In the last months, we have had the pleasure to speak with a wide range of companies, experts and CSOs. As we have finished our first round of assessments and second round of engagements in 2019, it is time for some reflection on what we have seen and heard in relation to living wage and food retail which we want to share with you.

How is living wage implemented in strategy and practices of food retail?

First of all, it is important to realize that food retail companies have to deal with living wage in various areas;

1. The payment of a living wage to their own employees, particularly relevant in the countries where there is no minimum wage or where it is below the subsistence level.
2. Paying a living wage in the production chain for the products that are produced in-house (for example, the private labels).
3. Stimulating a living wage with the producers of the products that are sold within the shops.
4. Informing customers about this theme so that they can make their own choices.

During the various meetings we have seen that companies active in food retail have an open attitude towards living wage, which is very positive and which we applaud. In most corporate codes of conducts a commitment to offer at least the legal minimum wage is mentioned. However, achieving this is already a challenge. A more comprehensive policy on living wage, which goes beyond compliance with minimum wage,  is often lacking. Among the reasons for this are the struggles with living wage as a concept, its definition and how it can be calculated. As the topic is developing and best-practices come available, it seems that these challenges are solvable. However, the more complex obstacles that came forward in our conversations are related to the question of how living wage can be integrated in complex supply chains in food retailing of which we’ll give a short overview in the next section.

Obstacles

One of the core obstacles that was mentioned during our conversations with food retailing companies relates to sourcing. Large numbers of suppliers and often short-term and infrequent relations add to the challenges to address living wage. In short, the sourcing strategy is designed primarily for low prices and far less towards CSR performance, including living wage.

Fortunately auditing schemes can be useful instruments to protect a CSR baseline. However, current auditing schemes have their flaws. They are not (yet) geared towards monitoring living wage and many steps still need to be taken to integrate living wage in audit schemes.

We also see little pull from consumers to support companies taking steps on living wage, aside from some specific markets or client groups. Customers are increasingly becoming more aware and interested in the topic, but focus mostly on health and not so much on whether the product is fair or not. That does not necessarily mean that they are not interested in the topic. One explanation could be that they find it hard to distinguish what living wage is and that supermarkets have a role to better inform consumers about the choices they can make. Certification now plays an important role with regard to private brands. However, there is a wide range of sustainability labels and sometimes it is unclear to consumers what they specifically mean. Also certification often means that steps are taken towards a living wage, but that does not necessarily mean that  a living wage is already paid. This also means that a food retail company cannot outsource its responsibility on living wage by solely focusing on certification schemes.

2020 Sector Takeaways

So what would be logical next steps for supermarkets to progress on living wage?

• First of all, it is important that companies develop their own vision and responsibility on this topic. Living wage therefore deserves a place in corporate policy and has to be translated into concrete steps and KPIs.
• Auditing schemes are among the building blocks of a living wage policy. However, current schemes have not integrated living wage successfully as yet. As companies often have a seat on the table at the various auditing schemes, it is important to use their leverage and jointly work to integrate living wage more strongly in auditing schemes.
• It still remains unclear how sourcing strategies, buying groups and pricing strategies on one hand and CSR goals on the other, interact. Transparency on how they interact and strengthen or weaken each other is much needed. This is a first step to enable the discussion about how they could be more aligned.
• Another open question is how customers can be informed more clearly about the CSR performance, including living wage, of the products they buy. By informing and nudging customers to make more sustainable choices, a business case arises to take steps in relation to living wage. This is more easily said than done, however there are several promising best-practices. Examples are the work that “C’est qui le patron!” is doing in France, and the work of “Tony Chocolonely” in the Netherlands.
• Also technological developments can be a part of solving this puzzle. Although still in their infancy, micro-insurance and blockchain can help to increase transparency in the chain and as a food retailer to directly remunerate employees at the bottom of the production chain.

To achieve all these points, we have to take a step by step approach and collaboration between companies, experts and CSOs will be necessary. Fortunately many food retail companies have started to do so in various platforms and initiatives.