 a toxic fire suppressor used in manufacturing furniture.

Earlier, in 2004, IKEA had received the BUPA Healthy Communities award for Excellence,5 an award funded by the Ministry of Health, UK. The company was given this award for initiating programs to curb crime and to tackle the issue of unemployment in the neighborhood of its Eastville store in Bristol, UK.

IKEA is the world's largest furniture retailer that specializes in stylish but inexpensive Scandinavian designed furniture (Refer Exhibit I for IKEA Facts).

IKEA's success is attributed to its vast experience in the furniture retail market, its product differentiation and cost leadership. The company's furniture was sold in kits to be assembled by its customers at home.

In addition to furniture, it also sold utility items such as utensils, hooks, clips, stands and more. IKEA's founder Ingvar Kamprad (Kamprad) had built an international furniture chain of 226 stores in Europe, Africa, Asia and the US. For fiscal year 2004-05, IKEA generated revenues of US$ 17.9 billion, a 15% increase over the previous fiscal year.

Most IKEA furniture was made of wood, which the company sourced from different countries. Acquiring this wood often involved large-scale cutting of trees from forests. Some of IKEA's suppliers used to exploit children in the manufacture of goods for IKEA. These problems made IKEA's management decide to reorganize the company's business policies and introduce stringent rules to ensure better social and environmental practices, both within the company and with business partners. Commenting on IKEA's decision, the company spokesman Marty Marston said, "At IKEA, we're moving toward a way of thinking based on the philosophy that everything we take should be used, reused and recycled, either by ourselves or nature, in such a way that causes the least possible harm to the environment."6

IKEA's Social and Environmental Responsibility Initiatives - Next Page>>

1] Barret, Richard M., "IKEA San Diego Supports 'Green' Movement by Developing Stricter Manufacturing and Supply Standards," www.sddt.com, September 13, 2005.

2] "IKEA," www.bsdglobal.com, 2001.

3] The Outstanding Sustainable Style Achievement (OSSA) Awards recognizes the outstanding social and environmental efforts across diverse style and design industries. The OSSA is awarded by the Sustainable Style Foundation (SSF), an international, non-profit organization that provides information, resources and innovative programs that promote sustainable living and sustainable design.

4] Brominated fire retardants (BFRs) are widely used in a number of consumer products to prevent fire-related injury and property damage. Polybrominated diphenyl ethers (PBDEs), a type of BFR, are persistent in the environment and are capable of accumulating in the tissues of animals, fish and human beings. They also cause neurological damage and learning disabilities in children and can cause cancer in adults.

5] The BUPA Healthy Communities award is given by the Business in the Community (BITC) organization headquartered at London, UK. The BITC consists of 700 member companies, both local as well as global. BITC's aim is to inspire, challenge, engage and support business in continually improving its positive impact on society.

6] Reda, Susan, "Conservation Efforts Bring Cost Savings, Community Benefits to Major Chains," www.informinc.org, 1999.


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