citizen' IKEA turns its back on SMEs
Business Standard , July 22, 2012
Rijit Sen Gupta
The story about IKEA’s
discussions with the government for relaxing the “local sourcing”
clause for it to invest in India has come as a surprise to many of
us. IKEA, the Swedish home-furnishing multinational — the world’s
largest — wants to enter the Indian market with an investment
worth euro 1.5 billion (Rs 10,500 crore). At a time when the
government’s coffers are strained, it is quite likely that it will
give in to IKEA’s demand over reducing dependence on local small
and medium enterprises (SMEs) in the first 10 years of its
operation. India requires all single-brand retail firms to source
30 per cent of the merchandise they sell locally from small
vendors. IKEA has indicated that it will need the whole period of
10 years to meet this requirement, and hence requested the
government to relax this stipulation on a yearly basis.
The government till now has shown considerable resolve in dealing
with the matter. It’s not often easy balancing the interest of the
economy or industry with that of the people.
The degree of concern from this development has been greater among
those cognisant of the company’s commitment to sustainable
development and inclusive growth globally. (Even a casual visitor
to IKEA’s website could not miss this.) This commitment seems to
have been integrated in the way it does business.
For some, this concern has turned into awe, especially among those
who follow the work of Unicef and Save the Children in India, two
organisations committed to protecting the interests of people and
their communities across the country. Unicef India has been given
over $200 million by IKEA over the past 10 years to support their
developmental work in the country. Save the Children’s work on
disaster response (Bihar floods) has also been supported by IKEA.
Save the Children India is currently discussing bigger and
longer-term partnership programmes with the company.
On IKEA’s website you can navigate to a section (People and
Communities) that provides these and other details of their work
in addressing issues pertaining to sustainable development and
inclusive growth in India and elsewhere. In addition to Unicef and
Save the Children, IKEA has also supported the work of the World
Wildlife Fund in many countries. The headline on this page says:
“Putting people first”.
It is difficult to imagine that a company as big and
internationally renowned as IKEA would maintain such double
standards on sustainable development and inclusive growth. Indeed
Sweden — and Scandinavia, of which it is the heart — is where the
term sustainable development originated.
This is, however, not the only case of double standards in the
course of a Scandinavian company’s operations in India. Around the
year 2000, it was revealed that Electrolux (a Swedish refrigerator
manufacturer) did not want to use climate-friendlier hydrocarbon
technology in India in its refrigerators, in spite of using this
technology for its refrigerators in Europe. In India, Electrolux
resorted to using the more polluting hydrofluorocarbon technology.
IKEA has supported development work for over 10 years now in this
country. One can assume that it has developed some understanding
about the needs of India’s local communities, and the fact that
the SME sector drives rural and semi-urban employment in India.
Their decision to not be compelled to buy from local vendors would
have negative implications for the families of these vendors and
IKEA has defended its position by saying that it would invest in
building restaurants, cafes, children's play corners, etc., in and
around its outlets, as a mark of upholding its commitment towards
society. It is disturbing to note that IKEA makes a commitment to
support the “haves” of society while ignoring the “have-nots” —
the opposite of what it has been doing through philanthropy in
India for over a decade now. This is somewhat like giving fish to
the poor and hungry, but not a fishing net to enable them to catch
fish and earn a living.
It is not unusual though, for firms to have distinctive standards
for their “for-profit” and “not-for-profit” operations. Social,
environmental and economic responsibilities often take a backseat
while corporations pursue their for-profit line(s) of business.
After having reaped enough profits like that, and ultimately being
driven by pressure from certain relatively stronger quarters (such
as consumers in their home countries), firms take out some funds
from their kitty to support community work for promoting their
image as a good corporate citizen.
This is an age-old model of Corporate Social Responsibility (CSR)
that is prevalent even today. We need to move away from demanding
and supporting such short-sighted and vacuous models of CSR, to
more comprehensive and holistic models that firms should follow
for meeting their societal expectations. Business responsibility
should be entrenched in the core-model of doing business in a
country like India, and not treated merely as a public relations
function by firms here.
We hope that voices emerge both within and outside IKEA leading
them to reconsider their stand, so local vendors can benefit from
their investments in India. If IKEA is able to get away on this
conditionality, then the government will hardly be in a position
to apply the same to other companies who are lining up to enter
India’s retail market.
The writer is director
of CUTS International, a consumer welfare NGO
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