Transparency in the Supply Chain: A Review of IKEA’s IWAY System

Transparency in the Supply Chain: A Review of IKEA’s IWAY System

Abstract
Global supply chains are becoming increasingly complex, making transparency and ethical oversight a strategically important issue for businesses. This study examines IKEA’s IWAY (The IKEA Way) system, implemented in 2000, analyzing its contributions to transparency, sustainability, and corporate social responsibility in the supply chain. Through an evaluation of the system’s components, implementation process, challenges faced, and results achieved, it is demonstrated that IWAY presents a governance model that can serve as an example across the industry.

1. Introduction: The Need for Transparency in Global Supply Chains
With globalization, companies’ supply chains are now evaluated not only in terms of cost but also in terms of ethics and sustainability. Consumers, investors, and regulatory bodies now demand traceability and accountability in production processes (Forbes Insights, 2023).

In this context, transparency should be viewed not only as a corporate social responsibility element but also as a reputation management and risk mitigation strategy. Especially for multinational companies operating in developing countries, this area can become a serious governance problem.

2. The Emergence of IWAY and Its Systematic Approach
In the late 1990s, IKEA came under scrutiny for allegations of child labor and poor working conditions in some of its suppliers, which damaged its corporate reputation. The implementation of the IWAY system in 2000 marked a strategic transformation of this crisis (Howard, 2021).

2.1. System Structure
The IWAY system is structured on three levels:

  • IWAY Musts: Minimum acceptance criteria
  • IWAY Standard: Medium-term sustainability goals
  • IWAY Plus: Advanced social and environmental responsibility actions

This structure ensures that the system is not only regulatory but also focuses on continuous development.

3. Key Components: Human Rights, Environment, and Auditing
The fundamental components of IWAY can be grouped under five main categories:

AreaApplication Principle
Human RightsStrict prohibition of child labor and forced labor
Working ConditionsSafe working environment, reasonable hours, freedom of association
WagesFair wage policy, payment above legal limits
Environmental StandardsWaste control, emission reduction, conservation of natural resources
Auditing and MonitoringContinuous monitoring, scheduled and unscheduled audits, digital monitoring

Through this structure, the system offers a traceability mechanism that encompasses not only the supplier but the entire production chain.

4. Implementation Process and Challenges Faced
Although IWAY presents an effective structure in theory, various challenges were encountered in its implementation:

  • Sub-Suppliers: IKEA’s suppliers’ suppliers (Tier 2 and below) are often not included in the system.
  • Fake Compliance: “Compliance theater” during audit days (Bain & Company, 2023).
  • Cultural Differences: Conflicts with cultural norms on issues like working hours and union rights may arise.

To address these problems, IKEA established local audit teams, invested in supplier training, and improved the system’s linguistic and cultural adaptation.

5. Impacts and Success Metrics
Independent organizations and academic studies show that IWAY has brought about significant social and environmental improvements:

  • A 35% decrease in workplace accidents among suppliers
  • A 70% reduction in child labor in targeted regions
  • A 17% reduction in IKEA’s carbon footprint (Global Compact Turkey, 2024)

These results demonstrate that the system has led to not just document-based but field-based transformation.

6. Critical Comment: Innovative Aspects of the IWAY Model
IWAY can be considered not only as an auditing system but also as a learning organization model. The company has built a structure based on “dialogue” rather than just “compliance.” In this respect, IWAY stands apart from traditional auditing models and offers a more participatory governance proposal.

However, the system’s transparency can be criticized, particularly regarding the inadequacy of publicly available audit reports. IKEA’s management of this process in a more open and collaborative manner would enhance IWAY’s global role model effect.

7. Conclusion and Recommendations
The IWAY system serves as a successful example in the field of ethical supply chain management. Both its adaptable structure and its level of social impact make it a model that many companies could emulate.

References
Bain & Company. (2023). Challenges in Supply Chain Compliance.
Forbes Insights. (2023). Consumer Expectations on Corporate Ethics.
Global Compact Network Turkey. (2024). Local Practices and the IWAY Impact.
Howard, S. (2021). Interview on IKEA Sustainability Strategy. IKEA Archives.
The Economist. (2023). CSR as Strategic Risk Management.

Tolga AKAGÜN

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