IKEA
High-profile organisations are held to account not only for their own conduct but also conduct across their value chain, as NGOs and pressure groups tackle low standards by targeting the most high-profile link. IKEA is responding to this challenge by working collaboratively with suppliers to address sustainability issues throughout the chain.
IKEA's supplier codes of conduct are central to this approach. The core "IWAY" code stands for The IKEA Way on Purchasing Home Furnishing Products, and specifies the minimum requirements suppliers must meet in order to do business with the company, covering protection of the environment, working conditions and child labour. In addition to laying out requirements, however, these documents also describe what suppliers can expect from IKEA in return.
A 'Staircase Model' encourages continuous improvement from IKEA's suppliers, allowing them to move through four levels of progressive achievement. New suppliers must be audited against the Staircase Model before delivering their first shipments. Level 1 of the staircase is the basic entry level, for which the supplier must have an action plan for reaching Level 2 - IKEA's minimum standard. Levels 3 is progressively higher, and for Level 4 suppliers must meet the strictest third party standards, such as those of the Forest Stewardship Council. If necessary, the company will step in to raise standards - in one example giving a loan to a Romanian furniture supplier so that it could invest in modern ventilation and air filters and a machine to turn briquettes from waste to energy and profit.
A network of Trading Service Offices has been created to train, support, and monitor suppliers to ensure compliance with IWAY, and conduct surveys and audits on a regular basis. IKEA audits are not limited to 'tick-box' exercises, but include assessments about whether procedures work in reality. Auditors are required to "explain the IKEA philosophy and check that the supplier understands the key environmental impacts and has started to measure and follow-up", and are subject to both internal IKEA and third party audits. The IWAY Council oversees the operation and is chaired by IKEA's CEO. IKEA's goal is to have 100% of its suppliers at the minimum Level 2 requirements by 2009 and 30% at the highest requirements of Level 4 shortly after.
In an increasingly globalised and connected world, scrutiny of corporates' impacts, both direct and indirect, will continue to grow. By anticipating and managing sustainability across its supply chain, IKEA plans to stay well ahead of the game.
