Ikea's brand could take a hit after the Swedish retailer admitted that political prisoners in the former East Germany provided labor to produce some of its popular household products.
A report by auditor Ernst & Young concluded that the company knowingly benefited from forced labor in the former East Germany to manufacture products during the 1980s.
The findings follow Ikea's decision in May to commission a report on the subject, following accusations that political prisoners were involved in making Ikea furniture, and that some Ikea employees knew about it.
“Even though Ikea Group took steps to secure that prisoners were not used in production, it is now clear that these measures were not effective enough,” the company said in a statement.
A number of accusations against Ikea appeared last year in German and Swedish media outlets.
The admission is likely to hit the brand's worldwide reputation. The Swedish retailer has become a global brand, known for its blue-and-yellow logo and inexpensive furniture.
Ikea's admission will also likely help victims' efforts to receive compensation for the work they were forced to carry out in East Germany.
The retailer retained Lippe Taylor for corporate work in the US early this year. The company has more than 30 US stores.
This article originally appeared on the website of Marketing, PRWeek's sister publication under Haymarket Media.