14 DECEMBER 2006 Le Monde diplomatique

‘LOW PRICES ALWAYS INCUR HIGH SOCIAL COSTS’

Secret hidden behind Ikea’s wardrobes

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 fi nd 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 council

lor 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-Mari

times 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 furnish

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

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

ing store lacks an outlet within 100km. Of

course success on this scale has its downside. When the fi rm opened a store in Saudi Arabia

in 2004, it off ered a $150 cheque to the fi rst 50 shoppers through the door. There was almost

a riot, with two deaths, 16 injured and 20 fainting fi ts. What is behind the global love aff air with Ikea? Apart from attractive prices, one of the

keys to the fi rm’s success is its social and environmental image.

Keen to fi nd a source of cheap, compliant labour it started outsourcing part of its pro

duction 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). From the start Ikea off ered extremely low

prices. In A Furniture Dealer’s Testament, published in 1976, Ikea’s founder Ingvar Kam

prad explained that he wanted every eff ort to be made to keep prices as low as possible, plac

ing high demands on fellow workers. Without tight control over expenses the fi rm would not

be able to fulfi l 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 fi rm 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 Work

ers threatened to boycott Ikea, leading to an agreement between the union and the retailer

(see box below). 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 appro

priate 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. Sub

contractors must not pay their workers less than the country’s minimum wage and work

ing 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 prac

tices in subcontracting factories, although the Iway prefers to refer to local legislation, point

ing 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).

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 fi rst

sight the working conditions in Karur seemed fi ne. The premises were clean and well venti

lated. 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

off ers 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

eff ort 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 fi nal 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 associa

tion and collective bargaining for wages and overtime. In the worst case there was no trade

The sins of the founder found out

I KEA is not quoted on any stock exchange. There is no way of knowing who really owns the Ikea idea, and still less of obtaining a consolidated balance sheet or a breakdown of investments. It seems that the Stichting Ingka Foundation in the Netherlands owns the limited company Ingka Holding, which embraces all the Ikea companies. Above all, there is Inter Ikea Systems, which owns the “Ikea concept” and is controlled by the Inter Ikea Foundation of Waterloo, Belgium. Inter Ikea Systems controls the brand name and focuses on making it a lasting success. It controls the image, names and standards that ensure there is almost no difference between an Ikea stores in China, the United States or Kuwait. Who runs Inter Ikea Systems, with its ownership of the concept and franchise rights? Stellan Björk, a Swedish journalist who investigated it, said: “As far as we know Inter Ikea Systems belongs to several foundations and offshore companies, some of which are registered in the Caribbean” (1). So we know nothing, although the Kamprad family cannot be far away. This opacity contrasts with the transparency fl aunted by the company. During its campaign about Ikea, Oxfam-Magasins du Monde asked to be allowed to monitor fi ve products jointly selected in consultation with the international management. A year later, despite many reminders, it had not received any answer. Ikea made a point of never putting anything in writing when dealing with the Belgian NGO. Ikea’s supposedly “independent” audits

are carried out by consultants who are not allowed to release their fi ndings, less still comment on them. In the framework agreement signed by Ikea and the International Federation of Building and Wood Workers (2) in May 1998, the union agreed to warn the fi rm before reporting any failure to comply with the Ikea code of conduct. In exchange the fi rm “will review the matter and propose appropriate measures” (3). Nothing slips out. In keeping with this rationale it proved impossible to fi nd a single Ikea employee in Belgium prepared to answer our questions. They are not authorised to talk to the media. If mistakes are discovered, though, Ikea communicates a great deal. Each time it reacts in exactly the same way, acknowledging its mistake, playing down its importance and providing “solutions”. Since the 1990s, in response to campaigns by environmental pressure groups worried about the use of timber, Ikea has developed links with the World Wildlife Fund and Greenpeace. When other groups accused Ikea of using child labour it launched partnerships with Unicef and Save the Children. Without prejudging the value of such projects, we have to make two observations. Ikea’s social and environmental policy is merely a reaction to outside pressure. It is not based on any altruistic commitment, but is an attempt to protect its business interests. None of the partnerships offers any form of guarantee. None of the partner NGOs get to supervise production, nor do they visit the factories of suppliers. The way in which Ikea handled the biggest media scandal involving its founder, Ingvar Kamprad, is revealing. In 1994 a Swedish

newspaper exposed a friendship from 1941 to 1950 between Kamprad, then a young man, and a prominent fi gure from Sweden’s political extreme right of the era. Under attack, Kamprad acknowledged his errors, repudiated all racist and fascist ideas, shed a tear on Swedish television and sent a letter to his employees explaining that this friendship had been the stupidest act of his life. In his offi cial biography Kamprad openly accused his father of being antisemitic, and then concluded that he often wondered when he might be absolved of his “youthful sins”. He asked if it was a crime to have been raised by German grandparents. Kamprad used similar communication techniques to those of his company when he referred to something he did aged 24 as a “youthful sin” (4) and apologised profusely. By occupying any space opened up by critics, and putting a different spin on events, Ikea monopolises all the versions of the stories in circulation. The revelations about Kamprad’s past helped to boost the image of its founder that Ikea wants to promote: that he is sensitive, acknowledges his faults and has the common touch. Many stories followed to corroborate this folksy image: how he sold matches when he was fi ve or how, despite being an ageing billionaire, he still compares the price of postcards. Ikea’s corporate communications team and Kamprad himself have built on the image to create an awesome fi gure, enforcing pennypinching on the whole workforce. Such tales delight the media. Kamprad is on fi rst-name terms with staff, drives an old banger, waits until the end of the market to buy vegetables at reduced prices and fl ies economy class just like everyone else.

True, not many ordinary people had two Porsches by the age of 30, own a 17-hectare vineyard or a 435 sq m mansion in Switzerland. Do we really believe he lives the life of a hermit? Despite the inconsistencies between fact and fi ction much of the media still loves the Ikea story. A striking example was the interview Kamprad gave this March to the Pardonnez

moi programme on Swiss-French television. The presenter aggressively questioned him at length about his stinginess (“You fl y economy class? Staff must write on both sides of the paper? Did you really drive an old Volvo for years? You haggle over lettuces at the end of the market?”) and spoke openly about Kamprad’s past. The interview seemed courteous yet pointed. However, it was exclusively personal. Though they talked for almost 20 minutes there was no mention of Ikea’s environmental performance or the working conditions of 90,000 employees and the hundreds of thousands working for its subcontractors. As usual Ikea had decided the agenda. By maintaining a trickle of self-criticism, occasionally revealing minor failings, Ikea is determined to monopolise debate, positive or negative. It hopes to pre-empt any publicity that might harm its sales. O B, J-M C AND D L

(1) Oliver Burkeman, “L’empire d’Almhult vous veut du bien’, in a feature “Ikea: la secte mondiale du kit”, Courrier International , no 722, Paris, 2-8 September 2004. (2) Now called Building and Wood Workers’ International. (3) “Revised agreement between Ikea and the IFBWW”, December 2001, www.ifbww.org/index. cfm?n=44&l=2&c=901 (4) Bertil Torekull, Leading by design: the IKEA story , HarperBusiness, New York, 1999.