[DEBATE] : Ikea's dirty secrets

[Peter Waterman]

Le Monde Diplomatique
December 2006

'LOW PRICES, HIGH SOCIAL COSTS'
Secret hidden behind Ikea's wardrobes

The Swedish furnishings retailer Ikea has a 
public image of Scandinavian design style sold 
cheaply. It is secretive about its business 
affairs, and though it declares its good 
intentions about the pay and conditions of its 
many third world workers, it will not guarantee 
them.

By Olivier Bailly, Jean-Marc Caudron and Denis Lambert

Ikea, the home furnishing multinational, with 410 
million customers worldwide and 160m catalogues 
in circulation (more than copies of the Bible), 
is doing fine. Its revenues continue upwards, 
from $4.3bn in 1994 to $19.4bn in 2005, more than 
400% growth. It would be hard to do better. Ikea 
now plans to conquer Russia and China, which have 
so far resisted its spread. As Ikea's in-house 
magazine Read Me explains, the aim is to improve 
the daily life of the largest possible number of 
people and, to achieve that, shops must 
constantly sell more things to more customers 
(1). Ikea is in no doubt that the act of purchase 
is the secret of happiness.

What is remarkable about a multinational so 
strongly associated with global uniformity and 
consumerism is that Ikea manages to fend off the 
attacks of consumer organisations, third-world 
activists and environmental watchdogs. This is no 
mean achievement. It has succeeded in 
establishing close links with its customers 
thanks to unbeatable prices and special 
children's areas in all shops, inventing an 
all-embracing concept in which buyers can find 
everything immediately - and preferably plenty of 
other items they didn't really want.

There is no shortage of stories about the 
strength of bonds between the shop and its 
customers. In 2004 a Stockport town councillor in 
Lancashire, Britain, bragged that having an Ikea 
store was an honour for the town (2). At Mougins, 
in the south of France, local people started a 
petition which read: "If you are fed up with 
making a 200km round trip, lasting two hours, 
just to shop in your nearest Ikea, then seize 
this opportunity (maybe the last) to bring a new 
Ikea to the Alpes-Maritimes department" (3). This 
is remarkable: people organising a petition, 
which collected more than 2,000 signatures, 
standing up for their rights and organising 
because a furnishing store lacks an outlet within 
100km. Of course success on this scale has its 
downside. When the firm opened a store in Saudi 
Arabia in 2004, it offered a $150 cheque to the 
first 50 shoppers through the door. There was 
almost a riot, with two deaths, 16 injured and 20 
fainting fits.

What is behind the global love affair with Ikea? 
Apart from attractive prices, one of the keys to 
the firm's success is its social and 
environmental image.

Keen to find a source of cheap, compliant labour 
it started outsourcing part of its production to 
a manufacturer in Poland in 1961. Since then Asia 
has supplied an ever-growing share of its 
products. China (hardly known for its defence of 
workers' rights) has overtaken Poland to become 
Ikea's top supplier, accounting for 18% of 
purchases. In all 33% of what is promoted as 
"made in Sweden quality" comes from Asia (4). 
According to The Observer, developing countries' 
share in Ikea's manufacturing activities rose 
from 32% to 48% between 1997 and 2001 (5).
Keep the price down

>From the start Ikea offered extremely low prices. 
In A Furniture Dealer's Testament, published in 
1976, Ikea's founder Ingvar Kamprad explained 
that he wanted every effort to be made to keep 
prices as low as possible, placing high demands 
on fellow workers. Without tight control over 
expenses the firm would not be able to fulfil its 
mission (6).

However, despite Ikea's current claims, low 
prices always incur a high social cost. Between 
1994 and 1997 three documentaries screened by 
German and Swedish television accused the firm of 
using child labour under degrading conditions in 
Pakistan, India, Vietnam and the Philippines (7).

In 1998, after the discovery of wretched working 
conditions in Romania, the International 
Federation of Building and Wood Workers 
threatened to boycott Ikea, leading to an 
agreement between the union and the retailer (see 
"The sins of the founder found out"). The Iway, 
as Ikea's code of conduct on the environment and 
working conditions is known, establishes as a 
basic requirement for any business relationship 
that there should be no forced or child labour. 
Item seven of the guidelines, on worker health 
and safety, describes working conditions for 
employees, who must be provided with appropriate 
protective equipment.

It also purports to protect the right of 
employees to form or join a union, stipulating 
that subcontractors should not prevent them from 
doing so. The Iway condemns any form of 
discrimination, by race, creed or sex. 
Subcontractors must not pay their workers less 
than the country's minimum wage and working hours 
must not exceed the local limit. It seems odd to 
draw up a code of conduct just to indicate an 
intention to obey the law (rather like making a 
solemn undertaking to drive on the left when 
visiting Britain). It is more important that the 
Iway has a positive impact on the conditions of 
work at subcontractors.

Ikea has certainly ended child labour practices 
in subcontracting factories, although the Iway 
prefers to refer to local legislation, pointing 
out that "national laws or regulations may permit 
the employment or work of persons 13 to 15 years 
of age or 12 to 14 years of age on light work" 
(8).
What about the workers?

But things are not quite the same when it comes 
to the right of workers to organise and join 
unions. During a trip this May to a village close 
to Karur in Tamil Nadu province, a textile 
production centre in southeast India, we talked 
to some people working for an Ikea subcontractor. 
Shiva (9) was prepared to answer questions from 
western visitors but her white-haired mother was 
worried. What would happen if Shiva lost her job? 
Her wages were the family's only resource, 
supporting the two women and Shiva's 15-year-old 
son.

Shiva barely criticised her employers, and talked 
about tea breaks and equipment to protect eyes 
and hands. The environment she described seemed 
healthy enough. And at first sight the working 
conditions in Karur seemed fine. The premises 
were clean and well ventilated. There were tea 
breaks and good quality equipment. Copies of the 
Iway were posted on the walls of the factory.

This is corroborated by other sources. "Ikea 
offers the best conditions, there is no doubt 
about it," said Maniemegalai Vijayabaskar, an 
assistant lecturer at Madras Institute of 
Development Studies and joint author of a study 
commissioned by Oxfam-Magasins du Monde on Ikea's 
suppliers (10). He added: "They put on a human 
face to avoid criticism and controversy. But they 
don't make much effort to improve working 
conditions."

In 2003 the Dutch trade union federation asked 
the Centre for Research on Multinational 
Corporations (Somo) to investigate Ikea suppliers 
in three countries: India, Bulgaria and Vietnam. 
In each case investigators met workers from three 
or four companies and conducted interviews 
outside the workplace. They visited the factories 
and talked to the management.

Their conclusions concerned 10 suppliers 
representing about 2,000 employees, noting in the 
final report: "There are still numerous 
violations of Ikea's code of conduct in all three 
countries in all factories researched." The most 
common concerned freedom of association and 
collective bargaining for wages and overtime. In 
the worst case there was no trade union, 
employees worked a seven-day week and the minimum 
wage was not honoured. No one was "aware" of 
Ikea's code of conduct.

>From what we saw in India, trade unions are still 
not represented at Ikea's subcontractors. 
Officially they are tolerated but, according to 
Shiva, they are not really necessary. She said: 
"When there is a problem we hold a meeting and we 
talk about it. It's often when they want to 
remind us about the cleanliness of the toilets. 
If I want something, I can tell the manager." 
Xana, a younger worker without any dependants, 
described things differently: "A union? No, they 
wouldn't allow it. And if inspectors visit the 
factory, the bosses remind us of the lies we 
should tell them."
'We eat simply'

There is nothing unusual about this; attempts to 
set up a union are generally thwarted. Ikea must 
have expected this, just like any other 
multinational starting business in India. Wages 
are kept particularly low. Shiva claims she earns 
2,300 rupees a month ($48.30) and it costs her 
500 rupees ($10.50) to take the bus to work. Can 
she really survive on such wages? When her mother 
cooks, the recipe is always the same. "We eat 
simply, soup and rice with sauce. We eat meat 
once a week, on Sundays. But not this week 
because it's the end of the month." We met 10 
days before the end of May.

The Ikea code of conduct offers no guarantee that 
workers will get enough to eat or furnishings for 
their homes. There are no Malm beds in Shiva's 
two-roomed house. Just a few calendars on the 
wall, some black and white photographs, a couple 
of mats, two small chests for clothes, a clock 
and household gods.Asked what she would do if she 
earned 1,000 rupees more a month, she outlined 
her idea of comfort: "We'd get a gas cooker with 
a bottle. Cooking over a fire is a nuisance 
because the smoke gets in your eyes. In the rainy 
season it's hard finding dry wood, and collecting 
it is a lot of work."

Among Ikea suppliers there is nothing unusual 
about Shiva's poverty. Manjula, who had just 
married, also works for an Ikea supplier. She 
said she earns 2,360 rupees ($49.60), but her 
payslip for October showed that figure 
corresponded to her gross earnings, from which 
national insurance payments were deducted. For 24 
days' work in October she took home 1,818 rupees 
($38.10). Even working six days a week she comes 
close to the absolute poverty line, without 
contravening the Ikea code of conduct. To earn a 
little more she had to work overtime. "They work 
12 hours a day, not including travel time," said 
Vijayabaskar. "At maximum output they may work as 
much as 15 hours a day."
Beyond the 8-hour day

Ikea tries to reduce overtime but pressure of 
tight deadlines and the need to earn more make it 
inevitable. The official eight-hour day is 9.30am 
to 1.30pm, 2.30 to 6.30pm. Kalaya, who lives in a 
poor neighbourhood of Karur, said: "If you work 
overtime from 7 to 8 or 9pm, they don't pay you. 
If you work till 10.30pm they give you 50 rupees 
[$1] more. The extra work is generally done twice 
a week."

Assam, who works at the same factory, said there 
was no overtime. The day we spoke the machines 
ran late into the night and we saw groups of 
workers going into the factory until 8pm. With 
strict instructions from management and the fear 
of losing a job, people may gloss reality. 
Denoosha made no bones about needing extra cash. 
She spoke to us briefly when she left work, then 
said she must be off. She had another job, from 
8pm to 1am, which earned her 80 rupees ($1.70) 
plus food.

Ikea views Shiva, Kalaya and Denoosha as labour 
costs that must be strictly limited. It is 
precisely because of low labour costs that the 
firm sources products in India. To make things 
worse its subcontractors contract work out to 
cope with fluctuating demand. At this point the 
Iway code of conduct becomes completely 
theoretical, with no control over anything but 
the deadline for delivery.

Even for official suppliers, auditing of 
compliance with the code of conduct is extremely 
uneven. Ikea's 46 purchasing offices, in 32 
countries, carry out most (93%) of the audits. 
The firm's Compliance and Monitoring Group has a 
staff of five (three in 2004) and is tasked with 
implementing the code of conduct. It trains the 
purchasing offices and carries out audits: 53 in 
2005 (11). External auditors, such as KPMG, 
PricewaterhouseCoopers and Intertek Testing 
Services, only did seven audits in 2004. Ikea 
admitted that the number was low but explained 
that "[2004] was a year with a low number of 
third-party audits. [2005] will in contrast be a 
year with a high number of audits" (12). In 2005 
external consultants did 26 out of a total of 
1,012 audits.
Skimming the surface

The third-party audits are integrated into Ikea's 
internal auditing system. Auditors cannot publish 
their findings, which are reported directly and 
exclusively to the firm's management. Each audit, 
carried out at two-yearly intervals (every six 
months or year in Asia), takes one or two days. 
It considers 90 criteria defined in the Iway code 
of conduct. In an eight-hour day that means 
checking one criterion every 10 minutes. How can 
anybody check that no pressure is being exerted 
on trade union representation in just 10 minutes? 
What about overtime, payment of wages on time, 
breaks, child or forced labour? The solution is 
simple: auditors ask the boss, check company 
records, or interview workers at the factory.

The people checking compliance are well-meaning 
but under the circumstances it is impossible to 
carry out a proper audit. They can only skim the 
surface, with little chance of employees 
providing a full account of their working 
conditions, particularly as the auditors are 
checking production quality at the same time. 
Ikea auditors visited Toneesh, a quality 
controller, twice last year. He said: "They ask a 
few questions, above all on product quality, to 
check production. They are Indians, based in 
Delhi or Chennai, but also Europeans, who only 
talk to the top-level management. Because of the 
language barrier the workers cannot talk to them 
directly."

Kalaya confirmed this: "Yesterday a man from Ikea 
came to the factory. He showed us a video on 
preparing a quality product. And he asked 
questions, but only about the product." This 
approach seems unlikely to prevent Kalaya from 
working unpaid overtime.

In practice Ikea merely sands off some of the 
rough edges of exploitation. Employees have 
access to filtered water, gloves and separate 
toilets. They sometimes have tea breaks. But tea 
is no help in making ends meet. As soon as social 
issues such as wages, union representation and 
overtime raise their head, the tune changes. Ikea 
is the main beneficiary of the semblance of 
social responsibility embodied in its code of 
conduct. As Vijayabaskar pointed out: "Ikea 
unloads the cost of its social policy on its 
suppliers." At the same time it boosts its image 
with commitments that cost it nothing, steering 
well clear of child labour, which really upsets 
western consumers.

Ikea's supposedly socially responsible attitude 
makes no difference to the hard lives of some of 
its workers. For Ikea to claim to be an ethical 
enterprise it should be able to offer them a 
decent living. This does not mean luxuries - 
televisions or mobile phones - just enough money 
to buy food more often, keep their children at 
school without needing to do two jobs, and have a 
proper day off every week. Or even the chance for 
Shiva to treat herself to a tiny luxury from 
Ikea's shelves.

Translated by Harry Forster

Olivier Bailly is a journalist, Jean-Marc Caudron 
a researcher and Denis Lambert the 
secretary-general of Oxfam-Magasins du Monde 
(Belgium); they are joint authors of 'Ikea, un 
modèle à démonter' (Editions Luc Pire, Brussels, 
2006)

(1) In the first French-language issue of Read 
Me, the Ikea international in-house magazine, 
March 2006.

(2) "Un Ikea sinon rien!", Courrier 
International, Paris n° 722, 2-8 September 2004.

(3) http://www.ipetitions.com/petition/ ...

(4) "Social & Environmental Responsibility Report 2005", Ikea.

(5) "Trying to assemble a perfect reputation", 
The Observer, London, 25 November 2001.

(6) "The testament of a furniture dealer", a 
brochure published by Ingvar Kamprad in 1976. See 
also Bertil Torekull, Leading by design: the IKEA 
story, HarperBusiness, New York, 1999.

(7) The German documentary, Mattan, is mentioned 
by Manuel Balza Duran and Davor Radojicic in 
"Corporate social responsibility and NGOs", 
Avdelning, Linköping, 30 January 2004. The 
Swedish programmes are quoted by Susan 
Christopherson and Nathan Lillie in Neither 
Global Nor Standard, Oxford University, November 
2003, and in "The Teflon shield", Newsweek 
International, 12 March 2001. See also "Ikea 
accused of exploiting child workers", BBC, 23 
December 1997.

(8) Iway standard, item 15.

(9) As several people we interviewed were afraid 
they might lose their job if identified, we have 
changed all the names of the workers quoted.

(10) LA Samy and M Vijayabaskar, "Codes of 
conduct and supplier response in the Ikea value 
chain", AREDS and MIDS, 2006. 
http://www.madeindignity.be

(11) "Social & Environmental Responsibility Report 2005", Ikea.

(12) "Social & Environmental Responsibility Report 2004", Ikea.

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