Members of the Garment & Footwear Working Group [1] of the Platform Living Wage Financials concluded their 2019 living wage assessments in September 2019. Just like last year, the assessments have been based on the externally-assured living wage assessment methodology that is aligned with the Reporting Framework of the United Nations Guiding Principles on Business and Human Rights (UNGPs). More than half of the assessments have also received external assurance.

Progress on living wage

Although one year is a relatively short period to see improvements related to living wage, between 2018 and 2019 we have seen progress in various areas related to both companies’ living wage policy and performance. Below we provide a high-level summary of the key findings and trends coming out of the 2019 living wage assessment. We expect to publish more detailed information on current best practices as well as our focus areas going forward by Q1 2020.

From 2020 onward, some aspects of the assessment will become stricter. That means that without performance- and/or reporting-related improvements, the companies’ existing scores may deteriorate. A non-exhaustive list of the considerations that we will integrate as of 2020 includes:

• requiring that all key information that the assessment relies on is included in the company’s own documentation as opposed to external documentation;
• substantiating more advanced indicators will necessitate projects at scale; pilot project may no longer suffice;
• information that has only been provided privately should be increasingly shared publicly.

Living wage policy (question 1): Commitment pays off

The assessed companies show a relatively moderate progress on question 1 of the assessment methodology. For example, we have seen the expansion of existing minimum wage clauses in Supplier Codes of Conduct to include language around workers’ basic needs and discretionary income. We have also seen a  growing commitment to living wage as a ‘salient’ issue. This commitment often seems to exist internally, but for some companies it remains difficult to make such a commitment publically. Once made public, we, however, believe that this commitment has the potential to trickle down to policy-level interventions across the organization and contribute an internal momentum to drive progress on living wage.

Living wage definition (question 2): Preach what you practice

Companies’ official living wage definition often amounts to a more diluted version of what companies swear by in practice. This is because many companies are members of multi-stakeholder initiatives that follow a more robust living wage definition, but the details of such a definition are not implemented in companies’ own policies. Without a clear policy-level commitment, it remains difficult to determine whether, in particular, the basic needs of a worker’s family and both food and non-food costs – which are essential parts of what a living wage should cover –  are included in how companies approach living wage.

Engagement (question 3): The big move from collective to individual reporting

The measurement and reporting on the outcomes of companies’ collaborative efforts to advance living wage remains at an early stage. Whilst multi-stakeholder initiatives increasingly report on their efforts and the effectiveness of these efforts in collective reporting, such disclosure is largely missing at the individual company level. Moreover, some companies prefer to work in closed (private) collaborations and partnerships as opposed to larger multi-stakeholder initiatives. In such circumstances, projects typically still need to gain scale. We would like to encourage such companies to share their learnings publicly as it remains in the interest of the whole sector to collectively improve wages and maintain a level playing field.

Assessing impacts (question 4): Acknowledge the human impact

Companies should assess the adverse impacts of their businesses. With regard to living wages, this goes beyond social compliance audits and wage data collection processes and should include a holistic assessment of how working conditions (i.e. wage or compensation) affect workers’ lives. Same as in 2018, companies struggle to provide public evidence related to the assessment of impacts as required under question 4. The salience perspective in the UNGPs focuses on those people whose lives are adversely impacted by a company’s business operations. A large portion of the relevant information that is currently provided remains regulation-driven, too broad, or only shared privately. We would like to see more awareness and acknowledgement that impact assessment goes beyond social compliance audits and wage data collection, regardless of how big the supply chain is.

Integrating findings (question 5): Missing links and labor costing puzzles

A relatively large number of companies was able to showcase good efforts in pursuing purchasing practices that would enable their suppliers to uphold sound labor conditions. However, a much smaller number of companies discloses information on purchasing practices-related efforts that would be intentionally linked to wages more broadly and wage improvement in particular. Companies’ approach to labor costing and the extent to which companies include living wage as a consideration in their purchasing decisions remains a black box. Moreover, whilst the efforts of the relatively lower-scoring companies have been improving, for the best-in-class scoring companies the performance and disclosure on this question remain stagnant.

Tracking performance (question 6): One year later and still waiting to move from efforts to effects

In companies’ public reporting there is a strong focus on social compliance and their efforts to mitigate adverse impacts on workers’ lives rather than the effects of those efforts. Provided companies track some performance-related data points, these are typically not explicitly linked to wages or related measures. Companies should make an effort to identify the effectiveness of the actions that they have implemented to mitigate adverse impacts. Provided adverse impacts have not been successfully mitigated, companies should consider an alternative course of action. Measuring the effects of companies’ mitigating actions also demands more transparency from companies on their data collection and analysis processes as well as the internal review process. This is to enable continuous learning and effectively lower the adverse impact on workers’ lives in the long term.

Remedy (question 7): Give workers a voice

There is a relatively high level of variation between the disclosure and performance of the assessed companies on question 7 of the assessment methodology. Whilst more and more companies are developing improved grievance mechanisms and opening these to not only internal, but also external stakeholders, it remains less usual for these mechanisms to be deployed at scale across companies’ supply chains. Occasionally, companies require their suppliers to enable the reporting of human rights grievances at the factory level. However, if this is the case, we would like to see that there are robust monitoring processes reflecting on the effectiveness of such mechanisms as well as examples of concrete awareness-raising initiatives aimed at the workforce. The whole sector should strive to improve its reporting on the number and type of human rights grievances received as well as the ways these have been handled. We have seen few of such cases being made public.

Transparancy (question 8): Show what you already know

Although the average standard of disclosure in the garment and footwear sector has notably improved, the data that is reported often remains inadequate in the level of detail provided. At times we see that companies’ understating of and maturity in addressing social issues in general and living wage in particular are more robust than their disclosure. This issue particularly stands out for companies ranking in the Embryonic stage that have only started building an internal commitment to living wage and companies that are close to reaching the Leading stage. For the latter, an (even) more robust disclosure around wage levels, wage data management systems, and the details surrounding purchasing practices and labor costing poses a challenge. The PLWF living wage assessments, however, rely on public information as we believe that improved transparency on wage-related indicators drives individual and collective progress on living wage. We expect that with improved disclosure alone, the scoring of various companies could immediately improve.

More information

We also encourage you to refer to the recently-published 2018 Good Practice Guidance that includes further learnings and findings, as well as the 2019 Living Wage Report of ASN Bank.

More assessments coming up in 2020

Several companies that are engaged and assessed by PLWF members are excluded from this year’s overview of the final assessment results. This is because the engagement with these companies has only started relatively recently and PLWF members leading the relevant engagements have focused on building a meaningful dialogue on the companies’ overall sustainability strategy and the position of workers’ rights and compensation in this strategy. The intention is to include these companies in the next year’s reporting on the assessment results. The companies that have been engaged but whose assessment results are not included in the overview above are: American Eagle, Zalando, Li & Fung Limited, Ralph Lauren, Hugo Boss, Hermès, TJX Companies and a general retail company Home Depot.

[1] Achmea Investment Management, Amundi, ASN Bank, Kempen Capital Management, MN (Chair in 2019), Robeco, Triodos Investment Management