- Published: October 31, 2021
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FACULTY OF BUSINESS AND ECONOMICS
CORPORATE SOCIAL RESPONSIBILITY IN MULTINATIONAL COMPANIES
CSR OF IKEA
MASTERS GRADUATION PROJECTIN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE AWARD OF
MASTER OF BUSINESS MANAGEMENT IN INTERNARIONAL BUSINESS
MBA INTERNATIONAL BUSINESS
FATIMA ZOHRA ALIA
ASSIST. PROFESSOR DR. SERDAR SEYDAM
TABLE OF CONTENTS
It has become a trend among companies to actively work with corporate social responsibility issues since consumers and other stakeholders are supporting those companies who take their responsibility. The rather long history of corporate social responsibility that to some extent goes back to 18th century together with today’s globalization, the growing corporate social responsibility trend, and the limited research within this area make this study an important piece of puzzle to understand corporate social responsibility in the 21st century. The purpose of this project is to gain a deeper understanding of the influences of global considerations of multinational companies’ corporate social responsibility. In order to reach this objective ,research questions focusing on the content of multinational companies’ corporate social responsibility and the factors influencing multinational companies’ corporate social responsibility in foreign markets where developed. To be able to understand the role of corporate social responsibility in multinational companies’ I have conducted case study of IKEA company focuses on why IKEA engages in CSR and what effects this has on strategy in company. IKEA was a suitable case company, in part because it has ranked high in CSR ratings, but also because it is considered a value-based company, which might facilitate the integration of CSR in its business model.Keywords: corporate social responsibility (CSR), stakeholders, Multinational companies
This research is dedicated firstly to Almighty Allah for His protection and guidance throughout this academic pursuit and also to my parents Mr. & Mrs. ALIA for their support and encouraging words to the achievement of my career goal.
I will like to appreciate the assistance and support of the following people without whom my academic progress would not have come this far. Firstly, I would like to appreciate the support of my project advisor and supervisor Assoc. Professor Serdar Seydam for his coordination and leadership through-out the duration of this project work. I also want to thank all of the lecturers and professors under whom I was very fortunate to receive lectures and gain knowledge.
This chapter will provide a background to the research area of this thesis, namely corporate social responsibility in business; it will begin with a broad overview of the topic, followed by the problem discussion which will lead to the purpose and research questions.
1.1 General Overview of Corporate Social Responsibility
Recent textbooks in a management area all have sections dealing with business ethics and this is because many companies today develop codes of ethics and make commitments to the public to behave ethically (Fisher, 2003) Business ethics is defined as:’’ the moral thinking and analysis by corporate decision-makers and other members regarding the motives and consequences of their decisions and actions” (Phatak, Bhagat &Kashlak, 2005, p.512).According to Svensson and Wood (2003) business ethics depend on two main factors, culture and time. The business environment‘s culture will define what is accepted and unaccepted and it is influenced by traditions, values and religion as well as individuals. Different cultures have different opinions in this question and if there is no adaption it will affect the company’s success. The business time dimension will also affect what is accepted and unaccepted. What is considered ethical today might not turn out to be ethical tomorrow. Companies should not only use business ethics as a corporate code. It should instead be integrated in business as a corporate philosophy .Phatak et el. (2005, p.512-513) state that there are several ethical dilemmas where international business have to take a stand. When companies engage in international business they face a lot of different laws, norms, and regulations and acceptance differ form from country to country. More and more international companies have ethic programs that discuss these issues and are implemented in their organization.Johnson, Scholes and Whittington(2005,p. 188)state that there are three levels of business ethics where societal expectations have a great impact on companies and organizations .The first level is the macro level that concede red with the ethical stance of the organization or in other words to which extent organizations exceed its legal requirements in connection with their stakeholders .the second level is the corporate social responsibility level that is within the macro level and concerned with how organizations exceed the minimum requirements to live up to ethical stance of the organization .the third and final level is the individual level or manager level that is concerned with individual’s behaviors and actions such as behaving with integrity and whistle blowing .Johnson et al.(2005)add that even though the first level of ethical stance and the second level of the ways used to live up to this ethical stance is separated by them ,they are often both included in the term corporate social responsibility (CSR) in the literature and will be the overall topic of this study.
Aims and Objectives of the Study
This project aims to gain a deeper understanding of the influence of the global considerations on multinationals companies ‘corporate social responsibilities.
This study research’ purpose is primarily descriptive and to some extent exploratory .A descriptive research purpose is required in the study to answer the research questions stated. An exploratory research purpose is also required since the research purpose was” to gain a deeper understanding of CSR together with the previous limited research in factors that can effect CSR in foreign countries.
1.4 Data Collection
1.5 Sample Selection
1.7 Limitations of the Research
1.8 Structure of the Project
This project work and its findings are thus laid out and presented in the ensuing chapters in the following structure represented graphically in Figure 1.2Figure 1.2 Structure of the Research Project
2. Literature Review
This chapter will discuss the main areas of the literature regarding CSR contents and subjects as well as how the content of CSR will be discussed. The theories that are created in this chapter will examine CSR from companies’ perspectives. The literature that is brought up to do some extent overlaps among other in terms of content. However, in order to have an overall picture of the intriguing all subjects of the issues will be mentioned and discussed separately in this paper project.
Corporate Social Responsibility definition:
It has to be said that there is no common accepted definition of CSR but it’s generally understood as “doing more than what is required by law” (Buhmann, 2006).The most agreeable definition of this vast subject of CSR is offered by ‘World Business Council of sustainable development’ which defined that CSR as ,“Continuing in commitment by business to behave ethically and contribute to economic development while improving the quality of the workforce and their families as well as the local community and society at large” (Michael Hopkins July 2011)Corporate Social Responsibility can also be referred to as “the social responsibility of business encompasses the economic, legal, ethical, and discretionary (philanthropic) expectations that society has of organizations at a given point in time (Carroll, 2004).
The beginning of CSR
The concept of CSR can be traced back to the 18th century when organizations became to recognize the crucial role of having an efficient workforce .Insufficiencies in food, housing and healthcare had serious negative impacts on the workforce’s productivity and keeping these impacts in considerations, companies moved to invest in medical facilities, housing and subsidized food for their own employees. From the organizations’ point of view this philanthropic was really coming from an enlightened self-interest (Brown, 2005).The modern CSR concept started to be commonly used between the 50’s and 60’s of the last century as a result two main principles. The first principle can be understood in charity suggestion which is that those who are well should give to those less fortunate. The second one is the stewardship principle which claimed that companies have an obligation to serve the public’s interest as a return of the power and wealth that companies enjoy from the society they work within and they should therefore serve the society’s needs. From other perspective, serving the society changed how companies were perceived by governments, press and other groups which led to the birth of new more socially responsible laws. (Sims, 2003)
Nowadays CSR has been the topic of ongoing debates as media interests increased. It has become a trend among companies to actively involve themselves in the public issues. As usual with trend many companies go with the flow while other discuss why and how they can engage in these activities efficiently (Andersson,2006).Consumer start to be more loyal to those companies who take social responsibility and therefore it is considered a growing strategic issues for companies(CSR wire).successful corporations such as ,McDonald’s, General Electric and Ford together with approximately 1,200 other CSR practitioners and experts made sure to attend the annual conference for social responsibility in New York 2006 .The main topic was to discuss the growing interests of CSR among companies. It became popular that sometimes the companies’ CSR reports exceed their annual reports. It has become a rich field and lots of businessmen, marketers, corporations leaders want to get into it. The participants of this conference spoke about their own corporate social responsibility and how companies can make the world a better place. (Nocera, 2006).
Social Responsibility in Other Nations
Social responsibility reflects the cultural values and traditions and it also takes different forms in different societies .What may be the accepted custom in the United States, Japan, and South Korea does not necessarily mean it will be accepted in Germany, Brazil, Indonesia, or Ukraine. Drawing the lines as to what is socially acceptable from a global view is often a difficult process.For example, Japanese organizations have less experience in stakeholder protests as firms in the United States. Victims of environmental disasters have been treated as outcasts when seeking compensation for harm caused by Japanese business activities. Employers’ practice may prefer certain groups have been generally adopted as a social practice in Japan. Ever since, Japanese firms have become more opened with the international community, corporate social responsibility has begun to emerge. The corporation’s aim of seeking profitability has been faced with stakeholder’s demand which forced firms to act as both economic and social entities. Japanese business has responded by attempting to establish a positive working relationship with society.On the other hand, corporate social responsibility acts in different manners in European countries due to the governments which provide many social services often received as benefits from private employers in the EU countries. For example, debate by governments their representatives over social responsibility issues resulted in the adoption of a social policy for the European Union (EU) countries, named the social Charter. Rather than relying upon private corporate initiatives, governments represented in the EU drafted a public policy which provided incentives and rewards for corporate social actions within the EU.The social Charter was approved by 11 out of 12 EU members, but not without argument. The United Kingdom was unyielding dissenter, and refused to approve the Charter. The UK stood fast to its own preference for the policy of deregulation considering employment issues, Embodied within the social Charter which refers to the Social Action Program (SAP). The SAP established health and safety guidelines, regulations on working hours, Europe-wide rules for worker consultation, and rules for gender equality at work. Thus European businesses’ reply toward social responsibility as matter of compliance with different governmental policy guidelines and program initiatives.Moreover, business leaders’ as well as government official attitudes toward social responsibility varies across cultures and countries. In many parts of the globe developing nations where poverty is wide spread and civil strife is frequent, economic goals and military activities seems to be given higher priority than the pursuit of social goals .Environmental protection, on the other hand, may be considered less critical than having a polluting steel plant that creates jobs. In these cases, social responsibility initiatives by business tend to be slow in coming.
Stakeholders and Corporate Social Responsibility
Regarding this relation, Robert W. Lane, the Chairman and CEO of Deere Company once said, “If you don’t have honesty and integrity, you won’t be able to develop effective relationships with any of your stakeholders”.Stakeholder groups draw the lines of the basis for success and failure of the business. Whether Stakeholders or individuals or even groups that have interests regarding their social responsibilities, rights and ownership of organizations and their activities. Customers, suppliers, employees and shareholders are all examples of primary stakeholder group. Each has his own interest in which organization performs or interacts with them. These groups can either benefit from a company’s success or be harmed by its mistakes.More importantly, stakeholders are also crucial because they can take action which will cause either damage or assist the organization. Moreover, stakeholders include governments (especially through regulatory agencies), unions, nongovernmental organizations (NGOs), activities, political action groups, and the media.For the sake of serving their stakeholders more in an ethical as well as social manner, more and more organizations are adopting the model of corporate social responsibility. The term Corporate Social Responsibility covers many other terms starting from corporate citizenship, responsible business and simply corporate responsibility. In other words when organizations build their ethical and social structures in their operating philosophy and integrate them in their businesses model, it is claimed to have possessed a self-regulating mechanism that guides, enhance and ensure its adherence to law, ethics plus norms in carrying out business activities that guarantees serving the interest of both external and internal stakeholders. In other words, the objective of being socially responsible business will be achieved once organization’s activities meet or exceed the expectations of all stakeholders.The pyramid scheme below illustrates a model for evaluating an organization’s social performance. The model indicates that total corporate social responsibility can be subdivided into four criteria which areEconomicLegalEthicaldiscretionary responsibilitiesTotal Corporate Social Responsibility
Figure 1.1 Stakeholders of Organizations
Layers of CSR
The first criterion of social responsibility is the economic responsibility. As the term implies, the business institution is above all, the basic economic unit of society. It’s responsible to provide products and services that societies seek, for the sake of maximizing profit for company owners and shareholders. The economic responsibility was carried to the extreme which now is called profit-maximizing view; it was advocated by a Nobel economist Milton Friedman. This view claimed that companies should be operated on a profit-oriented basis, with their sole mission to increase their profits as long as they stay within the rule of the game. The purely profit maximizing view is no longer considered an adequate criterion of performance in the world in general. Treating economic gain in the social as the only social responsibility can lead companies into trouble.
All modern societies lay down ground rules, laws and regulations that businesses are anticipated to follow. Legal responsibility defines what society deems as important with respect to appropriate corporate behavior. Businesses are obliged to fulfill their economic goals within the legal framework. Legal requirements are imposed by local councils, state and federal governments and their regulating agencies. Organizations that knowingly break the law are considered as poor performers in this category. Intentionally manufacturing defective goods or billing a client for work not done is illegal. Legal sanctions may include embarrassing public apologies or corporate ‘confessions’.
Ethical responsibilities include behavior that is not necessarily codified into law and may not serve the organization’s direct economic interests. To be ethical, organization’s decision makers should act with equity, fairness and impartiality, respect the rights of individuals, and provide different treatments of individual only when differences between them are relevant to the organization’s goals and tasks. Unethical behavior occurs when decisions enable an individual or organization to gain expense of society.
Discretionary responsibility is purely voluntary and guided by an organization’s desire to make social contributions not mandated by economics, laws or ethics. Discretionary activities include generous philanthropic contributions that offer no payback to the organization and are not expected. Discretionary responsibility is the highest criterion of social responsibility, because it goes beyond societal expectations to contribute to the community’s welfare.
2.1 Content of Corporate Social Responsibility
The areas that will be discussed in this section are firstly benefits of companies’ corporate responsibility, and later the areas and aspects that companies’ could assume responsibility over and encompass in their CSR work which becomes the content of their CSR.
2.1.1 Benefits of CSR
Corporate social responsibility (CSR) promotes a vision of business accountability to a wide range of stakeholders, besides shareholders and investors. Key areas of concern are environmental protection and the wellbeing of employees, the community, and civil society in general, both now and in the future. Evidence is now emerging that there is a genuine business case for taking CSR seriously. The benefits involve many dimensions of business activities: investor relations and access to capital; competitiveness and market positioning; employee recruitment, retention, and productivity; and the mitigation of litigation risk.
Development of Reputation
The review of relevant literature on CSR shows that a firm’s reputation remains a significant benefit that affects almost all levels of the organization. According to Stephenson (2009), corporate social responsibility programs can effectively build and enhance firms’ reputations. Through the development of a solid reputation, the organization can expand its business, attract new customers, improve shareholder value, and improve outcomes for the community. Additionally, the organization can achieve a competitive advantage because of its positive image. The development of reputation through corporate social responsibility has worked well for organizations such as Ben & Jerry’s, Microsoft, and Starbucks. Because of their commitment to CSR, these organizations have been able to differentiate themselves, creating a true competitive advantage (Stephenson, 2009).
Improving Organizational Efficiency
Improving organizational efficiency is also a recurrent theme that has emerged in the context of this investigation. When organizations develop corporate social responsibility programs that meet the strategic needs of the community as well as the strategic needs of the organization, value is created for all stakeholders. For the organization, increased efficiency can improve operations and allow the organization to expand both its business and its profits. This can create a financial competitive advantage for the organization that can be used for market dominance or expansion of the market to include new products. This reality is clearly seen by the development of the Prius by Toyota. By increasing the efficiency of operations and meeting an important social need, Toyota was granted a unique financial advantage over all other car manufacturers. Presently, the organization can use its financial position to offer increased benefits to shareholders and to expand its product line and further improve its competitive financial advantage.
Improved Operations and Products
Finally, corporate social responsibility programs provide the organization with a number of advantages that can be exploited to improve operations and the quality of the products produced by the firm. CSR programs enable the organization to earn higher revenues and profits which can be translated into the development of improved products offered by the firm. This process further facilitates the development of the organization as one that has superior products on the market. Improved reputation will lead to an increase in sales, revenues, and profits, which will in turn result in the development of more corporate social responsibility programs for improving the community, environment, labor practices, health, and safety. Arguably, the business justifications for the development and implementation of CSR for competitive advantage are quite extensive. Even when examined in generic terms, the competitive advantages that can be achieved from corporate social responsibility programs are quite extensive. The challenge in this case appears to be for organizations to effectively integrate CSR programs such that they can provide all of these benefits for operations and outcomes.
2.1.2 Areas of CSR that firms are responsible for
According to (Andriof and McIntosh, 2001) CSR is neither philanthropy nor a study of a business ethics, it is more of a version that business leaders have besides making money. Those responsibilities have impact on almost everything that company does and will affect both insides and outsides the company. in order to make more manageable this can be divided into four distinct areas:The environmentThe workplaceThe communityThe marketplaceThese four are the most aspects companies focus on, work with, and develop special programs within. These aspects will also have an impact such as monitoring and changing the way they conduct business within the organization.Companies those are engaging with the corporate social responsibility start to lose their traditional way of conducting businesses rather than focusing on making profit and in through this pay more attention to employees, environment, and communities. Those who practice CSR believe that employees are significantly productive when they get fair wages and work under good conditions. Not only that, they also believe that any company will be successful in long run if the community has a low crime rate and well developed infrastructure include education, healthcare. Companies which took environmental issues in mind while processing their all operations in the sake of earning a high degree of loyalty from customers and other companies in return. nowadays companies’ reputation is almost as important as price when a decision of purchasing the product is taken which explains related state from (Andriof and McIntosh‘s 2001) areas of CSR. Sen and (Bhattacharya,2004) provide below a number of CSR activities that companies can engage in.
2.1.3 Activities of CSR
According to Sen. and (Bhattacharya, 2004), there a lot of corporate social responsibilities initiatives and these can be categorized into six categories of activities within CSR. Those activities are more in depth descriptions of different ways of companies to engage within CSR. Companies can get involved in one or more of those activities. The chosen criterions are based on what CSR activities that customers consider important and therefore the company has to invest money, time and goods. The six different types of activities are:Community support: the company can provides and support several programs in their community such as arts, health, education, and housing initiatives for those who are poor but also generous and innovative giving accurse.Diversity: the company works for and supports the diversity of sex, race, family, sexuality, and disability.Employee support: the company supports questions regarding safety, job security, profit sharing, union relations, and employee involvement.The environment: the company uses environmental friendly products such as ozone depleting chemicals etc. They have a well-developed dangerous waste management and pollution control and recycling system. They also avoid testing methods involving animals.Non- domestic operations: the company ensures that operations in counties with human rights violations and labor practice such as sweatshops are prevented.Product: the company produces safe products and developed new innovations.(Johnson, Scholes and Whittington 2008) discuss the same issues when describing the internal and external aspects of corporate and social responsibility. They present the checklist for what organization should be practically responsible for. These are defined internal and external aspects of what areas the companies’ activities can affect. Internal aspects of the any company activities includes: employee welfare, working conditions, job design and intellectual property. External aspects includes :environmental issues ,products ,markets and marketing, suppliers ,employment ,community activity and human rights .(Kok ,Van Der Wiele ,McCenna and Brown 2001) agree with Sen. and Bhattacharya (2004).and Johnson,Scholes and Whittington (2008) regarding the activities/aspects of CSR but provides a more extensive framework .
2.1.4 CSR Aspects
(Castka et al, 2004) claimed that “there is no single authoritative definition of CSR. The CSR agenda seems to be loosely defined umbrella embracing a vast number of concepts traditionally framed as environmental concerns, public relations, corporate philanthropy, human resources management and community relations. Koke et al. 2001, “present in a table 2.1 a framework where the concepts mentioned above are taken in consideration. This framework was developed to help companies to reflect on their current CSR position and stimulate movements in the preferred CSR direction. Issues that are important when discussing CSR are classified into fourteen aspects that are connected to the external environment, the internal environment or both.
Table 2.1 Aspects of CSR
External Environment1.Social responsibility and new opportunities:2.Community relations:3. Consumer relations:4. Suppliers relations:5. Natural environment (e.g. pollution and packaging) and future generations:6.Shareholders relations:Internal environment:7.Physical environment :8.Working conditions:9.Minorities /diversity :10.Organizational structure and management style:11.Communications and transparency:Contributing to solving or reducing social problems.Extent of openness and support to people around the organization and to (local or national)government, stakeholder groups, action groups, churches, educational institutes, health care institute, and others.Extent of openness toward consumers; recognition of rights of consumers: safety, information, free choice, and to be listened.Extent of openness toward suppliers; recognition of rights of suppliers: information, participation in design.Execution of legal requirements, research into current and future technical and environmental developments, environmental issues regarding packaging (recycling).Respect for biodiversity and needs for future generations.Extent of openness regarding social effects of activities of the organizations (especially with regard to investment decisions).Safety, health, ergonomic aspects, structure and culture.Demand in relations to recruitment, selections promotions, part-time work, working on Sundays, medical aspects, and retirement aspects.Extent to which attention is given to minorities, diversity, multiculturalismEmpowerment, involvement.Top down and bottom up communication, use of information technology review of information flows: relevance, timeliness, detail, accuracy.12. Industrial relation:13.Education and training:Internally &Externally14.Ethics awareness :Extent to which communication takes place about expectations, needs, values, and norms in society.Needs of employees, current and future knowledge and skills ,review of training ,budget, personal development ,quality assurance of training process, ,evaluation of training process.Attention within development and training and communication for ethical subjects and aspects in relation to work and the business ;involvement of employees in developing codes of behavior, values, ethical codes, and the way employees are addressed to those aspects ; simulation of abroad ethical discussions with all parties.Source: Kok et al. (2001)(Kok et al,2001), state that ‘there are several good reasons for driving companies to use framework like the one in table 2.1 .It can be used as a part of the CSR planning process both strategically and operationally to show and evaluate current internal and external practices. It can be considered as a way to identify the strategic and practical CSR points of strengths and weaknesses. It simplifies the development of CSR improvement plan and provides basic data for the measurement of the CSR implementation in the organization. It also identifies the ones able to contribute to the CSR work and makes the participants.
2.1.5 CSR policy levels
Kok et al. 2001 continue to state that companies have one out of different policy levels in connection with each of the following 14 aspects .Improvement in the company’s CSR can be accomplished by moving towards the next policy level.The first policy level, the ad hoc policy, is in reality no policy The only times social issues are given any attention are when the cost are neglecting them are two high and potentially when legal action is made against the company.The second policy level, standard policy, is that policy strictly follows the law. Only when legal requirements exist will the company integrate in the business practices.The third policy level, planned policy, is when the law is followed and also when other parties that have a direct relation to the business performance is taken onto consideration.The fourth policy level, reviewed policy, is when the company believes it has legal and moral obligations to society. All parties are involved in the companies’ decision making and ethics awareness is a key work of organization (ibid).
2.1.6 Codes of conduct
Closely related to the company’s policy is the company’s code of conduct which is defined by international labor organization (ILO, No Date) as:” companies’ policy statement that defined ethical standard for their conduct”. They further state claims that there is a clear variation in the content of companies’ codes of conduct. Leipziger (2003) agrees with ILO’s definition and continuously claimed that one characteristic of codes of conducts is that they are either internal or specific and different from what is usually called standard that are boarder in scope and can be applied wider geographically and industrially as well.The institute of business ethics also refers to the code of conduct as code of ethics or ethical policy and statement of business practice, and set of business principle which clarified that companies view the code of code differently .Lohman & Steinholtz (2003) state the key issues can effects what a company code of conduct contains is that the industry that company works within and which activities the company is involved with. They continue to say that a code of conduct can contain areas such as: labor rights, human rights, bribery and corruption, environmental concerns and more.According to (Leipziger,2003) an effective code of conduct can serve to: “Raise awareness of corporate responsibility within the company, help companies to set strategies and objectives, assist companies with implementation and control of values, help companies avoid risk foster dialogue and partnerships between companies and stakeholders, enhance unity and identify among divergent companies”. The code of conduct ‘s importance, when trying to foster dialogue and partnerships between companies and stakeholders is receiving much space within literature today and therefore the area of CSR and company’s stakeholders are discussed further below.
2.1.7 CSR Stakeholders
Johnson, Scholes and Whittington’s (2005) definition the concept Corporate Social Responsibly includes the phrase “obligations to stakeholders”, which shows the importance of stakeholders in such tasks. Stakeholders are those individuals or groups who depend on the organization to fulfill their own goals and on whom, in turn, the organization depends”. Interfering interest from several stakeholders are common and usual, compromises throughout different stakeholder’s expectations are achieved, because all expectations cannot be accomplished all in once.While implementing corporate and social responsibility it is crucial to identify stakeholder groups targeted by the organization as well as prioritize between different stakeholder groups. For example a company highly vulnerable to criticisms usually prioritizes media and non-governmental organizations to a further extent than a company not as vulnerable to criticisms (Lohman &Steinholtz, 2003)
2.1.8 CSR initiatives
Kotler and Lee (2005) mention that they have identified six major initiatives in the era of Corporate and social responsibility, and the most of corporation’s CSR activities falls into one of these six initiatives. These initiatives have different potential benefits and possible concerns. Table 2.2 briefly describes the six CSR initiatives called cause promotions ,cause related marketing ,corporate social marketing, corporate philanthropy ,community volunteering ,and socially responsible business practices and also potential benefits and concerns.
Table 2.2: CSR initiatives and their potential benefits and concerns
Supporting social causes through promotional sponsorshipsBuild corporate reputationAttracts and retains a motivated workforceSupports marketing objectivesBuild strong community relationshipsVisibility for corporate efforts can easily be lostCoordination with cause partners can be time consumingStaff time and involvement can be significantPromotional expenses can be significantConsumers can be skeptical of corporate motivations and commitment
Causes �”related marketing
Marketing a contribution or donating a percentage of revenues to specific causes based on product sales or usage.Support marketing objectivesBuilds strong community relationshipsCoordination with cause partners can be timeStaff time and involvement can be significantPromotional expenses can be significantConsumers can be skeptical of corporate motivations and commitment
Corporate social marketing
Supporting behavior change campaigns
Making direct contributions to a charity or causesBuilds corporate reputationContributes to general business goalsAttracts and retains a motivated workforceSupports marketing objectivesBuild strong community BuildBuilds corporate reputationBuilds strong community relationshipsAttracts and retains a motivated workforceccVisibility for corporate efforts can easily be lostTracking resources expenditures and value can be difficult and expensiveVisibility for corporate efforts can easily be lostTracking resources expenditures and value can be difficult and expensive
Providing volunteer services in the communityBuilds corporate reputationBuilds strong community relationshipsAttracts and retains a motivated workforceVisibility for corporate efforts can easily be lostStaff time and involvement can be significantTracking resources expenditures and value can be difficult and expensive
Social responsible business practices]
Adopting and conducting discretionary business practices and investments that support social causesBuild corporate reputationContributes to general business goalsBuilds strong community relationshipsReduce operating costsReduce regulatory oversightsAttracts and retains a motivated workforceVisibility for corporate efforts can easily be lostEfforts may require external expertiseConsumers can be skeptical of corporate motivations and commitmentSource: Adopted from Kotler &Lee (2005) p.25, 258-259
2.2 Factors influencing corporate social responsibility
This section will be discussing the major factors that have great influence on the corporate social responsibility as well as the global factors that firms have to consider while going from domestic market to foreign markets will be discussed. Due to the globalization and the evolving of international businesses, people have to interact with others from different countries and cultures to become successful. Even though the foundation of the CSR is equally worldwide, there are differences in the context between countries. These differences regarding the responsibility of Social Corporation are reflections of four main factors which are culture, regulation and laws, NGOs and global standards. Since these factors differs from country to country, there are different values that will influence the society‘s expectations about the company (Burton, Farh, Hegarty, 2002) When establishing CSR in the home country the company evaluates the options in that country. However the CSR that is based on the factors in the home country will not necessarily will be appropriate for the global CSR. An organization has to identify the differences among these factors both home and foreign country in order to choose an effective approach to the CSR.(Galbreath,2006).The literatures used were selected because of their relevance and that they are often referred to in other previous studies with a global CSR.
2.2.1 Culture factors
Observing the culture factor is crucial to look at Hofstede’s cultural dimensions .Hofstede studied IBM employees from 70 countries and based on this he analyzed countries regarding different culture behaviors. His dimensions give an insight into other countries’ culture to be more effective when doing business internationally (Greet-hofstede.com).Individualism and collectivismIn (Phatak et al.2005) Hofstede referred to individualism as “a social pattern that consists of loosely linked individual who view themselves as independent of groups and who are motivated by their own preferences, needs, rights, and contracts”. They also define collectivism as a social pattern that consists of closely linked individual who view themselves as belonging to one or more groups and who are motivated by norms, duties, and obligations identified by these groups. These definitions indicate that firms which operate in individualistic societies are expected to care less about the company’s impact on society .However, Ringov and Zollo (2007) state that this dimension has no significant influence on the social and environmental performance based on their research.Power distanceAccording to In Phatak et al. (2005) power distance is described as “the extent to which extent less powerful members of institutions and organizations within a country expects and accept that powerful is disturbed unequally”. Ringov and Zollo (2007) claim that companies that operate on countries with low power distance discuss social and environmental aspects openly and therefore perform better in this area than those with a high power distance. They further claim that countries with high power distance consider more business practices as ethical compared to low power distance countries. They conclude that this dimension effect the social and environmental performance.Uncertainty avoidanceThe extent to which a member of a culture feels threatened by uncertain or unknown situations” is the meaning of Uncertainty avoidance provided by Hofstede in Phatak et al. (2005). Ringov and Zollo (2007) state that organizations that operate in a country with high level of uncertainty avoidance will have harder socially adaption as well as complicated environmental demands and therefore will take less initiatives regarding those issues. However, their research does not support this theory and has no obvious impact on both social and environmental performance.Masculinity and femininityGoing back to Hofstede, it defines masculinity as “pertains to societies in which social gender roles are clearly distinct “and femininity as” pertains to societies in which social gender roles overlap”. Companies that work in higher level of masculinity countries are anticipated to prioritize material success and progress than cooperation which is known to be a sign of weakness. Ringov and Zollo (2007) research supports the theory that claims that dimension has an impact on the social and environmental status.Burton et al.(2000) indicate that understanding of the culture of the country that a company wants to establish in is crucial to understand. Phatak et al. (2005) mentioned that the child labor is a common Childs’ rights violation in developing countries and few companies have avoided it in their all productions lines. It is not unusual that children are working 12 hours a day for extremely low wages. In many cultures it is considered not only unethical but also against labor laws to workers while in other cultures this is about surviving and keeping the children out of the streets and doing crimes. Galbreatth(2006) argues this dilemma and found out that it is a fundamental issues whether a company should establish their CSR based on the country’s or the foreign country’s cultural standards. Companies might choose to not operate in the countries where they have major differences than the expected from their CSR. In some cases they might use an adapted CSR to the foreign country which is different from the one used in the home country. Galbreath (2006) stated Sony as an example, Sony has standardized and implemented a global CSR worldwide. Using a universal CSR globally can be preferable in some regions but it is important to differentiate cultures in order to acknowledge when and where adoptions are necessary. (Burton et al.2000) supports the theory that different culture will react differently to a company’s CSR.Andriof and McIntosh (2002) explain that cross-culture factors are becoming important when doing international business. That there will not be a successful business if there is no understanding for the other party’s culture beliefs, religion, and values. This should also be taken into consideration in the home country since there are different people with different background, religion, and cultures integrated in the modern societies. These aspects are becoming more important in business’s CSR today. Another way to look at the culture besides Hofstede’s cultural dimensions is by viewing it through what (Kampf,2007) refers to as a cultural system.
2.2.2 Cultural systems and corporate social responsibility
According to (Genest, 2005) international corporate social responsibilities are more complicated than they seem, nevertheless given cultural standards among universal practice, all categories of corporate philanthropy procedures are required to be aligned with the culture values regarding specific countries and suit multicultural stakeholder’s that MNCs have in the global market currently.From another point of view, Kampf (2007) states that generally the most holistic way to overlook at CSR through different cultures is by cultural system perspective (figure 2.2).The main reason for using culture system model is that the model tries to illustrate both stakeholders and their interference with the company, this by presenting the company as a part of the cultural system (one part of institutional consequences) instead of the hob of the system.
Firms (the company)Trade associations Investors NGO’S
World Economy Technology
Coming from:Employees Communities Customers Managers
Origins or Ecological factors:
Political groups Governments Suppliers
Figure2.2: The Company and its stakeholders situated in a cultural system
Source: Kampf (2007).Continuously, Kampf claims that his system does not completely separate culture from history, policies, or law rather than it looks at culture as the system whereas context, norms, and institutional consequences contribute. However, external impacts such as globalization affect culture within a culture/country, more specifically cultural system functions differently depending either on the origin or ecological factors, the norms and institutional consequences that are established by stakeholders who affect and interact within each other. For example both Denmark and the U.S are influenced by external effects in CSR while the origins or ecological factors vary. The Danish government has given for long time extensive social services for their people in comparison to the American government. The norms differ as an outcome whereas Danes have a higher level of concerns for the social welfare and that businesses interfering through high taxes while Americans have a higher concerns for shareholder’s money and that businesses contribute by choice. The institutional consequences are that companies are already involved in offering social welfare in Denmark without a need to communicate their CSR to the same extent as American companies that do not automatically provide to the social welfare in the same extent.According to (Kampf,2007) “The cultural systems approach is to understand corporate responsibility opens up the opportunity for researches to explore the connection between local culture in which multinational company headquarters are suited and the global influences which are becoming increasingly important and influential business becomes increasingly globalized”. One part of the cultural system that is getting much more interest in the current CSR debate is the nongovernmental organizations.
2.2.3 Non-governmental organization
Princeton University‘s WorldNet defines non-governmental organization NGO as “an organization that is not part of the local or state or federal government”. (John,2001) states that NGOs usually are either ideas �”based or identify-based or both. Ideas-based NGOs focus on “human rights, education, equality, environmental sustainability, etc “.While identify �”based NGOs focus on “indigenous, female ,homosexual, etc”. Many NGOs have causes that are crossing and combing these two bases. (Galbreath, 2006) classifies the NGOs into three different groups that are based on what they do. There are operational, advisory, and advocacy .Operational NGOs offer their services to the society in areas such as education, health, disaster relief. Advisory NGOs offers different advice and information and works as consultant. Advocacy involve in lobbying activities with governments and other organizations in order to influence their decisions concerning policies for business. The question whether to customize the CSR to the host country due to the impact of NGOs in that country needs to be discussed by company when going abroad. The decision whether to customize or might not vary and is based on the company’s policy and goals.(Freeman, 2006) emphasizes that “the power and impact of NGOs cannot be overstated, emerging from almost nowhere to challenge multinational corporations”. He exemplifies this with Nike and Gap who were accused by NGO’s that there were using sweetshops .After this a lot of companies in different sectors have been confronted by NGO’s regarding different issues. This showed up in this business have gained a lot of respect for NGOs ability to solve out these types issues. Furthermore he claims that the NGO’s are institutions that influence business to engage in CSR more than most of others. NGOs expect companies’ willingness to admit when they have major problems or less performance as the most important aspects due to transparency. Two multinational companies that had been earlier accused by NGO solved the problem by setting a new standard for transparency .Nike and Gap chose to show the public all their suppliers and what problems they had with violations with their own CSR. Freeman (2006) concludes that “NGO relations are becoming almost important as investor relation especially from a corporate reputation and communication perspective”.(John, 2001) said that the developing CSR trend and its unstoppable popularity have arisen as a result of the pressure that the NGOs have on companies. NGOs lead companies to be “good citizens”, which means supporting the NGOs objectives. NGOs often apply pressure on companies not behaving ethically correct but they are also involved in applying pressure in companies not behaving legally correct.
2.2.4 Laws and Regulations
Legal responsibility is a crucial component of global CSR according to Carroll (2004).Companies have to follow the law in each country since it sets the norms of what acceptable and unacceptable. If laws and regulations are not obeyed it can damage the country’s reputation and image on the market. All countries have suctioned legal systems which vary in each country. This implies that the expectations on the company will also vary. Significant differences have to identified before going to the business in foreign country.Galbreath (2006) says that laws are generally imposed by government when the companies and the market have failed to “ensure fair competition, safe products, air and equitable working conditions and a clean healthy environment “.Laws are also developed by respect to different social responsibility aspects, usually demanded from agencies or organizations within that area.From what mentioned earlier, it has to be said that there are also laws that are more global, Phatak et al. (2005, p.129-131) reported OECD convention on combating Bribery of Foreign Public Officials in global Business Transaction. It was adopted in 1997; nowadays 35 nations have approved this convention. They further stated that the international legal environment consists of three levels of laws:The law in home country.The law in foreign country.International law.The biggest difference between countries’ laws and the international law is that is an agreement between countries and not a decision taken by central authority.According to one of OECD’s reports compliance with law is the dominate factor that influences the companies’ codes of conduct. They also state that almost of all the commitments in the 246 codes that they have analyzed are applied both in the home and foreign country. Besides these legal compliances all companies have commitments extent those regulated by law. A research made by (kuskusu and Zarkada �”Fraser ,2004) on differences between Australian and Turkish companies showed that laws regarding product, contracts and industrial relations are equally important in both countries, However it also shows that there were some differences in how the environmental and anti-discrimination laws are considered important in each country. The Turkish companies care less about these laws then the Australians and this can be due to the lack of regulations in these areas in Turkey.Galbreath (2006) adds that the regulatory environment in the country that the company will operate in when going abroad is an important factor that needs to be considered in CSR. Companies face the decision whether to regard the home and/or the host country’s’ laws in the CSR .He clarifies this by giving example “if a firm adopts a reciprocal strategy with respect to CSR in the home country and implements environmental production standards that go beyond those required by law as a part of that strategy, should the same policy be adopted in a host country of operation where environmental laws’ don’t even exist? “Issues such as this one have paved the way for more discretionary guidelines due to the legal inconsistencies worldwide.
2.2.5 Global standard and codes of conduct
The number of companies that integrate global standards and codes of conduct in their CSR have multiplied in the last decade and have become increasingly important in emerging markets which indicates that is has become even more essential for MNCs to incorporate standards and codes of conduct in their business (Fliess, 2007).Global standards, codes of conduct and frameworks within CSR area are topics that are receiving very much interest by companies and researcher at this moments. But global standard and codes of conduct are not something new, standards and codes have been signed between government ,organization and companies ever since 1948 in order to constitute some kind of moral authority and create guidelines for MCs (Phatak et al.,2005,p.251).Leipziger (2003) and Brown(2005)agree when saying that it could be very troublesome for companies active in CSR to negative through jungle of the sounds of standards and codes makes it impossible to review even a fraction of them in this study.Leipziger (2003) states that some initiatives that are wide in scope also implemented throughout the world by MNCs are: the OECD guidelines for multinational enterprises the united nation (UN) global compact, and the global Sullivan principles for social responsibility.The OECD guidelines for multinational enterprises are one of the most comprehensive guidelines and many countries are not OCEDs members have declared their commitments of these guidelines. Some of the areas treated in the guidelines are: general polices disclosure, employments and industrial relations, the environment, combating bribery, science and technology, competition, and taxation (OCED .org).Other codes and standards that are more focused in specific areas such as human rights, labor rights and the environment consists of amongst others: the universal delectation of human rights, social accountability 8000(SA 8000), Ethical trading initiatives, The CERES principles, the natural step, the business principles for countering bribery, and the international labor organization: tripartite declaration of principles concerning multinational enterprises and social policy. There are exists global standards and codes for implementation of CSR .i.e. Accountability 1000, Global Reporting Initiative as well as certification systems such as OHSAS 18001 that deals with occupational health and safety, and ISO 14001 That deals with environmental issues.
2.2.6 National and regional standards
Not only global standard affect MNCs’ CSR. Codes and standards are developed so that companies can act in an ethical way but ethics is not universal. Countries and culture are differ from each other in how they perceive ethics and therefore the codes and standards within countries and cultures differ (Donalson, 2001) .To illustrate this he says that even criminal gangs have their codes. The importance for companies to comply with different local /regional standards differs depending on where companies do business. For example company licenses issued to the companies that comply with local/regional environmental l standards amount 99 in the U.S (Green Seal),1756 in Japan (Eco-Mark program),and 223 in Sweden(Good Environmental Choice).There are also differences in how difficult these standards are to obtain in different countries. For example in Sweden and Spain there are relatively few requirements for companies when complying to national standards and as a result quit easy to obtain which is the contrary to Canada and Korea who have a vast number of requirements for companies’ that wants to comply with the national standards (Fliess, 2007) The author continues to say that these national standards differences are just one of a large number of factors that show countries’ commitment towards CSR.
2.2.7 The state of responsible Competitiveness
The degree of responsible Competitiveness in a country affects the CSR expectations that stakeholders have toward companies conducting the business within country. Al Gore says that countries that have a high degree of responsible Competitiveness help the companies to do the right thing through public policies and citizens action and increase CSR demand on companies. Some of the twenty one factors that affect the degree of responsibility competitiveness in a country which in turn effects the expectations of companies CSR work are: the signing and ratification of environmental treaties ,ratification of a basic’ worker rights ,the tax environment ,strength of audit and accounting standards, ratio of ISO certification, the level of corruption, press freedom ,transparency of transactions ,and NGO memberships (MacGillivray,2007).
2.2.8 Corporate Social Responsibility: International and local impact
One thing that is for certainty is that there is a growing pressure on businesses to play a role in social issues and in the community that they operate; a trend that is emerging both globally and locally (Mallen, 2008). Ideally, this pressure is not likely to stay the same but it is more strongly to increase. The desire of individuals, NGOs, the government and the society at large to get ‘something’ back from operation of companies in their communities is up surging. In the past, companies used to see social responsibility only as a voluntary but with the lapse of time, many companies, especially multinational companies, are making social responsibility as part of their corporate policies. They have embraced the concept saying that “it is simply good for our business” (Source Watch: 2007). Indeed, these companies consider their social responsibility as something important to be inculcated into their business objectives.Although the concept of CSR is not a new one (Hopkins, 2004), it is not fully embraced by everyone and a lot more people happen not to even understand this concept. The commitment of resources of corporate bodies towards social development issues has been with us for quite some time now but not everybody shared this view or celebrated this concept. Prominent amongst them is one of the world’s greatest economist; Milton Friedman. He did not believe that corporate bodies had should meddle in social affairs; neither should they have any responsibility towards the community. As a strong activist of capitalism and a critic of CSR, Friedman emphasized the need to ensure that corporate bodies’ managers use the monies and resources of businesses in a way that is in the interest of the businesses and nothing else (Friedman, 1970). For instance, he believes that if committing resources to reduce pollution as a ‘social responsibility’ of the firm would reduce the profits of the businesses in such a way that is not beneficial to the business, and then it should not be done. In his book Capitalism and Freedom, Friedman is said to have referred to corporate responsibility as a “fundamentally subversive doctrine”.It is a wonder that theorists like Friedman and his followers believed that corporate bodies giving something back to the society that they have taken from should be considered subversive. Although Friedman’s argument was strong and captured global attention, the upsurge of CSR has continued. The proponents of CSR arguing on the basis that, over the years the social cost of businesses has increases coupled with the fact that corporate bodies have gained much power and influence. In these contexts of market failures, it has become imperative for businesses to pay heed to social issues due to this increased vulnerability of society to the corporate entity. Again, the growth of governments’ inability to fulfill their basic responsibilities to society and to properly manage business activities and the market structures of a free market society in order to avoid over exploitation, means that the acceptance of social responsibility by the corporate world has become very inevitable and important (Amalric and Hauser, 2005)Currently, in most developed countries, the debate is no longer whether it is important for corporate bodies to assimilate the concept of CSR or not, but the extent to which “CSR principles can influence corporate decisions and practices and how business can best address its social responsibilities” (Idemuia, 2007). According to the United States Social Investment Forum, over $US1 trillion in assets are under management in the United States in socially and environmentally responsible portfolios (Hopkins, 2004). This shows the increasing commitment of corporations to contribute towards various aspects of social development.CSR and Financial PerformanceCompanies expect CSR activities will result in better financial performance. However, studies regarding the relationship between CSR, as measured by corporate social performance (CSP), and financial performance show mixed results. The relationship can be positive, negative, or neutral. Probably this is because there is still no agreement regarding standards and measurements in social activities. There are differences regarding concepts, operations, and methodology in defining CSP.Differences could also be found in measuring the financial performance. Researchers use different financial indicators, such as Net profit, Earning per Share (EPS), Return on Equity(ROE), or Return on Assets (ROA). Each indicator used in measuring financial performance also has its limitation. Accounting measures, for instance, capture only historical aspects of firm performance (McGuire, Sondgren, and Schneeweis, 1988). Moreover, they are subject from managerial manipulation and differences in accounting procedures. While the movements of stock prices often do not reflect a company’s real condition.
CSR and Reputation
Studies regarding the relationship between CSR and financial performance produce inconclusive result. However, the CSR activities continue to increase. According to (Minor2009), when managers are asked why they engage in CSR, they claim it is to secure a better brand and reputation. As (Fombrum et. al 2000), suggests’ the activities that generate CSR do not directly impact the company’s financial performance, but instead affect the bottom line via its stock of ‘reputation capital’ �” the financial value of its intangible assets”.Reputation consists of the accumulation of corporate images possessed by the Stakeholders over the relatively long time (Susanto, 2009). In reputation management, corporate images should be managed based on the corporate wish. In order to succeed in managing their reputations, companies should set policies and deliver actions that will support their performance. Subsequently, these policies and actions should be supported by effective communications so that misperceptions can be avoided.Changes in Business environment could affect corporate reputation. Mediaproliferation and information, increasing demand for transparency, attention to CSR, andrecent scandals involving large scale corporations have pressured companies to strengthen their effort in building and maintaining reputation.
Corporate Social Responsibility and IKEA
3.1 Fundamentals of IKEA and the concept of CSR
The project will supported by a case study for the sake of gaining better understanding of a complex matters or objects in order to clarify experience or provide strength to what is already found from previous researches. Researchers have used the case study research method for many years across a variety of disciplines. Social scientists, more specifically have made wide use of this qualitative research method to examine contemporary real-life situations and provide the basis for the application of ideas and extension of methods. Researcher Robert K. Yin defines the case study research method as an empirical inquiry that investigates a contemporary phenomenon within its real-life context; when the boundaries between phenomenon and context are not clearly evident; and in which multiple sources of evidence are used (Yin, 1984, p. 23).In order to get a better understanding and overall comprehended view to the case study, an empirical data will be required. Using Empirical data is ideal for this project because it provides a way of gaining more knowledge about the corporate social responsibility by means of direct or indirect observation or experiences regarding the company that case study is concerned about (IKEA).So apparently this chapter will present empirical data. The empirical collected data are based on the secondary sources such as home pages, annual reports, and CSR reports. IKEA was a suitable case company, from one hand because it has ranked high in CSR ratings, form the other hand because it is considered a value-based company, which might facilitate the integration of CSR in its business model. The aims of studying the case to answer the following research question: “Why and how does IKEA engage in CSR?” In order to acquire clarity in the way CSR works in practice.
3.1.1Overall of case study (IKEA)
Corporate social responsibility (CSR) is the basic notion that is becoming dramatically important to corporate boardrooms, business press and academic researches. CSR has many effects to the companies in most markets through increasing the number of legal and societal requirements on their ethicality, on a national as well as on an EU region and international level (Eberhard-Harribey, L. 2006). A variety of reasons shows why companies are engaging in CSR ranging starting from moral obligation to brand and legitimacy. In such cases, it is no longer advisable for companies to keep on social and environmental activities only as a way of staying competitive.Companies are expected to locate the key to gain a competitive advantage and part of this involves integrating their CSR into their operations and all business practices. There is a wide and complex range of issues surrounding CSR and the conflicting opinions on the topic make it hard for companies to know what and how it should be done. Understanding the inner workings of a successful example of CSR work could be a useful positive tool for companies intending to enhance their economic and environmental sustainability.The IKEA corporate social responsibility experience can successfully shape the framework and help other companies realize that CSR is not actually a cost; in fact it is a cost-cutter. This is important knowledge as societal expectations increase on companies to be socially responsible.
3. 1.2 Background of IKEA
IKEA is a Swedish multinational company and one of the world’s largest furnishings retailers. The corporate social responsibility strategies adopted by IKEA are typical example for corporate responsibility management in situations of hyper competition.IKEA is presented in 37countries and has approximately over 127 88 employees .Ingvar Kamprad founded IKEA in 1943.In 1947, he started to sell furniture and in 1955 IKEA started to design its own furniture. IKEA started as a mail order company, but this soon changed and the first store was opened in Almhult �” later it became the model for all IKEA establishments. IKEA is considered as a one of the most respected and reliable companies in Sweden and has become the one of the most companies to work for.In order to understand and analyze current CSR activities in IKEA, it is necessary to begin by looking into the foundation on which IKEA was built and the values and visions, which the founder Ingvar Kamprad instilled into the company culture from the beginning.
3.1.3 Corporate structure
IKEA’s corporate structure is highly complex and complicated. It is divided into two main parts: operations and franchising. Ingka Holding, a private, for-profit Dutch company, runs most of IKEA’s operations. The Stichting Ingka Foundation, a tax-exempt, non-profit foundation, in turn owns this company. Another Dutch company, Inter IKEA systems, owns the IKEA trademark and concept. Every IKEA store pays a 3% franchising fee to Inter IKEA Systems. According to I. Kamprad, the foundation for IKEA is that of taking a social responsibility, with democratic design. Nonetheless the corporate structure has been criticized as simply being a tax evasion scheme. IKEA’s corporate structure mixes for-profit societies with non-profit societies and has very low transparency when it comes to costs: ”Someone who would like to look at and understand their [IKEA’s] annual accounts cannot – it is a veritable maze”. IKEA has even been nominated to a Public Eye Global Award; an”award” that highlights corporate irresponsibility. Through its corporate structure, it has reduced its tax burden, yet the payment of taxes is recognized as a central element of CSR .(Christensen, J. & Murphy, R. 2004). Philanthropic activities have earlier not been practiced to any great extent. The purpose of the Stichting Ingka Foundation is to promote innovations in the field of architectural and interior design. Recently, it was announced that I. Kamprad is in the initial stages of opening up for a more general purpose of the foundation in order to be able to give charitable donations to wider range of causes. It is not known whether this is a result of previous criticisms of the Foundation or simply a necessity for a company of the size of IKEA. Nonetheless, there are many speculations as to what the future will bring and additionally several unanswered questions that stem from this complex group structure.
3.1.4 Company Vision
IKEA’s vision has been obvious from the start which is “To create a better everyday life for the majority of people”. IKEA’s business concept created in the decision to match the need that no other company appeared concerned with and led it to improve a niche market: manufacturing beautiful, inexpensive as well as durable furniture for the majority of people (Edvardsson, B & Enquist, B. 2002). I. Kamprad states that IKEA should “stand on the side of the majority of people, which includes taking on more responsibility than might at first seem to be the case”. A recent example is the company’s exceptionally costly move into the Russian market, but considered necessary as affordable furniture is a pressing need for the Russian population. The democratic design also involves representing the interests of ordinary people and getting rid of designs, which are difficult and expensive to produce, even if it is easy to sell. The concept was formalized in 1976 in Ingvar Kamprad’s thesis “Testament of a Furniture Dealer”, which became an important way to spread the IKEA philosophy. The fundamental goal was and is to provide affordable furniture for the people and cost cutting is key to achieving this. Cost-consciousness is a strong part of the business idea and the waste of resources is considered a “mortal sin at IKEA”. By ensuring that ordinary people are able to afford to furnish their homes beautifully, many associate IKEA with a company that stands on the side of the “little person” and this is a positive image for a company to have. In addition to this, I. Kamprad had another dream: the “dream of good capitalism” which is the idea that the good in a profit-making business can be combined with a lasting social vision. This implies the goal of developing and achieving a better future for IKEA’s customers as well as people working for IKEA believing that by working for IKEA, they are working for a better society and thereby contributing to a better world (Bartlett, C. et al 2006).
3.2 Empirical Findings
3.2.1 Development of CSR at IKEA
Inside the walls of IKEA’s company, Corporate social responsibility is referred to be as environmental and social responsibility going beyond legal requirements. Bearing Thomas Bergmark interview(Social and Environmental Responsibility Manager) the increasing focus on CSR can be recognized as a very normal and natural development at IKEA and not something that the company has forced itself into (Interview, Bergmark, T., 2008-05-26). The concentration on CSR has existed from establishment of the company, as the company is rooted in social values. The evolved development started in the late 80s of the last century and intensified in the 90s. The very first manager for “Environmental and social responsibility” was appointed in 1991 and in 2002 its role grew to be a separated organizational function to ensure the following objectives: clear CSR strategies, follow-up and evaluations of actions taken and that those CSR activities are operated externally and internally.However, there have been CSR goals stated from the beginning, the main steps of developments came as a result of a serial number of crises. In the early 1980s, experiments showed that some IKEA products caused more formaldehyde than was permissible under Danish legislation (Bartlett, C. et al 2006). In 1992, an investigative crew from a large known German newspaper and TV company found that IKEA’s best-selling bookcase series “Billy” produced marginally higher emissions of formaldehyde than were legal. These investigations revealed extensive damage to IKEA’s reputation and hence improving, more importantly the issues were highlighted as scandals, but also the company’s image as a whole became gradually important.During the 90s the focus of CSR was on enhancing the product lifecycle in order to reduce the environmental and social impact. According to Anders Gyhlenius (Store Manager at Kungens Kurva), the focus at the stores was primarily on environmental issues such as waste management at this time (Interview, Gylhenius, A., 2008-11-10). Environmental and social impact was not largely discussed or communicated, instead the focus laid on action. Finally in 1994/95, IKEA started to more visibly discuss and communicate environmental and social issues and CSR. According to Susanne Koerfer (Store Manager at Barkarby) and A. Gyhlenius, the range of IKEA’s responsibility is much wider today and is continuously broadening. Even the act of giving furniture to the Astrid Lindgren hospital can in a broader sense be considered as contributing to their vision of a “Better everyday life for the majority of people”. However, at the same time IKEA is also noticed as becoming clearer in the focus of its CSR initiatives and more specified. The latest direction within the IKEA sphere is that of “community involvement”, considering to the stores or in relation to the area around their suppliers’ factories. The concentration on local projects in regarding the stores can be classified as the most current focus area (Interview, Fredriksson, and Å. 2008-11-10).The main crucial areas of IKEA’s CSR efforts are the following: product development,Environmental Design, supplier relations , energy and transport (reduction of energy use in production and transport, geographical expansion (location and sustainable management of store), societal responsibility (code of conduct, partnerships and projects and leadership and competence development (education of all employees in CSR issues and specialist CSR competence for managers.
3.2.2 CSR as a complement to social vision
All of the interviewees believe that CSR fits perfectly with IKEA’s values and social vision, as stated by Ingvar Kamprad in 1976( Interview, Fredriksson, Å., 2008-11-10). S. Koerfer believes CSR as being vital because it indicates that the company contributes to more than just selling and purchasing. Along with the same lines, others believe CSR as important as it means that the company providing a contribution to society, as well as contributes to a better world. S. Koerfer beliefs that one can defected consider there being a conflict between the aim of selling as much as possible and CSR, but that the fact that IKEA is able to reach as many people as possible with low prices and improve peoples’ living situations (both customers and employees) makes the two issues complementary. In addition to this, IKEA’s strong commitment to CSR in the stores’ operations helps legitimize the continuous “opening of new stores” (Interview, Koerfer, S., 2008-10-22).
3.2.3 CSR �” from risk management to a source of competitive advantage
According to A. Gyhlenius, corporate social responsibility was in the beginning seen as an extra unwanted cost that was imperative to manage risk, which was in conflict with the organization’s desire for “low cost at all cost”. Since the initial integration of Corporate and social responsibility, and via working with the issue and gaining experience IKEA has realized the cost-cutting potential of CSR and in contrast to many companies, IKEA now perceives itself as not having to change its business idea and vision to accommodate CSR, as they reach to perfect fit between the two. The motto has changed from “low cost at all cost” to: “low cost, but not at all cost”. All of the interviewees that work at IKEA argue that CSR is a central part of its cost consciousness and contributes to the company’s profitability. According to T. Bergmark, there is a perfect combination of profitability and CSR for IKEA in 9 out of 10 cases. IKEA’s substantial engagement in CSR initiatives continues to build trust and to reduce risk, which is equally vital today as many journalists see a potential scandal involving IKEA as a “dream scoop” (Interview, Gylhenius, A., 2008-11-10). CSR creates value for IKEA by encouraging it to be more efficient, reduce resource use and waste and continuously and consistently improve in every aspect of its operations. However, over time IKEA sees itself as having learned and challenged itself through the co-operation with its partners and through gathering experience of CSR. IKEA sees itself in a continuous learning phase when it comes to CSR and that mistakes are inevitable and natural in this process. This is aligned with IKEA’s general company philosophy of “learning by doing”. T. Bergmark states that as IKEA is not a listed company, IKEA has a great advantage as the company has a greater freedom in not being driven by short-term profitability goals and thus can have a more long-term focus with its CSR. It is also mentioned that IKEA’s CSR capabilities can be a way for the company to differentiate itself and stand out amongst the competition (Interview, Koerfer, S., 2008-10-22). With ever increasing competition as well as growing interest of people for furnishing and home improvement, it is important for IKEA to stay on top and CSR contributes to achieving this (Interview, Stål, E., 2008-05-13) .
3.2.4 External pressures on IKEA
CSR has become crucially important over times as the public has pushed it to society priority number one. As such, a lack of interest in these issues showed by company would result in its “death”. A. Gyhlenius considers CSR as vital for a large, globalized company in today’s businesses climate. Other interviewees concur with this conclusion as CSR is seen as becoming a “base factor” and as such companies that do not engage in CSR will not be able to survive in the future. Media focuses its interests on these issues and the effects of negative attention seems far greater than the positive (Interview, Gylhenius, A., 2008-11-10). As a result, CSR is becoming increasingly vital for the brand and reputation of the company .
3.2.5 CSR issues in the supply chain
The supply chain is one of the focus areas of IKEA’s CSR. Ivana Hrdlickova (Information Director at IKEA Sweden) reported that IKEA consciously picks this path as the company procures from 60 different countries and therefore IKEA is able make the greatest positive impact by offering jobs, enhancing employee working conditions. Furthermore, IKEA has most knowledge within this area and this form of CSR is also closest to its capabilities and expertise. She believes that IKEA would not make the same impact had it simply chosen to just donate money to different organizations and charities (Interview, Hrdlickova, I., 2008-12-23).In 2000, the new code of conduct IWAY (IKEA Way on Purchasing Home Furnishing Products) was created, offering detailed specifications on requirements for manufacturers to be eligible for working with IKEA in terms of issues such as environmental, social and forestry regulations. It also indicates the requirements of IKEA towards the supplier and manufacturers and their working conditions, minimum wages and overtime payments. Issues with particular importance for IKEA such as the ban of child labor, discrimination in the workplace and illegal logging, are covered more in depth in the code. “Save the Children” has co- written the part of the code of conduct relating to child labor (e.g. IKEA Way on Preventing Child Labor), in order to illustrate how serious IKEA view these issues. UNICEF now regards IKEA as a model case of how to implement regulations in order to avoid the use of child labor.
3.3 Corporate social responsibility projects
IKEA has several NGO stakeholders and few partner organizations though. These can be categorized into three different categories of engagement and divided to three different types of organization (Figure1). Through these partnerships, it can improve and strengthen its work in both social and environmental issues. It is believed that it can achieve more results by operating with other organizations as well as sharing common goals. IKEA is very selective when it comes to selecting projects, allowing it to choose the right projects to fully engage in. This has caused criticisms from some NGO stakeholders as they view IKEA as very passive when engaging in dialogue (except for their partnerships). Some even claim that IKEA does not actually interact in dialogue with its NGO stakeholders (Maon & Swaen 2006). From IKEA’s perspective, it finds it impossible to engage in dialogue with all the stakeholders that wish to do so, “every week we get dozens of enquiries of engaging in different projects” (Interview, Hrdlickova, I., 2008-11-23).
• Greenpeace• Building andWood Workers’International• Business for SocialResponsibility• Green Power Market Development• The Network for Transport andEnvironmentRefrigerance Naturally• Save the Children• UNICEF• WWF
• Forest StewardshipCouncil• Global Compact• Better Cotton Initiative
• Clean Cargo WorkingGroupFigure1: IKEA’s official NGO stakeholders and partners
3.3.1Three main partnerships
IKEA cooperates with three main partners: UNICEF, “Save the Children” and WWF. The company is satisfied limiting itself to this number of partnerships, which allows it to choose the “right” projects and fully engage in them (Interview, Hrdlickova, I., 2008-11-23). IKEA initiated its partnership with “Save the Children” Sweden in 1993, with UNICEF in 1998 and with WWF in 2002. The partnership with “Save the Children” in Sweden steadily came to encompass the International “Save the Children” Alliance. IKEA has always broadened its cooperation with its partners: in 2005 IKEA founded an independent organization within the IKEA Group called IKEA Social Initiative, which takes care of its global partnerships with “Save the Children” and UNICEF. The partnership with WWF has unfolded in two phases: first three-year phase involved co-operation on responsible forestry projects.The year 2005 initiated a broadening of the partnership to involve cotton production, protecting from illegal logging and climate change projects. IKEA sees the broadening of this partnership as a way for the company to “challenge” itself (Interview, Stål, E., 2008-05-13, Interview, Gylhenius, A., 2008-11-10).
3.3.2 Environmental issues
IKEA strives to reduce its negative impact on the environment and has as such attempts several internal projects to promote this issue such as “IKEA Goes Renewable” (all IKEA stores are to be run on renewable energy by 2009), transporting goods with minimized emissions of carbon dioxide, and working to enhance products with less negative environmental impact throughout the whole product life cycle, starting from the design stage and ending to the disposal stage: Environmental Design(Brochure: “People and the Environment”). These efforts include designing goods that can be stapled upon each other in order to minimize transports needed and disposing of customer’s old IKEA sofas when they buy a new one(Interview, Koerfer, S., 2008-10-22).
22.214.171.124 Global and national level
IKEA works externally with WWF in both independent and joint projects on a national and global scale. Projects related to responsible forestry (preventing the use of illegally logged wood in their products) such as “Sow a seed” to save Borneo’s rainforest, climate change with “IKEA Goes Renewable” to reduce energy use and sustainable cotton production with “Better Cotton Initiative” (BCI). IKEA has worked hard at developing a sustainable and environmentally friendly cotton production program. It does not utilize ecological cotton in all its products lines, as only small quantities are available and hence cannot fulfill IKEA’s needs. However, by engaging in BCI, IKEA is able to minimize the harmful environmental impact of increased cotton production by reducing the amount of water and toxins needed to produce them. This is more efficient than using ecological cotton for a small selection of products (Interview, Stål, E., 2008-05-13). BCI is good both for IKEA and for the cotton farmers as the sharing of IKEA’s knowledge offers cotton farmers education to increase and improve their harvest and can in turn pass this on to other farmers.
126.96.36.199 Local store level
At store level, the CSR responsibility lies with the customer service department and the CSR coordinator is most often in charge of the environmental committee(Interview, Fredriksson, Å., 2008-11-10, Interview, Koerfer, S., 2008-10-22). The CSR-coordinator receives directives from the Service Office to organize certain types of events. In the past ”Save Energy Weekend” promoting the use of economical energy lamps has been organized; future plans include encouraging bicycle riding. In addition to the partner projects, independent initiatives at stores are encouraged. An international example comes from IKEA Singapore where a fee was charged for plastic bags in order to decrease the use of plastic bags �” this also led to other retailers in the area following suit (Interview, Hrdlickova, I., 2008-11-23).
IKEA Sweden as well as many other IKEA national franchises around the world, co-operate with “Save the Children” and UNICEF each year by donating the proceeds of particular soft toys sales to selected projects around the world. At times of disasters, IKEA’s department for Social Initiative donates blankets and other necessities to relief victims, labeled “in-kind assistance” . The international projects are focused on South Asia and mainly on India (Interview, Barner, M., 2009-01-05). These are directed at children and women, helping with vaccinations and nutrition, education and micro-credits. IKEA commits itself to build preschools and schools near to IKEA provider factories like schools in Vietnam and India. This shows its commitment to eradicating child labor and ensures that these children have the opportunity to acquire an education (Interview, Gyhlenius, A., 2008-11-10).
188.8.131.52Global and national level
Beside the official projects with the official partners and shareholders, the store management is currently in charge of making the decision on which local CSR issues are and can be addressed. The stores have got directives orders from IKEA headquarters (“IKEA Service Office”) that local projects should focus on children, adolescents and the environment. This year it has been decided that one of the three top store priorities is CSR, alongside leadership business excellence and the customer meeting (Interview, Koerfer, S., and 2008-10-22).
184.108.40.206 Local store level
At the Barkarby store, a couple of social projects dedicated to both women and children in 2008 were selected by store manager S. Koerfer, the donation of sofas to Astrid Lindgren Children’s Hospital, the donation of toys and furniture to a burnt-down pre-school in Järfälla and of furniture and interior decorating to two women’s relief homes. The furniture donated was mostly from the bargain section and thus constituted merely a marginal cost to the company, eventually ”the cost disappears within a small corner from the totality of the operations” (Interview, Koerfer, S., 2008-10-22) In Sweden, all proceeds in “Save the Children’s” donation boxes in IKEA’s stores go to Joint local projects. At IKEA Barkarby, customers’ voluntary cooperates for spare parts are also dedicated to such projects. In many IKEA shops and workshops, involving the Barkarby store, these proceeds go to a local “Ellen/Allan-project”. The “Save the Children” project made, aimed and designed for the youth who need counseling and support. At the Kungens Kurva store, the collected money goes to relief aid for the children that have been victim to the 2008 cyclone disaster in Burma. We can thus see that IKEA commits to projects, with both “in-kind assistance” or physical assistance which are products made by IKEA and with money donated from customers and of course from the corporation itself. The local store projects tend to involve more “in-kind assistance” as there is no budget for CSR matters per se (Interview, Fredriksson, and Å. 2008-11-10).
3.3.4 Future Projects
I. Hrdlickova reveals that the coming procedures for IKEA’s CSR development will be to inform and help customers to create a sustainable place to live in. Therefore, IKEA will put its knowledge on this area in the hands of customers. An example of its useful knowledge is a solar panel lamp which has been improved and was launched in spring of 2009. This might only be a small step in the righteous path but had a great symbolic value regarding electricity consuming issues and showed the potential developments of the next two or three years. In January 2009, the new IKEA “PS collection” were launched, which is designed with the highest consideration to the environment( Interview, Hrdlickova, I., 2008-11-23).