Assessment of Living Wage
Within the Platform Living Wage Financials (PLWF), one of the main means of stimulating companies’ progress on living wage is by assessing our investee companies against a robust living wage assessment methodology. The assessment methodology was developed by ASN Bank and a UK accounting firm Mazars, and it closely follows the UN Guiding Principles Reporting Framework1. This section describes the structure and aims of the methodology.
Why did the PLWF base the methodology on the UNGP Reporting Framework?
The United Nations’ Guiding Principles (UNGPs) and the related Reporting Framework have become the authoritative guidance and best practice for companies to address their respect for human rights on the most salient issues2.
Given that the PLWF believes that living wage constitutes a salient issue for most garment and footwear brands, we have taken this opportunity to closely align our methodology closely with that of the UNGP Reporting Framework.
How have we translated the United Nations Guiding Principles in the assessment methodology?
Parts C1 to C6 of the UNGP Reporting Framework set out a logical process for garment and footwear brands to follow in order to best address and positively impact the payment of a living wage, although we anticipate that over a period of time, the concrete questions in the methodology may become more detailed as best practice continues to evolve.
Do you ask the companies you engage and assess to follow a particular living wage benchmark?
The assessment does not stipulate which living wage benchmark companies should follow or what the appropriate wage rate per region is. The main objective of the assessment it to ensure that each company has adequate policies, procedures and processes in place to be able to determine whether its suppliers pay a living wage and, if they do not, what steps need to be taken to progress toward it.
Do you ask the companies to fill in the assessment methodology for you?
No. The assessment is conducted by expert analysts from among the PLWF members based on the information that is available in the public domain as well as any additional insight gained from our direct engagement with the companies under engagement. It is not our aim to increase the workload of garment companies by asking them to provide information that should not already be available to them. Given that living wage should be a salient issue for most garment and footwear bands, the information we require, as set out in the questions of the methodology, should already be publically reported. However, we recognize that meaningful reporting on human rights is in its infancy. Accordingly, as part of the process for obtaining relevant information to rate these companies, we are contacting the companies on an individual basis to request information that we were unable to find in the public domain. This will help us to gain a better understanding of where these companies stand on their journey to a more widespread payment of a living wage. If relevant, we also use data supplied by our research providers and there is an ongoing consultation with relevant stakeholders, such as multi-stakeholder initiatives and NGOs.
Does the assessment have any broader objectives, beyond the promotion of living wage and related human rights?
We believe that the assessment contributes to establishing a new standard for evaluating social factors (the ‘S’ of ESG) by measuring companies’ performance and real world effects and eventually creating more relevant data on the ‘S’ in the public domain. As highlighted in the “Putting the ‘S’ in ESG”3 report, we believe that investors, “if equipped with reliable, accessible information, are in a unique position to identify and reward companies with strong social performance, thereby creating incentives for companies across an industry to upgrade their operations in a way that improves human rights and strengthens societies”4.
How many companies does the PLWF engage and assess?
In the core engagement group, there are 14 garment and footwear brands that had been already engaged on living wage prior to formalizing the PLWF collaboration. The assessment of these companies is formally assured by a UK accounting firm Mazars. The external and independent assurance of our work is important to us as we aim to publish credible results.
In addition, in 2018, 7 garment and footwear brands and 1 retail company have been newly engaged and assessed and a few additional garment and footwear brands have been recently added as new targets.
Most recently, PLWF members have been redrafting the assessment methodology so that it could be applied to companies in other sectors. We expect to expand to the retail and food and agri sectors in Q4 2018.
1 See www.UNGPreporting.org, co-authored by Mazars and Shift
2 For a definition of ‘salient’ human rights issues, see www.UNGPreporting.org
3 Casey O’Connor and Sarah Labowitz “Putting the ‘S’ in ESG: Measuring Human Rights Performance for Investors” (NYU Stern Center for Business and Human Rights, 2013)
4 ibid 3