5 steps to a living wage for the people in your supply chain – it’s not so hard

Once in a while, a catalyst for huge change arises, offering business leaders a chance to transform their operations for the better and make even more of a positive impact on the world. This month, one of the world’s biggest opportunities to build more profitable, ethical and resilient supply chains was announced.

The United Nations Global Compact Network Australia, in partnership with hundreds of participants and a global array of leaders from businesses of all sizes, has launched Forward Faster – a way to help all business leaders achieve important sustainability targets.

A cornerstone of Forward Faster is the principle of a “living wage”, which refers to payment or remuneration received by a worker for a standard workweek that is enough to afford a decent standard of living for the worker and their family. This needs to include food, water, housing, education, health care, transportation, clothing and other essential needs, as well as provision for unexpected events and emergencies.

It’s important to understand that a living wage is not just the minimum wage. The legally-set minimum wage in many countries is often not sufficient to support a decent living standard.

A minimum wage may not be consistently enforced, set up with social dialogue, adjusted to keep up with rising costs or inflation, or applied to all workers – such as farmers or the self-employed. More than 1 billion people worldwide are estimated to learn less than they need for a decent standard of living covering essential needs, including more than half of all small-scale farmers worldwide.

The core parts of any living wage initiative are estimating the cost of a basic but decent lifestyle for a worker and their family in a particular place, and then determining if the estimated living wage is being paid to workers.

Estimating a net living wage (Credit: Global Living Wage Coalition)

This is where Australian organisations have a role to play, and a chance to improve the lives of the most vulnerable people in our operations and across our supply chains.

Forward Faster represents an opportunity to engage with our suppliers, understand where our products, resources, goods and services come from, and ensure human rights are being respected.

Forward Faster lays out two key targets for business leaders:

1. In Australia, ensure 100 per cent of the organisation’s employees earn a living wage.
2. Both in Australia and around the world, establish joint action plans with contractors, supply chain partners and key stakeholders to work towards achieving living wages and/or living incomes with measurable and time-bound milestones.

These targets are not just admirable, but necessary and beneficial to companies that achieve them. Why? First, it makes good financial sense.

An unsustainable, ethically-dubious supply chain is a serious reputational risk, not to mention a threat to your operational resilience. A strong, sustainable supply chain is a competitive and financial advantage.

Lifting workers out of working poverty grows consumer markets especially in developing countries, increasing consumer spending, stimulating demand and creating economic opportunity. Living wages also increase engagement and productivity, reducing turnover of workers and the corresponding recruitment and training costs.

Second, it has multiple environmental benefits. Paying workers a living wage can help combat climate change by letting more people change household fuel and light sources, afford cleaner energy, and make more sustainable purchases. In the past five years, multiple international living wage collaborations have been established that help support an energy-efficient and environmentally sustainable industry, as with the Malawi Tea 2020 initiative.

Third, it has enormous social impact and benefits. Most importantly, it supports workers’ standards of living, improves health and wellbeing, and helps tackle modern slavery.

The Global Slavery Index estimates 41,000 people are living in modern slavery in Australia, 29.3 million in the Asia Pacific, and 49.6 million globally. As we’ve seen from previous articles in The Fifth Estate, tackling modern slavery needs collaborative action. One of the best ways to address modern slavery risks in line with legislation is through a Living Wage Commitment and robust reporting.

Of course, a living wage looks different in every country, as do the challenges to achieving it.

A client recently came to me, concerned about a supplier in Asia. An audit revealed that the workers in their facility had worked 90 days out of the last 90 days.

While employees could technically take a day off any time they wanted to, they didn’t – because they couldn’t afford to both feed their families and take days off. We went back to them to help them collaborate with suppliers around setting a living wage, so workers could afford to take days off work.

A living wage is not as expensive as you might think

Happily, making the change to ensure a living wage across your supply chain may not be as expensive as you think.

For instance, according to Good On You, if clothing brands passed the entire cost of paying a living wage across their supply chains to consumers, it would cost an additional whopping 1 per cent of the retail price.

There are five simple steps for anyone to get started:

1. Educate yourself and those around you; increase awareness and understanding of what a living wage is, working with your employees, supply chain partners, and NGOs in your field. The has a wealth of resources for an organisation to take its first steps toward a living wage
2. Change your approach through a new policy; look at what others have done in your sector and create a Living Wage Policy or Living Wage Commitment. (The UNGCNA provides a framework to guide all businesses regardless of their size, complexity, or location)
3. Work on your wage-setting and wage-payment approaches, and communicate them to staff, peers, clients, and suppliers. This motivates all individuals across the organisation and promotes best practice for others to follow. Transparency is key
4. Set targets and monitor progress – and celebrate your goals as you achieve them! Remember – progress is more important than perfection
5. Collaborate with your stakeholders; consider where you can partner with others to achieve more impact and leverage. Partnership is the new leadership

As we cross the halfway point to achieve the Sustainable Development Goals (SDGs) by 2030, now is the time for business leaders to take measurable, credible, and ambitious action.

When it comes to the living wage, we have all the resources we need, and nothing to lose. Seize the opportunity. Take action at https://forwardfaster.unglobalcompact.org/living-wage

To help Australian companies engage in the living wage discussion, the UN Global Compact Network Australia is facilitating a Living Wage Roundtable in Sydney on 7 November 2023.