Ethically Controversial Business Decisions and Their Organizational

Impact
As a well-established furniture retailer, IKEA is equipped with resources to create strong ethical
and social policies to drive societal and economical change. However, despite having an image
of excellence in producing easy-to-assemble furniture, IKEA lacks the same excellence when it
comes to fulfilling its ethical commitments.

Following an in-depth research of practices and actions at the organization at broader level,
several ethical issues have been identified which include age discrimination, worker rights
issues, spying on competition, political extremism, tax violence, animals, and above all,
environment.

People

Workers’ rights
IKEA has been accused of age discrimination on numerous occasions. According to a 2019 post
on the Business and Human Rights website, IKEA has been sued in US courts five times in just
over a year for age discrimination. Workers claimed they were denied promotions, demoted,
and paid differently because of their age[CITATION Nin18 \l 1033 ].

In a 2018 Reuters article, IKEA was accused of weakening unionization rights in the United
States, Ireland, and Portugal. "IKEA management in the Stoughton, Massachusetts, store
consistently misled the economic realities of union membership, giving workers the idea that
their salaries and conditions would be much worse if they chose to form a union," according to
a 2018 UNI website post. Workers were also warned that if they joined a union, their job
security "might be worse."

In its supply chain, IKEA has also been accused of abusing Eastern European truck drivers.
According to a 2017 article on the Business and Human Rights website, lorry drivers sometimes
live in their trailers for weeks or months, and their hourly wage was less than £3. This was
found to be illegal by a court. We gave IKEA a failing grade because of its long working hours,
hazardous working environment, and low pay.
In 2019, the IKEA Franchisor website disclosed that the company operated in seven countries
that Ethical Consumer classified as hostile regimes. Among the countries represented were
Jordan, Saudi Arabia, China, Thailand, Russia, and Israel.

Furthermore, the company lacked an adequate conflict mineral sourcing policy. In FY18, IKEA
reaffirmed its commitment to a conflict-free supply chain by joining the Responsible Minerals
Initiative (RMI). We've also created official specifications, and we're in the process of
determining our direct suppliers' key mineral sources." [ CITATION The19 \l 1033 ]

However, there was no information found about these "formal requirements." Because it
promoted a variety of electrical goods and lighting, the company received Ethical Consumer's
worst grade for conflict minerals.

Politics
IKEA's tax policy has gotten a lot of flak. According to a study by Green Party ministers in the
European Parliament in 2016, it was accused of dodging up to $1.1 billion in corporation taxes
from 2009 to 2014. IKEA had structured itself to avoid taxes by employing onshore European
tax havens, according to the research.

The corporation received Ethical Consumer's lowest score in July 2019 for likely use of tax
evasion strategies due to its multiple holding entities in tax haven nations. IKEA spent $40,000
on lobbying in 2018, according to the website Open Secrets. Eurocommerce, WBCSD, and the
World Economic Forum were all members of the organization. These were multinational
corporate lobbying organizations that Ethical Consumer believed had undue corporate
influence on policymakers in favor of market solutions that could be harmful to the
environment and human rights.

Environment
With 21 million cubic metres of wood consumed in 2019, IKEA is the world's largest wood
buyer. According to a report issued by the non-profit organization Earthsight in June 2020, IKEA
was selling products made from illegally harvested lumber in the Ukrainian Carpathians woods,
which are home to endangered lynx and bears. According to the study, corrupt state-owned
forestry corporations made this possible, and FSC's shortcomings allowed the wood to be
certified.

Animals
In addition to leather, IKEA also sells feather-based products. The corporation gave no
assurances that a down standard had been implemented, which would inspect the entire
supply chain, including parent farms.

The company sold animal and meat products sourced from cows, pigs, chickens, and fish,
according to Inter IKEA's FY18 Sustainability Report, earning it a full mark for Animal Rights.
There was no policy requiring organic or free-range beef.

Child Labor
IKEA utilised child labor in Pakistan to weave looms, according to a Swedish television
documentary from 1994. IKEA decided to send a legal team to Geneva to seek assistance from
the International Labor Organization after finding that this was a global business concern. In
addition, IKEA began working with Swedish Save the Children and UNICEF to better understand
the issue of child labor in countries like India and Nepal, where many of their suppliers were
located.

IKEA stakeholders engaged with suppliers, unions, political activists, non-governmental

organizations, and UN groups to come up with solutions. IKEA has introduced additional
contract language stating that if a supplier hires children under the age of legal employment,
the agreement will be terminated. To keep an eye on child labor breaches at supplier locations,
the company even recruited a third-party monitoring organization.

A year after IKEA began to address the issue of child labor, a German documentary maker
discovered underage children working at Rangan Exports, one of IKEA's major suppliers. IKEA
was encouraged by the documentary's authors to send a representative to participate in a live
dialogue during the screening of the film[ CITATION Nic20 \l 1033 ].

Many local and international businesses, whether deliberately or unwittingly, use children as a
primary source of labor. Businesses that use children as slaves frequently do it for monetary
advantage. "Child labor was highly and favorably associated with teenage morality, population
nutrition, and the occurrence of infectious disease," according to research (Roggero).

When a company outsources production to another nation, the likelihood of using child labor
increases. IKEA recognized the negative implications of child labor and how it caused more
harm than good, despite the fact that it can be a wise financial option for both domestic and
foreign enterprises. IKEA continues to monitor suppliers and has broken links with businesses
that exploit children [ CITATION Coh16 \l 1033 ].

Breach of Employee Privacy

On 15th June in Paris, a French court ordered IKEA to pay a 1 million-euro ($1.2 million) fine for
spying on its French staff after the world's largest furniture retailer was found guilty of
improperly gathering and maintaining data on its employees[ CITATION Pai21 \l 1033 ].

The French part of the Ingka Group, which owns the majority of IKEA stores throughout the
world, has been accused of spying on its employees and customers for years. Employees'
privacy was allegedly violated by the flatpack furniture company, which agreed to unethical
practices such as obtaining their bank account information and, on occasion, creating bogus
employees to submit reports against them. Worker representatives said the information was
used to target union leaders in some cases or used to IKEA's advantage in disputes with
customers, after the firm trawled data on people's finances and even what cars they drove. It
was also found to have paid for access to police files.

After taking steps to halt the snooping practices, the company said it was analyzing the court
decision to see if any other actions were required.

"IKEA Retail France has strongly condemned the actions, apologised, and put in place a
comprehensive action plan to prevent this from happening again," the Ingka organization
stated. IKEA employs around 10,000 people in France, its third-largest market after Germany
and the United States, and has experimented with different formats there, including the
opening of a store in the centre of Paris in 2019 [ CITATION Rog07 \l 1033 ].
Beyond the town, it's famed for its massive self-service markets, but many people have turned
to shopping online, especially during the pandemic lockdowns, when demand for office
furniture, food jars, and cooking supplies spiked.

The Ingka group's operating profit fell in the year to August 2020 due to retail closures caused
by the coronavirus pandemic, but it expects a return.

References
Cohn, T., 2016. Global Political Economy. s.l.:s.n.

Nicholov, B., 2020. You Wouldnt Give Away your Ethnic Identity. So why Should Macedonians?. [Online]
Available at: https://medium.com/discourse/is-ikea-ethical-and-sustainable-6121b334e77e
[Accessed 8 November 2021].

Nini, J., 2018. How Sustainable is IKEA, Really?. [Online]

Available at: https://ecowarriorprincess.net/2018/03/how-sustainable-is-ikea-really/
[Accessed 11 November 2021].

Pailliez, C., 2021. IKEA fined $1.2 mln for spying on French employees. [Online]
[Accessed 8th November 2021].

Roggero, P., 2007. The Health Impact of Child Labor in Developing Countries: Evidence from Cross-
Country Data. American Journal of Public Health, Volume 5, p. 271.

The Ethical Media, 2019. Reviewed: How ethical and sustainable is Ikea?. [Online]
Available at: https://www.theethicalhomeedit.org/brand-reviews/reviewed-how-ethical-and-
sustainable-is-ikea
[Accessed 8 November 2021].