The BBC is publicising their story about the treatment of drivers in the Ikea supply chain. From the BBC report it appears that suppliers to Ikea are finding loopholes in the law to pay the drivers in their home country on their home country rates rather than meeting the minimum wage requirements of the countries that they are driving in. There is also the issue that drivers are camping out in their cabs, although they are being paid some expenses which should be used to stay in accommodation away from the cab to meet road safety legislation.
Why is Ikea in the dock? Well they are a household name and if you are going to make a headline it is very useful to have a company like Ikea to be portrayed as the villain. But what is the responsibility of the Leaders of the Supply Chain, the position that Ikea ultimately holds?
Legally, they have subcontracted the work so are not responsible, but ultimately they need to look to their position. The fact that BP were not running the oil rig in the Gulf of Mexico was no real defence when disaster struck. Similarly in the clothing supply chain, companies were reputations were tarnished when the building collapsed in Bangladesh killing local workers. And that is why a number of companies take the treatment of workers in their supply chain very seriously.
“But we audited our suppliers” claimed Ikea. Well they didn’t actually say that, they said their audits didn’t provide the same picture as the BBC report, but the implication was there. So I would make two points.
- If they audited their suppliers did they fully understand the business model the suppliers were using to provide the services? If they did they should have noticed the way drivers were being paid as it is fundamental to the model. But was that actually the purpose of the audit (and if it wasn’t, what was the purpose of the audit)?
- How did Ikea not notice the lorry parks, which were in effect camps, outside their distribution centres? Was this simply that local employees and management didn’t care or was it that people knew but senior management didn’t do anything about it?
And then there is the issue of expenses. It is all too easy for the hauliers to pay drivers fixed rate expenses, which they then don’t spend on accommodation, and then claim the responsibility for the accommodation has been passed to the drivers. I have worked with companies who have done exactly that and the temptation to save on expenses is always there. However, there are alternatives: only pay what the driver has spent, which may actually cost more to administer, could have the desired effect. Or provide the accommodation yourself. So companies do just that.
Not a good day for the reputation of private enterprise, but probably not a good day either for the national governments who should be enforcing minimum wage and road safety legislation. But who are we going to hold to account?
My position is that people are responsible for their supply chain and they need to really look at what is going on. People will get caught out, but reputational damage for not doing this is often very significant.