Home furnishing chains are a bright spot in a sluggish South Korean economy, tapping demand from the rising share of people who are living alone and spending more to make their dwellings attractive and comfortable. (JG Photos/Sylviana Hamdani)

Ikea Working to Polish Its Reputation in Indonesia

JANUARY 20, 2015

No man is an island. Nor is any country or any company.

In spite of abundant resources and advanced technology, every country and company has to work together with other parties in order to survive.

And in commerce today, it’s important to cultivate a public impression that you pay due attention to ensuring your business not only benefits shareholders and our employees, but also the broader community and environment.

Indonesia and the European Union, for example, have been doing business for decades.

Over the years, Indonesia has been exporting many products to EU countries, and vice versa.

“For the EU, Indonesia is the 25th largest import source and the 33rd largest export destination,” said Harvey Rouse, head of economic and trade section for the European Union’s mission to Indonesia.

In 2013, bilateral merchandise trade between Indonesia and the EU amounted to $27 billion, with a sizeable $5.3 billion surplus for Indonesia.

“We’re also one of the largest investors here,” Rouse said. “We have a lot of companies in a lot of different sectors in Indonesia.”

According to the data from Indonesia’s Investment Coordinating Board (BKPM), the EU is currently the second largest investor in the country, with companies ranging from automobile and cosmetic manufacturing to the energy sector.

During the period of 1990 to 2013, the EU’s foreign direct investment (FDI) in Indonesia amounted to a total of $24.6 billion. 

And it is estimated that these investments have contributed to around 1.1 million high-quality jobs for Indonesians.

“But commercial exchanges are not only about economic gains, but also [about] sharing technology, knowledge, values and opportunities of progress,” Rouse said.

“The EU has decided that we should not only see the companies as coming here and investing and taking some market shares and making some profits, but [also at] what they can contribute to Indonesian society at large,” he said.

According to the head of economic and trade section, the EU encourages European companies that invest in Indonesia to respect local values and cultures, as well as improve the welfare of the people around them through corporate social responsibility programs.

“By addressing these social responsibilities, companies are actually building long term relationship and trust with employees, customers and citizens,” Rouse said.

One of the European companies in Indonesia that has a solid commitment to local CSR programs is Ikea.

Since its launch in Alam Sutera, Tangerang, last October, Ikea’s first store in Indonesia has been a favorite shopping destination.

“There are around 10,000 people coming to our store each day,” said Ririn Basuki, public relations officer for Ikea Indonesia.

When we visited last Thursday morning, there were already people lining up at the restaurant and bistro by 9:30 a.m.

“Ikea Indonesia is the only Ikea store [in the world] that serves local coffee,” the public relations officer said.

Sustainability

The coffee served at Ikea Indonesia’s restaurant and bistro comes from the highlands of Pangalengan, near Bandung, West Java.

“This coffee has been UTZ certified, which guarantees its sustainable farming practices and fair treatment to its employees,” Ririn said.

The company ensures the sustainability of its products starting from its sources, its manufacturing and all the way to packaging and delivery. For example, all woods used in Ikea furniture should have Forest Stewardship Council (FSC) certification, which ensures that they come from responsibly managed forests.

“And each product is tested millions of times before being mass produced for all our stores,” Ririn said.

Ikea currently has 364 stores in 46 countries around the world.

Indonesian manufacturers supply about 550 products to Ikea stores all over the world, according to Ririn. These products range from soft toys to furniture and upholstery.

“In every country in which there is an Ikea, we always organize give-back programs,” Ririn said. In collaboration with Save the Children Foundation, Ikea Indonesia has funded the education of more than 400 disabled children in Bandung over the period of two years,” Ririn said.

“Our CSR programs started long before our [store] opening in Indonesia.”

During Muslim, Christian, Buddhist, Hindu, Chinese and Swedish festive periods, Ikea Indonesia will also donate one nutritious meal to a less-fortunate child living in a local neighborhood for every four poached salmon dishes sold at the restaurant.

Although Ikea’s branding is popularly identified as Swedish, the firm’s actual corporate parentage traces back to a complex corporate tax-optimization scheme of nominally non-profit trusts and foundations straddling the Netherlands, Luxembourg and Liechtenstein.

It is unclear what, if any, arrangements Ikea Indonesia or its multinational franchise licensor Inter Ikea Systems have made to “optimize” the company’s tax bill in Indonesia.

Inter Ikea Systems reportedly receives 3 percent of all Ikea gross sales revenues in royalties, and is owned by Inter Ikea Holdings, registered in Luxembourg.

Ikea Indonesia will not provide free plastic bags to their customers. Instead, customers are encouraged to buy the environmentally friendly, and iconic, blue bag to carry their purchases.

The full retail value of each blue bag sold is donated to Mercy Corps Indonesia’s local water and sanitation sewage projects.

“We aim to install 100 septic tanks over a period of two years in the Penjaringan area [of North Jakarta],” Ririn said.

“Before the opening of our store, we surveyed several [slum] locations in Jakarta and were taken by the Penjaringan area,” Ririn said. 

“There, the people don’t have in-house toilets and have to use communal ones, which are very dirty. That’s why we want to help them by building septic tanks.”

Ikea Indonesia employees also wear batik on Fridays as a concession to the local culture.

“We hope that now batik has been introduced to Ikea Indonesia, it will also soon make it onto the list of merchandise sold at Ikea stores globally.”

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