IKEA Child Labor Dilemma: Ethics, Culture, and CSR

Executive Summary

IKEA's core founding value was based on the concept of making life better for people by giving them access to affordable products (Bartlett, Dessain & Sjöman, 2006). The problem that arose for IKEA in the 1990s, several decades after the company's founding, was the issue of child labor and whether IKEA should continue to source rugs from a supplier that had been reported as using child labor in its manufacturing process. From a social issues standpoint in the Western perspective, IKEA was being pressured to break ties with the supplier. However, in countries like India, unbonded child labor was not viewed as harshly as it was in the West; on the contrary, it was socially acceptable because children worked under the guidance of their parents and learned their trade in this manner. To sever ties with a supplier simply engaging in a traditional custom of its country could itself be hypocritical. This paper examines the case and provides a recommendation for IKEA to assess whether the child laborers are bonded or unbonded — and if the latter, the company should continue to source from the supplier, as doing so would actually help Indian families rather than harm them.

Case Analysis

An IKEA supplier of Indian rugs had become the subject of a German television news report on child labor. This was problematic for the company because the CEO of IKEA "was being urged to sign up to an industry-wide response to growing concerns about the use of child labor in the Indian carpet industry" (Bartlett et al., 2006, p. 1). The Swedish Save the Children organization and a collective of "manufacturers, importers, retailers, and Indian nongovernmental organizations (NGOs)" were applying pressure on IKEA to "do the right thing" and sever ties with suppliers who used child labor in the production of rug products in India (Bartlett et al., 2006, p. 1).

While child labor appears unethical on its face, there are actually two distinct types of child labor that exist in India: (1) bonded child labor and (2) unbonded child labor. In the former case, the child is essentially an indentured servant used to pay off the debts of his or her parents at such high interest rates that repayment often takes a lifetime — and sometimes longer, with the debt passed on to the next generation. This type of bonded labor is particularly offensive to Western sensibilities. The other type of child labor involves children working alongside their parents in whatever field the family is engaged in, whether rugmaking, agriculture, or another trade. The child learns the parents' craft by working beside them — an ancient custom that seems foreign to modern sensibilities primarily because in the industrialized West all children are expected to attend public school. In India, where ancient customs continue to persist, there is a way of life that is humbler and simpler.

The problem for IKEA is that severing ties with the supplier could actually end up hurting Indian workers and families rather than helping them. Many families in India depend on these jobs to make a living. Yet IKEA was being pressured into cutting ties by other Western companies and organizations as part of a strategy of promoting corporate social responsibility. Is this mere virtue signaling (Orlitzky, 2017), or is there a genuine need to address the issue from a human rights point of view (Smolin, 2000)?

Conclusion and Recommendation

An investigation is required before anything is done. IKEA needs to assess the situation of its Indian supplier to ascertain the facts. The agendas of the various organizations pushing IKEA to cut ties with its Indian supplier may be other than they appear, and IKEA should not act simply to pacify these groups. IKEA's core founding value is based on making life better for people — not harder. Cutting ties with the supplier because children work on the rugs may seem like the righteous course of action in the eyes of Westerners — but what about in the eyes of the Indians themselves who make those rugs and whose livelihoods depend on selling them to companies like IKEA?

Refusing to buy from them because children participate in the process — learning under the guidance of their parents — would be potentially catastrophic for those families. That is all they know. Opportunities for schooling in India are not as plentiful as they are in the West, nor does formal education necessarily translate into better opportunities for supporting a family. India's families depend on social and traditional customs. So long as children are not being exploited through bonded labor, IKEA must respect the culture of the Indian people and not yield to peer pressure from Western organizations that are offended by any form of child labor and do not examine the subtle but meaningful differences between bonded and unbonded labor.

For that reason, IKEA should not sever ties with its Indian rug supplier — at least not yet. First, it should investigate whether the children involved are being exploited via bonded labor. If so, the company should address the issue by obliging the supplier to either end the bonded labor arrangement and employ the families as unbonded laborers, move to a different supplier, or contract with the families directly. IKEA cannot conscientiously condone bonded labor. However, if the arrangement is unbonded, this would be acceptable, as it is rooted in tradition and involves no exploitation.

References

Bartlett, C. A., Dessain, V., & Sjöman, A. (2006). IKEA's Global Sourcing Challenge: Indian Rugs and Child Labor (A). Boston, MA: Harvard Business School.

Orlitzky, M. (2017). Virtue signaling: Oversocialized "integrity" in a politically correct world. In Integrity in business and management (pp. 190–206). Routledge.

Smolin, D. M. (2000). Strategic choices in the international campaign against child labor. Hum. Rts. Q., 22, 942.