Results of the 2018 assessment

 
 
In this section, we will cover a sector overview of the 2018 review results, highlighting in which stage each of the companies is when it comes to living wage.
The full report by ASN Bank with results of the living wage ratings assured by Mazars can be reviewed here.
 

Our approach to communicating the assessment results

Although we have determined a concrete ranking with exact scores per company, we have decided not to publicly communicate these results. Instead, we have decided to communicate the category in which the assessed companies are located and to report on key takeaways and aggregate results per sector.
 
There is a number of reasons underpinning this decision. 
 
Measuring human rights performance remains a challenge
We believe that the individual review sheets and accompanying scoring are useful from an engagement point of view (investor-investee), but do not necessarily reflect the underlying sectoral issues and themes. To put it bluntly: What is one point extra in terms of human rights? There are no fundamental units for measuring human rights.
 
We do not aim to create another benchmark
Moreover, the objective behind this assessment is not to create yet another benchmark that will lead to no performance-related changes on the part of the companies assessed (or, in other words, “to benchmark for the sake of benchmarking”). The objective of the assessment is to stimulate sector-wide progress and to ultimately lift the level playing field.
 
We believe this does not help the payment of living wage
We believe reporting concrete scores and ‘naming and shaming’ might negatively affect the quality of the engagement, for example, by potentially undermining our engagement efforts vis-à-vis some of the lower-ranking companies which have committed to improve their performance going forward.
 
From a sectoral perspective, it is more informative to report on the stage each of the companies is in
Therefore, rather than concentrating on a specific score, we are grouping the companies into four categories based on where we perceive them to be on their journey to implementing living wage. This gives us a good overview of where the sector is as a whole and where we would like it to go.
 
These four categories are ‘embryonic’, ‘developing’, ‘maturing’, and ‘leading’, and they are defined as follows:
 
Embryonic: The company has barely recognised the importance of living wage and has not articulated the benefits for itself or more widely.
Developing: The company recognises that the payment of a living wage is an issue, but there is no formal process to tackle it within its own manufacturing arms or those within its supply chain, and there is little evidence of improvement.
Maturing: The company recognises that the payment of a living wage is a salient issue and has in place formal processes to address it. There is evidence of improvement in high risk areas.
Leading: The company believes that payment of a living wage is a salient issue and is important for its wider strategic intent. There are effective processes in place to ensure progress to a widespread payment of a living wage in its own manufacturing arms or those within its supply chains. The company is seen as a leader and acts as a catalyst for other organisations to strive to pay a living wage.
 

Assessment results 2018

Rating of 14 companies conducted by ASN Bank and Mazars
 
 
 
The full report by ASN Bank with results of the living wage ratings assured by Mazars can be reviewed here.
 
Rating of 7 companies conducted by MN
 
 

 

Comments on the assessment results

Most companies see Living wage as a salient issue
From the  sector overview we can see that most companies find themselves in the developing and maturing stage, which is a positive outcome. It means that most of the garment companies under assessment regard living wage as a salient issue, setting a living wage policy and definition (C1). This is an important step and not something to take for granted. After all, salience means that the risk is in the supply chain, with the community, the worker, the environment and not with the core business.
 
We see more initiatives to tackle the payment of living wage down the supply chain
Consequently, a key obstacle in realizing living wages in the garment sector is that brands we invest in do not pay the workers a salary, instead the manufacturers in producing countries do. Ever since the endorsement of the UNGPs, however, brands are expected to mitigate salient human rights risks. The crux is how; how to do that if you are not the one hiring people and paying their salaries. In recent years, initiatives have been taken to find creative solutions either on factory or industry level5.
 
Companies work together in sector initiatives, and in collaboration with trade unions, NGO’s and governments
This brings us to another aspect that most companies under assessment have embraced: collaboration with partners and stakeholders to further the cause of living wage (C2). Companies that are buying from manufactures in producing countries or via a third party cannot realize living wage alone; an essential part is working together with other garment companies, trade unions, (multi) stakeholder organisations and governments.
 
Companies need to do more in practice to advance the payment of living wage
Despite the positive developments described above, when we look at the centre part of most of the company reviews (C3 – C6), we have difficulties finding evidence to award higher scores. This means that most companies under review still need to do more to assess the impact of the non-payment of living wage and to integrate the findings in their business. We do not see many examples of companies actually gathering data that show the wage gap between minimum or prevailing wages and living wage estimates or changing their purchasing practices to help close the gap and monitoring that with key indicators on the living wage statement.
 

Going forward

We have set out concrete asks and steps for the companies
We would like to see that companies embrace their ownership over the living wage implementation process. We would also like to see that companies take steps toward improved transparency (final question 8 in our methodology) about wages & surrounding data, progress made, but also difficulties and obstacles faced. As investors, we are not interested in window-dressing activities, but in an open and honest sharing of what works, what does not, and what support is needed.
 
Working together is key
Together with brands, other financial institutions, experts, and civil society, we want to engage in forward-looking activities and co-create innovative solutions to the complex issue of living wage in global supply chains. Obstacles pertain, such as compounding price escalation when salaries are raised, the overall increase in living costs when wages go up, or the hesitation of governments/producers to raise (minimum) wages out of fear of losing a competitiveness edge over new supplying countries such as Ethiopia.
 
New technology might advance the payment of living wage 
Still, we are positive that with joining forces and using out-of-the-box thinking living wage can be realized for workers in the garment industry and other sectors where poverty wages prevail. We are interested in working with experts to look at Blockchain to increase transparency or to raise awareness with consumers and find solutions as to how they might be able to make concrete contributions to a living wage
 

5 See for example the living wage initiatives by the Fair Labour Organisation (FLA), ACT (actonlivingwage), Sustainable Apparel Coalition (SAC) and Fair Wear Foundation (FWF)