Ikea, the Swedish manufacturer of flat-pack furniture and purveyor of Swedish meatballs, has been accused of using forced labour. It is the latest in a long line of major corporates and global brands that have ended up having to de-fuse a potential public relations bomb. Mark O'Shea from our Commerce and Technology Team looks at this in further detail.
In Ikea's case, the adverse publicity centres on Ikea's alleged, knowing use of East German political prisoners by some of Ikea's suppliers in the manufacture of Ikea products. Ikea engaged accountants Ernst & Young to investigate the matter.
A common problem
Other corporates, including some luxury brand owners, chocolate producers, and sporting, clothing and footwear manufacturers, have been accused, often with some justification albeit not always with their proven knowledge or complicity, of using or acquiescing in the use of forced and/or child and/or impoverished labour. Similar accusations have been levelled at corporates who allegedly source raw materials from unsustainable sources. In August 2011, Gibson Guitar Corporation in the US was raided by Federal Authorities who alleged that Gibson had illegally imported wood from Madagascar and India - Gibson agreed to pay a $300,000 fine but contended that the wood had been incorrectly labelled by a local supplier. Some have admitted to past transgressions by previous management / owners; others have blamed suppliers, either admitting to failing to ask any or the right questions or that they were actively misled by the supplier as to the nature and/or conditions of the labour force used / source of raw materials. In such cases the adverse publicity and public backlash can severely impact sales and profits, not to mention brand reputation.
The commercial driver
For many global brands and manufacturers, the attraction of overseas manufacture in countries where labour and raw material costs are low, and where there is an abundance of ready and willing labour, is clear. However, the difficulty is that in the age of the Internet, of instantaneous communication, with cameras on every mobile phone and device, any transgressions can be global news in the blink of an eye.
An 8-point action plan to reduce risk
But what can and should corporates do to minimise and mitigate their risk?
Conduct an audit of your supply chain. You need to know what your suppliers are doing – don't just take their word for it. At the end of the day, it's your brand...