Integration and Communication of CSR Principles by IKEA. An Analysis of the Influence of and on External Stakeholders.

1. UCL Integration and Communication of CSR Principles by IKEA.An Analysis of the Influence of and on External Stakeholders. Maon François Swaen Valérie Université catholique de Louvain – Belgium GIN 13th International ConferenceCardiff 2006

2. Structure of the Presentation A. Context and Objectives B. Conceptual Background C. Methodology D. Main findings E. Managerial Lessons

3. Context • Stakeholders’ perceptions and attitudes towards companies’ CSR policies are complex and difficult to define in a generalperspective (e.g. Sen & Bhattacharya, 2001) • Research focus on certain types of stakeholders: consumers (e.g. Brown & Dacin, 1999), investors (e.g. Sparkes, 2002), employees and job applicants (e.g. Turban & Greening, 1997)  Impact on other stakeholders (NGOs, unions, public authorities, …) are rarely analyzed and contrasted • Research often considers only one type of stakeholder at a time  Prevent any analysis of the potential differential impact of CSR commitments and communication on different types of external and ubiquitous stakeholders

4. Objectives of the study 1. Analysing how external and ubiquitous stakeholders can influence the development of CSR commitments 2. Assessing the differential impact of CSR commitments and CSR communications on various stakeholders’ groups How? • Through an in-depth case study: The case of IKEA • By using an integrative framework providing an integrated stakeholder orientation for a step by step implementation of CSR (Maignan et al., 2005)

5. Conceptual Background (1/3) Corporate Social Responsibility (CSR) «the extent to which businesses assume the economic, legal, ethical and discretionary responsibilities imposed on them by their various stakeholders» (Maignan, Ferrell & Hult, 1999)” Stakeholders « interface and relay between society expectations and the corporation » (Whetten, Rands & Godfrey, 2002)  Companies develop appropriate strategies to meet, manage and/or change stakeholders’ expectations

6. Conceptual Background (2/3) Stakeholders’ reactions to CSR activities • Enhanced reputation (e.g., Fombrun & Shanley, 1990) • Creation of corporate goodwill on key stakeholders (e.g., Murray & Vogel, 1997) • Positive consumers’ attitudes towards the company and its products (e.g., Brown & Dacin, 1997) BUT • CSR initiatives can under certain conditions decrease consumers’ buying intentions (Sen & Bhattacharya, 2001). • Asymmetrical influence of ethical information on attitudes (e.g., Carrigan & Attalla, 2001)  Companies hesitate to communicate about their CSR practices

7. Conceptual Bakground (3/3) CSR Implementation Integrative Framework (Maignan et al., 2005) STEP 1 : Discovering organizational norms and values STEP 7 : Promoting CSR STEP 2 : Identifying stakeholders STEP 4 : Assessing the meaning of CSR STEP 5 : Auditing current practices STEP 6 : Implementing CSR initiatives STEP 8 : Gaining stakeholder feedback STEP 3 : Identifying stakeholder issues Short term feedback loop Long term feedback loop

8. Methodology • Case study research method (Dufour, 1983; Yin, 1984) and complementary data collection techniques: • Exhaustive inventory of IKEA’s CSR communication • Media analysis & store visits in three countries • Extensive desk research • 20 in-depth interviews in 2005 with representatives of IKEA’s external stakeholders • Survey carried out on on a sample of 150IKEA customers in Belgium (quota sampling)

9. Main Findings • IKEA’s CSR Commitments • IKEA’s CSR Communication • Stakeholders’ Reactions to IKEA’s CSR Policies and Communication • IKEA case through the CSR implementation integrative framework

10. 1. IKEA’s CSR Commitments • Ambition: “to make products which have minimum impact on the environment and to manufacture them in a socially responsible way” • CSR commitments and policies materialized in 1998 by the creation of avoluntary code of conduct: The IKEA Way

11. 1. IKEA’s CSR Commitments Scandals and criticisms faced by IKEA • 81-92  Product safety and environmental issues in Europe • 92-97  Child labour in Pakistan, India, Vietnam and Philippines • 98  Lamentable work conditions in IKEA supply chain • 98-99  Pressures from environmental groups related to wood procurement issues in Russia and Indonesia • 1999- … Criticisms on the code of conduct implementation in suppliers’ factories(wages levels, freedom of association, work hours…)

12. 1. IKEA’s CSR Commitments Reactive behaviours • Different programs of actions aiming at dodging risks, latent detractors’ criticisms and their potential harmful impacts • Importance of external stakeholders in the development and enforcement of socially responsible buying practices agreements and codes of conduct • Code of conduct based on a 1996 IFBWW-IKEA agreement • Collaborations in environmental and social matters

13. 1. IKEA’s CSR Commitments Proactive behaviours • Anticipate environmental demands as a part of its corporate culture and management philosophy • Officially, IKEA does not simply consider CSR policies as reactions to criticisms and scandals • Sustainable development & CSR = market opportunities • IKEA presents itself as a CSR-concerned company • speed of reaction • humble attitude • increasingly proactive behaviour

14. 2. IKEA’s CSR Communication • Central belief: « Little publicity is good publicity » BUT • Doesn’t want to appear as a distributor achieving low price at any price THEN • Traditional communication tools • CSR-specific communication tools • IKEA tries to keep a low profile and prefers to progress cautiously by privileging actions instead of communication in CSR matters • Passive behaviour in terms of CSR communication • Lets potentially interested parties “find” CSR information about IKEA by themselves

15. 3. Stakeholders’ Reactions About customers • Feeling of not being informed on IKEA’s CSR policies • Don’t significantly ask for more CSR information • Slightly positive perception about IKEA’s CSR commitments (mean = 4,3 on a scale from 1 to 7) • No significant influence on their buying intentions • Relatively ethical “chastity” of IKEA doesn’t constitute a determinant factor in IKEA’s consumer behaviour • 40,6 % of customers affirm they would boycott IKEA if they learn about important negligence related to CSR matters they attach importance to

16. 3. Stakeholders’ Reactions About other stakeholders than customers • Stakeholders’ assessment of IKEA’s CSR commitments • General perception = relatively favourable • HOWEVER: Interesting differences have been highlighted according to the type of stakeholders considered

17. 3. Stakeholders’ Reactions About partner organizations, trade unions and public administrations which have regular and /or formalized contacts with IKEA • better perception of IKEA’s CSR commitments and policies About organizations that have only accessed to independent and external sources of information on IKEA’s CSR policies • often sceptical and critical attitude, sometimes aggressive Lack of structured dialogue with stakeholders is emphasized  Transparency - demanded by a large majority of stakeholders – plays a positive role in the development of positive attitudes towards the firm

18. 4. IKEA Case through the CSR implementation integrative framework Step 1: Discovering organizational value and norms • IKEA’s Origin, values and culture, as well as IKEA’s business vision – “to create a better everyday life for the many people”:  considered as fostering the development of CSR policies  Fit with prerequisite of openness towards stakeholders issues  Strong basis for implementing an integrated CSR program

19. 4. IKEA Case through the CSR implementation integrative framework Step 2/3: Identifying stakeholders and stakeholders’ issues • Customers, employees and suppliers historically considered as key stakeholders in IKEA’s environment • Crisis IKEA faced:  importance of other key stakeholders such as NGOs, unions federation, or the media  new social and environmental issues considered  Step 1, 2 and 3 allows IKEA to efficiently assess a CSR meaning that takes into account key stakeholders’ expectations

20. 4. IKEA Case through the CSR implementation integrative framework Step 4: assessing the meaning of CSR • IKEA’ CSR vision highlights two essential points: • The motivation supporting the CSR commitments • The stakeholders’ issues considered as priorities • Better everyday life at home for customers • Products free from hazardous substance • Responsible forestry policies • Fundamental rules to be respected by suppliers: • No child labour • « Acceptable » work conditions • Responsible attitude towards the environment

21. 4. IKEA Case through the CSR implementation integrative framework Step 5: auditing current practices • Regular market studies on customers, suppliers and employees • Batch of « general » key performance indicators • Internal audit structure • External auditors (KPMG, Price Waterhouse Coopers, etc.) referring directly and only to IKEA executives  No involvement of external stakeholders in the monitoring process • Social audits allow IKEA – only to a certain extent – to progress in implementation of CSR initiatives related to most valued issues

22. 4. IKEA Case through the CSR implementation integrative framework Step 6: implementing CSR initiatives • Initiatives with limited adaptations of the existing process • Focus on child well-being and protection of globe’s forests • New process created with the development of the code of conduct • Transportation issues, energy policies, ameliorated auditing process, new functions…

23. 4. IKEA Case through the CSR implementation integrative framework Step 7: Promoting CSR • No structured dialogue • Lack of transparency and clarity • Credibility perceived as high but ‘voluntary blurred’ discourse • CSR communication = too shy • Little is made to encourage to encourage ideas exchange and interactions with stakeholders • IKEA gauged as too unilateral • Stakeholders’ skepticism

24. 4. IKEA Case through the CSR implementation integrative framework Step 8: Getting stakeholders’ feedback No real multi-stakeholders structured dialogue + Confidential audit results and lack of transparency = Reduced efficiency of stakeholders’ feedback + Limited credibility of the CSR practices + Skeptical attitude towards the company

25. 4. IKEA Case through the CSR implementation integrative framework STEP 1 : Discovering organizational norms and values STEP 7 : Promoting CSR STEP 2 : Identifying stakeholders STEP 4 : Assessing the meaning of CSR STEP 5 : Auditing current practices STEP 6 : Implementing CSR initiatives STEP 8 : Gaining stakeholder feedback STEP 3 : Identifying stakeholder issues Short term feedback loop Long term feedback loop

26. Managerial Lessons • Be conscious of the company's changing environment: persistently scan the external environment, identify key stakeholders, and consider CSR as a latent growth vector • Be aware of the role of external stakeholders in the success of CSR integration process: tackle the raised issues early enough and engage in multi-stakeholder dialogue • Communicate with the right tools to the appropriate stakeholders: expectations and perceptions vary from a stakeholders’ group to another

27. Managerial Lessons • Give transparency the importance it deserves: it strongly participates to the building of stakeholders’ attitudes towards the company • Adopt a humble attitude: involve stakeholders in the monitoring process and communicate clearly on your intermediary achievements • Do not rest on present achievements: CSR is a continuous process

28. Thank you for your attention Cardiff 2006 GIN 13th International Conference

29. IKEA engineers imagining the strange look on the customer’s face when he discovers the new self-assembling system…