Our view on implementing IWAY across our value chain
At IKEA, we believe it is not only about what we create and offer to our customers, but also how we do it, that matters. IWAY, the IKEA way of procuring products, services, materials and components, is an important part of that how. We choose partners that share our values and work closely with them and inspire each other. Through IWAY, we want to improve environmental impact, secure decent and meaningful work for workers, protect children’s rights and improve the welfare of animals across the IKEA value chain.
The IKEA value chain includes all the steps to bring IKEA products to our customers – from design and sourcing of raw materials to manufacturing and distribution of products to IKEA customer meeting points. Our value chain also includes services, from construction and cleaning services, home delivery and product assembly, to bringing back products to reuse and recycle in our efforts. The IKEA value chain touches millions of lives around the world.
IWAY is the IKEA supplier code of conduct, and it is so much more than that. It sets clear requirements, expectations and ways of working for environmental, social and working conditions, as well as animal welfare, and is mandatory for all suppliers and service providers that work with IKEA. We work with more than 1,500 direct suppliers for home furnishing, transport, logistics and distribution services, components, and food, and thousands of other direct suppliers and service providers who help run our business.
Here's how we do it.
Identifying and assessing risks
Before the start of a new business partnership, we conduct risk assessments and evaluate whether a potential new supplier* is capable and willing to meet the IWAY requirements. These risk assessments continue throughout the partnership.
To understand the risks, we evaluate several different data sets connected to the specific supplier, including:
- Country and industry risk indices, provided by independent external risk data analysis companies, connected to corruption, environmental regulatory framework, freedom of association, wages, child labour, women’s and girls’ rights, water quality, biodiversity and many more topics;
- General industry characteristics;
- Results from previous verification activities at the supplier, when applicable.
Based on the risk analysis, we plan implementation and verification activities with the supplier, including focus and frequency of these activities. For a potential new supplier, this risk assessment helps to determine whether we can start up a partnership and what support the supplier will need to implement IWAY requirements and maintain them over time.
Making IWAY a part of daily business operations
Our suppliers take ownership for implementing IWAY requirements in a way that fit their business setup, and IKEA provides tools, guidelines and supports along the way. To secure this way of working, development of IWAY is a continuous journey:
- First, IKEA suppliers are required to fulfil all IWAY Must requirements at all times (prior to first delivery or service). This is defined in every business contract between IKEA and suppliers. Read more about IWAY, our supplier code of conduct.
- A new supplier has a focus on securing compliance with the IWAY Basic requirements (within latest 12 months after the first delivery or service). Once a supplier has implemented the IWAY Basic requirements, they focus on monitoring and maintaining their compliance and integrating these processes in their daily operations.
- At the next stage in the IWAY implementation journey, suppliers focus on continuous improvement. For example, they look for ways to assess the effectiveness and efficiency of their IWAY implementation activities. They can review existing ways of working to find potential improvements. Some suppliers may also start implementing the IWAY Advanced or IWAY Excellent expectations.
IKEA teams located in different regions around the world play an important role in supporting our suppliers to implement the IWAY requirements. They keep daily contact with suppliers, developing the business to reach our common goals. They also provide trainings on specific topics, facilitate peer learning and provide capacity-building projects, by, for example, helping to develop and execute performance improvement plans.
Complementing implementation with verification
In every business partnership, we believe in building long-term collaboration based on trust, openness and dialogue. Our suppliers know their business the best, and we value their knowledge and expertise to produce home furnishing products, supply delicious meals or provide great services to the IKEA customers. For example, the average length of collaboration with our home furnishing suppliers is 11 years.
Still, we recognise that ensuring compliance every day plays an important role. We use verification activities to complement implementation of IWAY at our suppliers and as a tool to continuously develop the business. Through verification – such as auditing - we can understand whether the supplier achieves the outcome we want to create through working with IWAY.
At IKEA, we have our own teams of approved IWAY auditors who conduct the majority of IWAY verification activities at our suppliers. These activities are supplemented with additional independent third-party audits. All verification activities are paid for by IKEA. This means that where we conduct audits, we have first-hand knowledge of our supplier practices and can provide our suppliers with support, when needed. This first-hand knowledge is crucial in understanding and leveraging the relation between business performance and social and environmental conditions at the suppliers.
Each year we perform more than 1,000 verification activities at IKEA suppliers. They include gap assessments for new suppliers and full or focused audits for existing suppliers. Frequency of IWAY audits at our suppliers is defined based on regular risk assessments.
Every IWAY verification activity is conducted based on principles of integrity, confidentiality, impartiality, objectivity and evidence. IWAY auditors are responsible for documenting and reporting findings truthfully and accurately.
No verification is the same as our goal is to identify risks or problems and help suppliers implement sustainable changes to improve. Here’s a glance at the typical approach to IWAY verification:
- In preparation, an IWAY auditor gathers information about the supplier: type of supplier operations, size of operations, number of workers, languages spoken by the workers, etc. The IWAY auditor reviews previous IWAY verification reports and gap assessment documentation, gathers information from the respective IKEA business team on how the supplier performs on other business topics, as well as publicly available information about the supplier.
- The IWAY audit may be announced or unannounced, as well as cover the full scope of IWAY requirements or focused on just selected requirements.
- Verification may include a site tour. The site tour covers both indoors and outdoors, when relevant, and areas of significance for IWAY, for example, rest areas, workspaces, loading and unloading bays, warehouses, production lines, storage of chemicals, maintenance areas, etc.
- Verification may include worker interviews. Information gained from worker interviews is used to put an extra focus on certain topics during the audit. For example, if several workers do not know what to do during an evacuation drill, the IWAY auditor will additionally follow up whether the supplier has documented routines in place and drills have taken place when the workers interviewed were not on site.
- Verification also includes a process review to understand the supplier’s system, routines and ways of implementing.
Some examples:
At a sewing factory an auditor may look at how materials arrive at a warehouse, get unpacked, then get cut, sewed, and packed. They also pay attention to workers’ canteen and resting areas, as well as other areas that workers use. The site tour will include visiting areas which can incur environmental impact, such as waste areas or an effluent treatment plant, if there is one at the supplier.
During an audit at a customer delivery service provider, the site tour can include, for example, visiting loading bays, warehouse, inspecting vans or trucks, drivers’ rest areas, outdoor environment etc.
Following up
Following a verification activity, the IWAY auditor evaluates the supplier’s performance against each IWAY Must and IWAY Basic requirement in the relevant IWAY Standard Sections. Follow up action is dependent on the outcome. For example:
- Failure to comply with IWAY Must requirements results in a stop of delivery or other business consequences. This stop is lifted when the IWAY Must non-conformity is corrected or when a corrective action plan is agreed.
- In case of non-compliance with IWAY Basic requirements, the supplier is responsible to perform a root cause analysis of the non-compliance and define and implement actions to correct the non-compliance within an agreed timeline and prevent it from happening again. Following the verification activity, the IWAY auditor verifies whether the supplier has closed all corrective actions and is compliant with the IWAY requirements.
- For a successful implementation of IWAY, it is important that non-compliance does not repeat. IKEA teams will additionally follow up what the supplier is doing to prevent non-compliance from happening again and provide support to the supplier to implement IWAY.
- There are business consequences, including phasing out a supplier, that we implement, in case the supplier does not put the corrective actions in place or does not address the issues in a reliable and consistent way to fulfil the requirements according to the defined timelines.
Always improving, the IKEA way
We have been working with IWAY since 2000. We are continuously revising it and updating our approach to make sure that IWAY stays relevant, reflects global changes and challenges, and contributes to our actions on sustainability.
IWAY is reviewed, by analysing internal and external inputs and trends, comments and feedback from IKEA suppliers, IKEA organisations, as well as from external stakeholders.
As we revise and update the IWAY requirements, we also revise and improve our ways of working with IWAY. An important part of this process, is feedback and concerns that we receive through grievances and appeals process.
Competence development of our co-workers and suppliers is one of the key success factors. Through transparent and open dialogue, we will continue working and developing the IWAY system in a collaborative approach with our business partners.
*Supplier - a company or organisation with which an IKEA company has an agreement and also any sub-contractors to that agreement that supply products, services, materials or components. Here the term supplier applies to suppliers, service providers and other contracting parties.