The BBC recently ran a story exposing IKEA “and other large retailers” [whose names were not disclosed] as using cheap transport firms that flouted European rules; namely that drivers posted temporarily away from home should be guaranteed the host nation's minimum rates of pay and working conditions. Ironically, IKEA has a code of conduct, IWAY, that specifically requires adherence to all applicable laws and regulations for suppliers: “Workers at the IKEA supplier shall be employed according to applicable laws and regulations and there shall be a contract (offer or appointment letter) written accordingly.” A number of other items in the code are also being flouted, such as the national minimum wage requirement and keeping complete and accurate records of hours. What this exposes is that having a code of conduct is one thing, making sure that it is adhered to at every point of your supply chain is something else entirely. But that’s what compliance is all about.
“We recognise that there is a discrepancy between what we find in our audits and interviews and what is presented in the BBC report. We are currently running a pilot aiming to further reduce the risk of breaches of social conditions in the IKEA Supply Chain.”
Josefin Thorell, a spokesperson for Inter IKEA Group
IKEA has made a formal statement regarding the BBC story, which is reproduced in the box to the right, but Josefin Thorell, a spokesperson for Inter IKEA Group, told CW: “IWAY is part of the contractual agreement with our transport service providers and we also have a robust auditing system to follow up on compliance. In 2016, IKEA conducted 174 IWAY audits among our transport service providers. Very few issues related to working conditions were found and all of these were corrected.” But IKEA went even further than its standard IWAY audits, according to Thorell, but still did not identify the problems that the BBC story exposed. “In addition to the IWAY audits, we introduced unannounced driver interviews to improve the everyday life for drivers. In 2016, we had a total of 97 driver interviews that did not highlight any major issues.” When asked about how, if the BBC story was true, this additional compliance effort did not turn up any issues, Thorell replied: “We recognise that there is a discrepancy between what we find in our audits and interviews and what is presented in the BBC report. We are currently running a pilot aiming to further reduce the risk of breaches of social conditions in the IKEA Supply Chain. Focus areas are among others minimum wages, working hours, resting times, cabotage, and posted workers.”
“Basically, the Department for Transport is not doing nearly enough to get to grips with drivers’ hours and roadworthiness offences. And the treasury minister responsible for HMRC [Her Majesty’s Revenue and Customs department] is doing nothing about enforcing the National Living Wage. We need more enforcement action and for some serious offences, much stiffer deterrent penalties.”
Jack Semple, the Director of Policy at the Road Hauliers Association
Drivers for IKEA transport firms, as well as others, are being paid as if their place of work is Hungary, for example, even if they never actually work there. According to EU law, says the BBC, drivers must take 45-hour weekly rest away from their cabs, but these regulations are not being enforced. The story claims that legal action is now being taken against some of IKEA's contractors. Compliance Week spoke to Jack Semple, the director of policy at the Road Hauliers Association (RHA) in the U.K. about the wider issues that this story exposed.
“The issue of foreign hauliers is a big concern in the transportation industry in much of the European Union and the U.K.,” said Semple, confirming without naming names that the problem did not just lie with IKEA. “We know they are being widely used because our members tell us so. Lead [transport] suppliers have been asked to include the use of foreign hauliers because they don’t cost as much as local transport companies. They offer two types of competitive advantage; there is a degree of legitimate cost advantage, for example, they use cheaper fuel than is available in the U.K. – we have the highest diesel duty by far. This is an issue we have taken up with the U.K. Treasury. The other competitive advantage is based on a higher level of non-compliance with the law. Most of the companies that are based in Eastern Europe don’t pay the United Kingdom’s National Living Wage when they are here, nor do they pay minimum wage rates under similar jurisdictions in the European Union. We also know that there is increased non-compliance with regulations covering roadworthiness, drivers’ hours and other safety regulations. These are all safety issues not just for lorry drivers but for other road users.”
We are aware of the BBC reporting and we sympathise with the interviewed drivers. We take these reports very seriously, and will act upon any concrete evidence of non-compliance presented to us, by the unions, the BBC or any other actor.
Even though they are not employed by IKEA it is very important for us that every driver transporting our products enjoys good and fair working conditions and we want to do our part to secure their rights. Through our supplier code of conduct, IWAY, we put clear and strict demands on our transport service providers when it comes to wages, working conditions and following applicable legislation. We also follow up and make regular audits and act to correct any non-compliance.
Despite our efforts, we do recognize that there are challenges within the transport industry. We are developing IWAY for transport to reduce the risk of social dumping and we also call for joint efforts, on different political levels as well as from key industry stakeholders.
Source: IKEA spokesperson
CW asked Semple how loopholes in the law were being exploited by these firms. “Each EU country is responsible for the regulation of their own operators, regardless of where else they are working. But the United Kingdom cannot regulate visiting foreign hauliers. We certainly regulate companies registered in the United Kingdom. For example, between 250 and 300 firms have their operating licences revoked each year. But we have no power over visiting hauliers other than to impose penalties for specific offences when they are detected, and that is a basic problem. Enforcement in the United Kingdom is insufficiently effective. Basically, the Department for Transport is not doing nearly enough to get to grips with drivers’ hours and roadworthiness offences. And the treasury minister responsible for HMRC [Her Majesty’s Revenue and Customs department] is doing nothing about enforcing the National Living Wage. We need more enforcement action and for some serious offences, much stiffer deterrent penalties.”
Semple explained that the RHA is working on behalf of its members to try and narrow the ‘competitive advantage. “We are talking now with the Department for Transport about enforcing a ban on drivers taking their 45-hour weekly rest in the cab. Regulations allow drivers once every two weeks to take a reduced weekly rest in the cab, this is not allowed for the 45-hour rest.” The BBC story had referenced drivers working in Holland, Denmark, and other EU countries, so CW asked Semple if any EU countries were enforcing the regulations. “Yes,” he replied, “in France and Belgium, there are very heavy penalties for taking the 45-hour break in the cab; and you should remember that there are tachographs in the cab that record this. There are a number of other EU states that are considering proper enforcement. We are asking the Department for Transport, as a matter of urgency, to enforce the £300 fixed penalty for non-compliance with this aspect of drivers’ hours Regulations 561/2006.”
Semple also noted that the problem was not going to lessen, and without enforcement, it would get considerably worse. “The use of foreign hauliers in the U.K. is increasingly sharply. In the U.K., for example, in the two years to the end of 2015, the proportion of total HGV [heavy goods vehicle] traffic represented by foreign hauliers increased by 50 per cent, according to Department for Transport figures. That trend has continued to increase, because, as far as shipping firms are concerned, they can keep cost down this way. But, what this entails is the exploitation of drivers.”
CW asked Semple why he thought the U.K. Government was not enforcing the rules it had subscribed to as part of the European Union, but admitted to being bemused, especially as it was so much in the Government’s interests to do so. “You would think the Treasury would have some interest in enforcing these regulations,” he said, “because they are losing millions of pounds in revenue by not doing so, as the foreign hauliers replace U.K. firms. They aren’t collecting employment tax in respect of these workers, nor business tax from these businesses, and no diesel tax from the purchase of U.K. diesel. In addition, these foreign hauliers are putting unfair commercial pressure of U.K. firms that do retain the work, so lowering their wages, profits and the ability to re-invest.”
Semple also pointed to another compliance issue being flouted, as well as the direct regulations covering working conditions. “Then there are CSR (Corporate Social Responsibility) issues,” he added. “Should a company be aware of the working conditions of workers further down the supply chain? I think that is a well-established principle among large companies.” He also pointed to further environmental problems also within CSR compliance. “In addition to all of this, there is an inadequate infrastructure for parking lorries, especially at weekends when most drivers will be taking breaks in the cabs. Lorries used in this way are now becoming an environmental nuisance.”
“The increased controversy about Eastern European haulage in Western Europe,” continued Semple, “is to a large extent because the European Commission has not been listening to member states on this issue. There has been a drive to create an EU-wide road haulage system, but the measures have not been put in place to make that work fairly. The resulting exploitation of drivers from Eastern Europe is working strongly against another objective, which is to have fair and socially responsible conditions for all workers.”
He further confirmed that this problem must be more widespread than just IKEA. “We know that other large retailers must be exposed to these supply-chain risks as well, because it’s not IKEA telling the hauliers what the working conditions of the driver should be, it’s their direct employers. We also know, because Kent is littered with parked lorries on weekends. The drivers are traveling to the U.K. to take their long breaks in the cabs as the regulations are not being enforced here and this allows them to escape being fined in France and Belgium. Finally, tired drivers are a road safety risk.”
IKEA’s Thorell concluded: “There are challenges in the transport industry that can only be solved by joint efforts – from the contractors, the transport service providers and law makers. We welcome clearer regulations on national and EU-level.”
However, it would seem that the regulations at both the national and EU-level are already very clear, what is lacking is enforcement and compliance, at both the company level and the supply chain level. Without enforcement, there is no stimulus for compliance, unless a company happens to have a code of conduct. And even here there are failures.