Corporate social responsibility
Commonly known as CSR, corporate social responsibility is part of the larger discipline of Ethics and is the attempt by businesses to achieve accountability for the impact of their activities on employees, customers, suppliers, the environment and basically the entire community in which the company operates. The concept derives from the development of the modern selling model, in which the consumer is of central focus, and therefore his interest outside of what the company is offering must be addressed if is to guarantee long term survival.
It is manly an effect on public perception, and is basically the process of ensuring that business decisions have factored in public interest. For CSR to succeed, the main components of the stakeholders have to be viewed in a new perspective. For instance, instead of considering employees as mere economic units that are a means to an end, amore profitable end, businesses has to treat their staff like the human beings that they are, try to inculcate pride and loyalty to the company, because if a staff member leaves because of dissatisfaction your competition is just waiting for him and all the precious experience that he has gained in your institution.
The environment is not being polluted, you are just paying for things that you end up discarding as waste and hurting the environment in the process. Customers are the whole point why you exist and treating them like statistics that will just be multiplied by prices to come up with revenue figures is bound to attract a fatal backlash especially in their era of cutthroat competition. Apart from being paid in time, your suppliers would like to feel involved and appreciated in the operations of your business, and the recognition that their success it tied to yours and vice versa means that you need to show them that your job is also making them earn a decent living and that their success means as much to you as your own.
The pursuit of public approval however presents a dilemma for the company, as on one hand it is estimated that the company will gain in the long term by endearing itself to the local community which more often than not comprises of the stakeholders of the business, the customers, suppliers, employees and legislative apparatus will all want it to succeed if they feel that it has considerably taken care of their interest.
On the other hand, social responsibility dopes not come without its costs and the company might find itself diverting its resources to CSR to secure revenues in the long term at the expense of current (short term) financial stability and to some extent even liquidity. This is because as the success of CSR is measure by the impact perceived by the public, the company may be tempted to embark on extremely expensive projects whose return may not justify their cost, or even stick to existing CSR projects whose costs have increased unexpectedly just so it can keep its caring image.
There are many ways n which companies engage in social responsibility, such as the natural ones of providing employment for workers, market for suppliers and variety and quality for customers. These are however not enough and thus corporates have to go a step further using a variety of approaches, one of the most popular being the company’s involvement in community development projects.
Thee projects cover a wide range of areas, be they business oriented, such as the promotion of free trade practices or dealing with only those companies that have passed some quality certification, community oriented such as education sponsorships and programs, health programs and those target at the legal aspect of business for example only trading with companies with a clean tax returns history. An alternative that is however not very popular is funding community based organizations which do the above. This is no widely practiced because no matter what amount of advertising is used to illustrate the development activities are being funded by the company, it cannot substitute the effect of actually being in the field and being in direct contact with the community.
An alternative form of corporate social responsibility comes in the form of social accounting, which is basically an attempt by the company to take responsibility for the impact of its operations on its surroundings be it the people, the environment or even the country as a whole. This is because as mentioned earlier economic actions may not always be in the best interests of the community. Though social accounting and auditing is largely voluntary, there are some places where legislation exists to support it for instance France.
Difficulties arise on the methodologies and standards of measurement in the generation of Social Accounting Reports, in response to which there have been several guideline that have bee developed for the purpose of streamlining them. Examples of these include the popular triple bottom line standard (Profit, Planet, People) the United Nations standard and the ISO 14000 standard, among many others. Despite all these attempts at standardization, actual reports differ greatly both in terms of content and area pf measurement and also style of display. At any rate they are considered by many to be just endearment strategies that hold absolutely no water in terms of the management commitment.
IKEA
IKEA is a Swedish – Dutch owned furniture manufacturing that was founded in 1943 by Ingvar Kamprand. The first retail store was however opened in Sweden in 1958. It is easily the world’s largest furniture company with revenues $28.8 billion. It has stores in all continents with the majority being in American and European markets. Employing over 120,000 employees globally as of 2008, the company has 296 stores in 36 countries. The furniture will normally come with an instruction manual on how the assembly should be carried out.
Most of the furniture sold by the company is mainly home based, i.e. kitchen items, bathroom accessories and also some office applicable products. The company specializes on flat pack furniture, which is furniture that typically arrives in a box, and requires the user to assemble it himself, which the company say is works wonderfully in saving shipping costs, since a piece of furniture when assembled occupies a lot o space most of which is just open air, the disabled version is a lot less bulky. Probably what makes the furniture from IKEA to stand out is its affordability, and in fact the Chinese name for the company when written literally means fit for home.
Apart from furniture, some of the other products that are offered by IKEA include partnerships with other corporate entities to provide such products as flat pack houses, that are targeted at first time home owner and intended to reduce the cost and an innovative product dubbed ‘Family Mobile’ which is a partnership between IKEA and T-Mobile, which allows family members obtain and share credit among their SIM cards, and also has the cheapest rates than any other in the UK (Ingvar Kamprad and IKEA, 1996).
The company’s product catalogue, considered to be it major marketing tool, taking about 70% of the total annual budget, is published ion 27 languages for 36 countries, and is one of the most extensive descriptions of the products that the company offers. It is distributed both by mail and also via the retail stores. Although this catalogue is quite exhaustive, it falls short of the company website, which boasts of over 12,000 product variants and has 470 million visitors in the years between 2007 and 2008.
The home page of the website introduces the company as a one stop shop for Scandinavian type furniture, and has little else apart from links to the location of the visitor. This underlines the global reach of the company and emphasis on customizing the product for each consumer, as each location link is dully written in the local language of the region (albeit with the English name in brackets below). There are also links to a page describing the company’s franchising concept, possible targeting distributors and prospective store owners (Ingvar Kamprad and IKEA, 1996).
IKEA in the Middle East
IKEA is a multinational corporation that is it has outlets all over the world. After opening its first store in Europe, it embarked on a global expansion program that saw it open branches in the Americas, the middle and Far East. The fist IKEA stores in Asia were opened in 1974 in Japan and Australia. According to Urbanplanet.com, an online business directory and business trends forum, the company currently has five stores in the middles east, spread between Kuwait city, the United Arab Emirates (UAE) and Saudi Arabia.
It is also poised to open 10 more branches in the region (Urban Planet, 2008). A visit to the IKEA website confirms the strong presence of the company in the region, as there are several redirects to Middle Eastern dedicated sites under the umbrella of the company. These locations include, the UAE, Saudi Arabia, Israel, and Kuwait. The websites are written in the language that is most dominant in the region, although there are options for choosing German, French or Italian.
IKEA and CSR
The consumer
The website, as part of the corporate responsibility of the company, the website has a feedback service dubbed ask Anna, which is quite instrumental for the companies survival, because since most of its products are to be assembled by the client, there inevitable arises difficulties despite of the instruction manual that accompanies each product. The service also allows for questions concerning the product catalogue, disambiguation of product names most of which are of Swedish origin, since the company uses real names rather than product codes, on the premises that the names are more memorable and therefore customers find it easier to order for products they may have been introduced to and may want to purchase.
This is of particular importance especially in the Middle East where religion is an integral part of the people, and since one word may mean one thing in the home country of the company and a completely different one in the middle eastern market, care must be taken to ensure that the names that are potentially offensive are at least adapted or even completely withdrawn. The information concerning the effect of the names primarily comes from the consumers, although some measures would have been taken to minimize the impact as much as possible, it is unlikely that the company will be able to avert all possible naming blunders that may happen. Examples of such a problem can be in the American understanding of such a name as a ‘farfull workbench’, which could kick off a controversy that is potentially damaging to the company’s image.
The suppliers
IKEA enjoys a strong relationship with its suppliers, under a program known as the IKEA way, the company’s social responsibility vehicle. The company places much emphasis on the role of the supplier in its value chain and thus has instituted strict guideline and conditions that govern the selection of the partners. Issues that are factored into the decision include how the supplier treats their employees, their policy on child labour, working conditions and since most of their suppliers deal with timber, their response to forestry issues (Samy Karur and Vijayabaskar, 2007).
The company strives to develop long term relationships that are based on good practices and that have a common IKEA philosophy of providing quality products at minimal cost both to the consumer and to the environment. To achieve this, suppliers are required to meet certain certifications from organizations such as the United Nations. The company also expects each of its partners to account for the impact of their activities on the environment. The compliance of the IKEA requirements is done by instituting appropriate internal monitoring and evaluation measures, the results of which are verified externally by contracting several auditing firms.
Though IKEA’s requirements are not so difficult to comply with, some suppliers do have some genuine challenges, and the company tries its best to help them achieve them through dialogue and the development and execution of a reforms plan. Is however the supplier is unwilling or unable to execute the plan then the relationship with that company is terminated. All this information concerning the relation of the company with its suppliers is easily accessible on the IKEA website, and guidelines on how to become an IKEA supplier are also provided online (Samy Karur and Vijayabaskar, 2007).
The community
Sometimes the activities that are aimed at social responsibility do not always bear fruit, as can be attested by the incident in Saudi Arabia in which free vouchers were offered to customers in the launch of a new outlet that led to the death of three people in the stampede that ensued. The company has also bee faulted for destroying and replacing historical site so as to erect branches. To counter or at least reduce these adverse effects, IKEA is involved in several community projects, which are directed at a diverse social sphere including education, health care and conflict resolution.
For example, in conjunction with the United Nations Children Fund (UNICEF), IKEA promotes the education and rehabilitation of children in war torn countries such as Angola, where some amount is contributed to the fund from the sale of toys made by IKEA which is then channeled towards the education of children with a focus on non – formal instruction and playing. In health care, the company is involved in the rehabilitation of at risk children especially teenagers in an attempt to sensitize them in the reality and danger of HIV/AIDS. Also in healthcare the company is involved in several immunization programs around the world.
The environment
In 1992, the company instituted an environmental sustainability action plan that was meant to address diverse environment concerns related to the company. Among the measures undertaken were a reduction in the amount of PVC and formaldehyde in the company’s products, encouraging recycling by developing a chair made from 100% recycled materials, introduction of air inflatable furniture and the reduction in the use of a variety of chemical in the production processes.
Probably the largest area of social responsibility that the company can demonstrate is care for the environment, specifically forests, since it is in the business of making furniture out of wood, and therefore its very core business activity involves the cutting down of tree, which is universally accepted as detrimental to the global environment in general and to the food security situation in many specific places, since it leads to changes in climate patterns throwing the farming cycles out of phase with the weather thus leading to loses of livelihoods and sustenance. In recognition of this, the company has instituted several projects that are aimed at reducing the impact on the global stock of forest cover. According to the company website (IKEA, 2009), IKEA is committed to ensuring that the forests from which its raw materials are obtained are reasonably taken care of, since apart from ensuring their own sustainability, forest cover is an important resources and thus has to be conserved. It is also aggressively against illegal logging ad works closely with the relevant authorities to minimize the vice as much as possible. Using the supplier code of conduct described above the suppliers are required to show accountability in obtaining the wood that they supply to IKEA.
The company cooperates with the world Resource Institute to obtain information about the distribution of the worlds natural forests in an attempt to ensure that logging operations are placed such that they have the least adverse effect on the forest resources available world wide. Apart from this, IKEA also supports education in the forestry sector by providing scholarships to students in several countries who are pursuing studies in the area of forestry so that the future generation is equipped with knowledge that will be instrumental in the responsible management of the resource. The Sow a Seed foundation was also started by the company in 1998 and is aimed at encouraging the planting of indigenous trees while rehabilitating destroyed forest cover.
Conclusion and suggestions
The company seems to have done a commendable job in its social responsibility, as the needs of the majority of the stakeholders have been considered and attempts made to meet them. Some work however remains to be done especially in the area of responsible marketing, and response to criticisms. Case and point, in the 1990s the company came under fire on account of its advertisements in British television media, most of which were dismissed. Instead of this he company should have at least made an attempt to assure the complainants that their suggestions were welcome and have been duly noted, even if nothing would be done because of them.
This would have strengthened the company’s image as a caring listener as opposed to the arrogant and self righteous picture that was probably perceived by the public from its reaction. The relationship of the founder of the company Ingvar Kamprad with Jewish clients is also in need of some serious mending since he is known to have had Nazi ties in his younger years and this connection draws a lot of ill will especially from Israel, as can be attested by the controversy that developed when the company opened a store there.
Although the public has learned to separate the product from the producer, I feel that more should be done to show that he is apologetic of his actions in a direct approach to the people. His admittance in his book that it was a big mistake to support the inhuman regime in his youth is not enough to placate many Jews that were afflicted during the period. The company does not also have a clear cut public policy on the issue of gender equality management, as highlighted by a retired Norwegian Prime Minister that most of the assembly photographs comprise of men doing the work thus leaving the women out which portrays the image that the assembly is strictly a man’s job.
Apart from the above few suggestions, compared to most other multinational corporations, I would say the company has made great steps in looking after the needs of the society, given the difficulties in coming up with harmonized Corporate Social Responsibility policies when dealing with the diverse societies that are characteristic of a global environment. IKEA seems to have kept most of the promises that it has made, although it remains to be seen whether this trend will be sustained in the wake of changing global conditions and also as the company expands.
References
- Inter IKEA, (2008) ‘IKEA social & environmental responsibility – the IKEA way’ Web.
- Ingvar Kamprad and IKEA (1996). Ingvar Kamprad and IKEA. Harvard Business School Publishing, Boston.
- Urban planet (2008) ‘IKEA Plans 10 Stores in Middle East’.
- Samy Karur, L.A. and Vijayabaskar, M. (2007). ‘Codes of Conduct and Supplier Response in the IKEA Value Chain’. Web.