IKEA’s Global Supplier Standards: Maintaining Low Costs While Fighting the Root Causes of Child Labor Known for its styl

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IKEA’s Global SupplierStandards: Maintaining LowCosts While Fighting the RootCauses of Child Labor
Known for its stylish ready-to-assemble home furnishings, IKEAhas long relied on an extensive supplier network to manufacture itsproducts and support its rapid global expansion. It has worked hardto develop a successful approach to encourage high ethicalstandards among its suppliers, including standards concerning thenotoriously difficult issue of child labor. IKEA’s initial plan tocombat the use of child labor by its suppliers involved (1)contracts that threatened immediate cancellation and (2) randomaudits by a thirdparty partner. Despite these safeguards, thecompany discovered that some of its Indian suppliers were stillemploying children. IKEA realized that this issue would crop upagain and again if it continued to use low-cost suppliers indeveloping countries—a critical element inits cost-containment strategy.To address this problem, IKEA developed and introducedits new code for suppliers, IWAY, which addressessocial, safety, and environmental issues across itspurchasingmodel. When faced with a supplier slip-up, IKEAworks with the company to figure out and tackle theroot cause of violations. Using child labor, for example,can signal bigger problems: production inefficienciesthat require the lowest-cost labor, lack of alternativeoptions for children like school or supervised communitycenters, family health or income challenges thatmean children need to become breadwinners, and soon. IKEA takes action to provide technical expertise toimprove working conditions and processes, offer financinghelp at reasonable rates, run training programsonsite, and help develop resources and infrastructure inareas where its suppliers are based. The IKEA foundationalso began focusing on these issues through partnershipswith UNICEF and Save the Children aimed atfunding long-term community programs that supportaccess to education, health care, and sustainable familyincomes. As of 2016, their efforts have improved theeducation opportunities of more than 12 million childrenin 46 different countries.IKEA’s proactive approach has reduced some of therisks involved in relying on suppliers in developingcountries.Through its approach, IKEA has been able to maintainits core strategic principles even when they seemto be at odds: low costs, great design, adherence to itsethical principles, and a commitment to a better world.