Business Ethics can be described as the various principles and standards that are used by an organization to operate the business in the market. There are various factors in the business ethics i.e. customers, shareholders, government, competitors and employees. Business hubs believe that profit making is the only objective of working in the Industry. In the view point of customers, corporate social responsibility can be considered as the process to enhance the positive impact on the nature and reduce negative impact among the members of the society (Bevan, & Wilmott, 2002). Basically, business ethics is related to the work decision of the employees and the organization to decide the right and wrong in the business operations. It is the wide concept that impact on the overall business activities of an organization. This report is based on the case study of famous company IKEA that is facing some ethical issues in its business.
IKEA is basically involved in manufacturing of furniture it has great reputation all over Europe. The company IKEA is famous furniture manufacturing company. The company has recently used 13.56 million meters of solid wood for the manufacturing of furniture instead of paper and packaging. It means, the company alone is using 1% of wood in all over the world. The high rate of consumption leads to massive cutting down of trees and it results in an increase in deforestation. IKEA holds up great attention in furniture industry all over the world thus its consumption of wood is increased manifold times in the past decades. However IKEA had made several steps in order to make the economy better. According to the IKEA, the company is moving ahead in the business and it will be ‘forest positive’ in the year 2020. It means that although there is high demand for wood in the market, the company would have positive impact on the forests of the world. But the issue is that the company is using many trees for the production. Although the company has done commitment to grow more trees by 2020 but it would be taken in the use of company to make more products. This steps help in growing as much as trees which are cut for the use of IKEA (Kelly, 2012).
Being an international brand IKEA made difficult situation for the workers of USA with fewer wage as compared to the European workers. Further, the workers of IKEA complained about the company for the strict regulations and overtime job. There are many workers who came from the temporary staffing agencies. Those employees got very little or no benefits in the company. However workers from Europe are guaranteed a wage of $19 the American workers were paid a wage of $8. In the other companies, employees are many opportunities to grow and it is becoming difficult for the company to retain the employees. This was the big ethical issue for IKEA in the business operations (Render, 2012).
IKEA`s vision is to provide affordable products so that consumers can create a better everyday living. They are supporting their vision by providing wide range of products. They have well designed, functional home furnishing. The company is trying to provide good returns to all stakeholder i.e. suppliers, customers, society and customers. They have their own supplier code of conduct. For example they ensure that the raw material (wood) for production should not be of the protected forest. Its shows the IKEA`s level of responsibility and it vision for ethics (Salisbury, 2011).
Apart from the vision statement, mission statement is also important to achieve the organizational goals of the company. Mission statement of the company is similar to its vision it does not includes all the important components. They are customer oriented and trying to focus more on customer satisfaction. They have a huge customer base but the rating of IKEA in its mission is really low. So, the mission of IKEA must be based on the organizational goals. There is the need to develop clear purpose for the profit of stakeholders (Zhang and Joan, 2009).
In case of IKEA, the company has training programs that details the codes and policies to the employees to maintain ethical conduct. The most important Code of Conduct of IKEA is with its suppliers as it already has few allegations in relation to its code of conduct. The company has adopted some code of conducts i.e. IKEA Way or IWAY. It has necessary details about the policies and rules for suppliers, stakeholders etc ( Schömann, Sobczak,Voss, and Wilke, 2008).
IKEA paid attention on the employees working for the company and their recruitment is based on whether they can share the vision and values of the company. The company is seeking for those employees who have some ethics and value. IKEA looks for the employees who share similar values. IKEA wants to understand the views of the employees towards the company. Making them understand the sustainability goals of the company. For instance Ikeas celebrate “The Big Thank You” in 1999 in which company divided total sales of the day among all the employees. 84.85 million Euros were distributed. IKEA even don’t designate anyone within the different levels and everyone is called Co worker of the company. The company has given unique uniforms to its workers which is free of cost. Along with this, the company has developed strong relationship with the employees so that they can do their work with the concern to the company. The company provides co-workers with uniforms free of charge, including the typical IKEA yellow polo shirts. IKEA has also established a trust line that allows co-workers to report concerns to the firm (Forno & Graziano, 2014).
IKEA is the customer oriented company. It is the partner of world famous company UNICEF and has taken some initiatives to save the children by funding them for their education and developing the school to eliminate the child labor from the society. It also employs women in the company empowering the women. This can be understood by an example. Every year the company donates one Euro to UNICEF and saves the life of children. Along with this, the company is supporting the business principles and rights of children by UNICEF. The company has invested on the renewable resources. They installed over 550,000 solar panels over IKEA buildings worldwide. They have developed effective way of managing the use of energy and using recyclable products in their manufacturing (Charmaz, 2003).
The company is focusing on providing online help to guide the customers for more sustainable life. The company is focused on the home improvements in the slow housing markets. Company is supporting to its consumers with the tips on the website for reducing the negative impact on the environment. This would be helpful to save the money. The management of IKEA is trained on the concept of sustainability and the company is responsible for what it is doing and how it is accountable for the sustainable livings. For the welfare of the society, IKEA has special attention on the children’s products that must meet safety and high quality requirements. There is the special risk assessment developed by IKEA based on the needs of children. By this assessment company ensures that the product is safe for the children. Further, IKEA is accountable to develop various ranges of home furniture products. The business area of company has dedicated sustainability leaders and group of sustainability specialists. They are accountable for the sustainable work in the product development.
In terms of sustainability practices, all the product materials in the company are renewable, recycled or recyclable. Company has sustainable sourcing of raw material for the production. The extraction of raw material can be the cause of social and environmental concerns. So, company is responsible for the development of sustainable practices in the long and complex supply chain. Along with this, the company is promoting sustainable life at home also and reducing environmental impact. Aim of IKEA is to create awareness among the customers so that the negative impact on climate can be reduced significantly.
IWAY is the special code of conduct decided by the company for its suppliers. The suppliers must take proper care of the rules and policies made by IKEA for maintain long run business with the company. The most important requirement that potential buyers must take care of is that the suppliers cannot force to any child for the child labor. It is the expectation of the company with its suppliers that they work as per the guidelines and expectations of IWAY.
There is a written agreement with the sub contractor and the suppliers to maintain an agreement audit annually. Regulations related to work patterns is also a significant concept in IWAY. According to it the workers should not work more than 60 hours per week (Wadsworth, 2015). The forestry standards includes that the wood should be responsibly and sustainably sourced. In the company, there are 68% of its suppliers are approved in terms of IWAY concept. IKEA maintain all the rules as per the IWAY if the suppliers are not working according to the expectations then they are dropped. In year 2013, IKEA dropped 9 suppliers. IKEA also developed a Supplier Sustainability Index almost in which 95% of the suppliers are actively participating in it.
This report defines social responsibility and then surveys some significant CSR threats and how IKE is dealing with them. When Ethical failings are high in a company, companies tends to loss in their public trust. IKEA is based on a manufacturing industry which manufactures furniture, some small kitchen items, and décor items for home.
Their vision is to provide large range of products at real low prices so that everyone can afford it. The values of IKEA helped directly to make IKEA`s action. For Example, The Company is taking material from the protected forests for its products that are the value in its CSR activities. CSR practices are now essential for the corporate world (Van, 2003). CSR is the basic concept of “values” that established the relationship between business organization and its environment. In organization perspective, it is responsibility towards the customer CSR is concerned with the integration (Standing, 2007)
Figure 1: Carroll`s CSR Pyramid
(Source: Carroll, 2016)
This concept is related to the manufacturing of products and goods and providing them to the customers for making the profit. IKEA has various stakeholders who want profitable returns from the company. In the group of stakeholders, there are the employees who want safe and secured job. Further, there are the customers who want quality products at the affordable prices. So, key responsibility of the company to stay competitive in the business along with the high level of profit. The working environment of the company is comfortable for the employees to earn profit (Tilley, Fredricks & Hornett, 2012).
The legal responsibility of the company includes the rules and regulations which have to be followed by the company while operating the business. The company IKEA is bounded with the various legal responsibilities that impact on various organizations operations. For operating the business effectively, company has to deal with the various external factors in which the company is operating.
It refers to the ethical responsibility expected by the IKEA apart from the legal and the economic responsibility. It covers wide range of responsibilities. They are not necessarily imposed by law and are related to welfare of the society. IKEA has to generally follow guidelines made in IWAY and is actively participating in social work, charity and donations (Webley & Werner, 2008).
Under this, Company IKEA is focused on various different things to improve the life of the working people in the company community and societies in which it is operating. These responsibilities are important for the company and need more improvement in this manner.
According to the stakeholder theory, there are various stakeholders who are affected by the various organizational activities. Stakeholders in the company include suppliers, employees, and community in which the company is operating. The stakeholder approach is becoming key concept for the CSR initiatives such as the Global Compact, Forest Stewardship Council, and the Fair Labor Association (Amaeshi & Adi, 2007). Managers have to take the interest of Stakeholders with the decisions in the company so as to keep the relationship with the stakeholder.
Shareholders are the persons who are investing in the share of the companies by buying shares which help the company to raise funds from the public. Part of profit is paid to the shareholders who have stakes in the company. They have right to appoint the directors of the company who develop the policies in favor of various stakeholders. Along with this, they have voting rights in the decision making process.
Employees are those people who are working in the business environment of the company IKEA. They have keen interest in the business because of the employment and the growth of the company in the operating industry.
Government has the keen interest in the business operations of the company. The company has interest in the profit of the company as the company pays high level of taxes to the government for the growth and development of the country. So, profit maximization is the main concern of the government (Schwartz, 2007).
The competitors have higher power due to the reason that they keep strict eye on their rivals about any new product they might introduced by which they gets the competitive advantage.
Customers are the key users of the various products and services of the company. Customers are concerned with the quality of product and the price of the products. Customers become loyal for the company’s products and they never switch their choice to another product.
IKEA is a customer-oriented company and provides quality furniture to its customers by its innovative thinking. With this innovative approach, company is able to build its strong image in the market. Their vision focuses more on equality and providing affordable products which makes their long lasting relation with the customers (Hough, Green & Plumle, 2016). By the IWAY, the company has made some regulations and ethics codes. Such companies might have greater legitimacy requirements and thus need to communicate through a wider spectrum of channels and levels. So IKEA is trying to maintain CSR and relationship with stakeholders. However all of its activities of communication in internal level are not at the point thus IKEA is not fully successful in maintaining and ethically dealing with its stakeholders (Hazlett, 2007).
There are some recommendations for the company IKEA that would be helpful in improving the ethical practices in the business operations. Recommendations for the company are as follows:
The main objective of IKE is to provide affordable products to its customer so that equality can be maintained. So, there can be quality issues found in the products. Company should Increase in budget attracts the customers who look for qualitative products rather than getting low quality products. IKEA`s made a very good profit in the past decades and made several new policies. These policies should be implemented so as to fulfill the CSR. Vision and mission are two different things IKEA had to change its mission in a broader area so as to fulfill social responsibility and ethics. The relation of IKEA with stakeholders needs to be overcome by the communication and involvement strategies. Recommendations of new recruitment process will be helpful at the present stage of the company. Diversification and innovation is important tool for growth and survival of the company. IKEA should take necessary decision and emphasis on the new ideas in the world of globalization.
Reference
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