1. IKEA’s Global Sourcing Challenge:
Indian Rugs and Child Labor
Ines Haitzinger, Karen Hintelmann, Leonie Steegers, Anny Yen

2. AGENDA
COMPANY & SITUATION SHORT-TERM ACTIONS RESPONSE PROPOSITION LONG-TERM STRATEGY RECOMMENDATIONS

3. COMPANY & SITUATION
• IKEA = Swedish furniture retailer
• Strategy: Sell affordable, good-quality furniture to mass-
market consumers
• Procurement policy: Establish long-term relationship with
suppliers
• 2,300 suppliers in 70 countries
• Marianne Barner: Business area manager for carpets
• Rangan Exports: Indian carpet supplier; Recently signed
contract forbidding the use of child labor
COMPANY & SITUATION SHORT-TERM ACTIONS RESPONSE PROPOSITION LONG-TERM STRATEGY RECOMMENDATIONS

4. COMPANY & SITUATION
1994:
Child labor scandal in Pakistan
1980: Ikea had no awareness of child labour problem
Formaldehyde scandal in Denmark  Apology
 Collaboration with chemical  Advice from organizations
companies to reduce formaldehyde  Change of supplier contracts
concentration  Random tests & situation analysis
1992: 1995:
Formaldehyde scandal in Germany Child labor scandal reported by German
 CSR: TV channel at Rangan Exports
1. Forestry  Invitation for live discussion
2. Adaptation of product range  What to do?
3. Working with suppliers
4. Transport and distribution
5. Environmentally concious stores
COMPANY & SITUATION SHORT-TERM ACTIONS RESPONSE PROPOSITION LONG-TERM STRATEGY RECOMMENDATIONS

5. SHORT-TERM ACTIONS
• Investigate first the
situation and generate
potential learnings
• Find a long-term
solution
• Stop business activities
 No direct cancellation
only if violation proven
COMPANY & SITUATION SHORT-TERM ACTIONS RESPONSE PROPOSITION LONG-TERM STRATEGY RECOMMENDATIONS

6. Media Representation
COMPANY & SITUATION SHORT-TERM ACTIONS RESPONSE PROPOSITION LONG-TERM STRATEGY RECOMMENDATIONS

7. LONG-TERM STRATEGY
Alternative suppliers
COMPANY & SITUATION SHORT-TERM ACTIONS RESPONSE PROPOSITION LONG-TERM STRATEGY RECOMMENDATIONS

8. LONG-TERM STRATEGY
COMPANY & SITUATION SHORT-TERM ACTIONS RESPONSE PROPOSITION LONG-TERM STRATEGY RECOMMENDATIONS

9. LONG-TERM STRATEGY
Own monitoring and control processes or sign up to Rugmark?
COMPANY & SITUATION SHORT-TERM ACTIONS RESPONSE PROPOSITION LONG-TERM STRATEGY RECOMMENDATIONS

10. LONG-TERM STRATEGY
COMPANY & SITUATION SHORT-TERM ACTIONS RESPONSE PROPOSITION LONG-TERM STRATEGY RECOMMENDATIONS

11. LONG-TERM STRATEGY
Addressing root causes of child labor?
COMPANY & SITUATION SHORT-TERM ACTIONS RESPONSE PROPOSITION LONG-TERM STRATEGY RECOMMENDATIONS

12. LONG-TERM STRATEGY
• Problem before: Formaldehyde and forestry issues  reactive
• Ikea as global company: higher awareness of social
responsibility & anticipate potential upcoming risks  introduce
a full CSR concept
Increase awareness of Indian population
hotline, experts, investigation
Provide kids education they have
missed  future work prospectives
Higher family income 
elimination of child labor,
boycotts together with other firms
COMPANY & SITUATION SHORT-TERM ACTIONS RESPONSE PROPOSITION LONG-TERM STRATEGY RECOMMENDATIONS

13. RECOMMENDATION
COMPANY & SITUATION SHORT-TERM ACTIONS RESPONSE PROPOSITION LONG-TERM STRATEGY RECOMMENDATIONS

14. Thank you for your attention!