General
Every individual deserves the right to a decent standard of living. A ‘Living Wage’ is the remuneration received for a standard work week by a worker, in a particular place, sufficient to afford a decent standard of living for the worker and her or his family (see definition Global Living Wage Coalition).
However, worldwide, more than 2/3 of workers do not earn enough to afford a decent standard of living. This means that there still is a major Living Wage ‘Gap’ for the majority of salaried formal and informal workers around the world.
There are several critical reasons why the Living Wage gap needs to be closed:
- Persistent wage gaps increase economic inequalities, creating a cycle of poverty.
- Workers who are not paid fairly experience low morale, leading to reduced productivity.
- Child labour, forced labour and unsafe working conditions are often linked to inadequate wages.
- Due to financial desperation, workers often find themselves compelled to engage in environmentally harmful practices.
The commercial benefits of a Living Wage
For corporates buying products through international supply chains, there are significant commercial benefits to ensuring workers are paid a Living Wage:
- Enhanced Return on Investment: ‘Investing’ in a Living Wage pays off: workers who earn a Living Wage are generally more motivated and satisfied, and have access to better nutrition – allowing them to be more productive and contribute more to the business.
- Mitigate risks and comply with regulations: Corporates can mitigate their operational and reputational risks and stay ahead of the ever-increasing regulatory environment on Living Wage – for example, the European Corporate Sustainability Due Diligence Directive mentions the necessity of identifying whether a Living Wage is paid in supply chain.
- Attract and retain talent: Employers who are known to be paying a Living Wage are more attractive to higher skilled workers in the region, and retain a workforce loyal to the business.
- Strengthen the brand and investor appeal: Companies can differentiate themselves as a socially responsible organization, attracting the ever-growing ethical and impact investor base.
The NewForesight way to a Living Wage
At NewForesight, we believe in a world where all workers earn enough to afford a decent standard of living.
We are at the forefront of taking action on Living Wages, as a founding member and project management office lead of WageMap, a global coalition of service providers seeking to standardize living wage data. We have applied our Living Wage Benchmark Methodology (recognized by IDH and B Corp) across the globe, having establish 28 Living Wage benchmarks, and we have worked with retailers, brands, traders, and suppliers to take action towards closing the living wage gaps in global supply chains.
Figure 1 Our geographical span – We have helped clients in their Living Wage journeys across a wide range of commodities and countries
Sevices
We have developed an expertise to implement Living Wages in a way that is credible, scalable, and makes business-sense. Our approach combines all necessary ingredients for a comprehensive Living Wage strategy for your organization:
- Market-driven solutions: Any strategy towards Living Wages should work in, and with, the market. We therefore tie any Living Wage strategy to elements of procurement, sourcing, pricing and other dynamics of supply and demand. Ultimately, the market should reward a decent standard of living for all – not sanction it.
- Data-informed strategies: In an age of digitalization, AI and an abundance of data, the question is not so much Can we have access to data?, as it is What data to prioritize, and how to use it? All our work is driven by the use of credible, transparent and informative data. We believe this makes implementing Living Wage more sustainable, and not a one-time thing.
- Holistic perspective: Living Wage is not a topic in isolation – it is inherently connected to (other) human rights, the communities people live in, environmental factors, and the economics of the supply chain. Our approach to Living Wages therefore encompasses a strong engagement of the realities and levers at production-, supply chain-, and sector level.
Where do you start? The Living Wage journey and its challenges
If you are a business, paying a Living Wage in your supply chain is increasingly becoming a priority. Similarly, non-profit certification systems, investors and governments have an important role to play as well. But this is a complex task. It starts with knowing what the Living Wage journey looks like. Each business or supporting organization will be at a different stage of this journey:
- Understand ‘Living Wage’
We help clients understand the concept, opportunities, and barriers to a Living Wage. We do this through:
- Inspiration sessions: We offer light, high-level inspiration sessions (virtual and in-person) to introduce teams to the concept of a Living Wage – offering challenging reflection questions to start the conversation within your team or with your suppliers.
- Training and Workshops: We develop and deliver training programs and workshops for businesses on understanding, implementing, and monitoring Living Wage policies.
- Risk assessment: We analyze supply chains to identify risks and opportunities related to Living Wages – e.g. in which geographies or supply chains are the risks of not paying a Living Wage the highest?
2. Know the Living Wage Estimate
We help clients know the Living Wage estimate through:
- Living Wage benchmarking: We establish Living Wage benchmarks, using our methodology recognized by IDH, the Sustainable Trade Initiative, and accepted by B Corp for its members’ B Impact Assessment. To date,
- Movement Building & sector convening: We facilitate dialogue and collaboration among stakeholders to align around systemic issues, and collaborate pre-competitively to promote the adoption of living wage principles and practices. For example, NewForesight is one of the six founding organizations of WageMap: supporting the achievement of living wages for workers through standardizing living wage data.
3. Understand the Living Wage Gap
We help clients understand the gap between prevailing wages and Living Wages, which includes:
- Living Wage Gap analysis: We measure current wages and in-kind benefits to inform the gap between current wages and living wage standards. The focus can be employees in your own organization, or Tier 1, Tier 2 and Tier 3 suppliers in your supply chain.
- Due diligence: We help incorporate the Living Wage gap assessment cycle into your (mandatory) human rights due diligence practices – e.g. to comply with the EU Corporate Sustainability Due Diligence Directive.
- Train: We train employers to collect, verify and analyze data, assessing the Living Wage gap for Tier 1, Tier 2 and Tier 3 suppliers. This allows your team to internalize and scale the Living Wage within your own organization for the years to come.
4. Close the Living Wage Gap
We support organizations individually and at sector-level in this most important, and equally challenging, step:
- Fair pricing & sourcing practices: We assess pricing structures, cost breakdowns, and market dynamics, identifying pricing levels and sourcing practices that will enable living wages at every level of production and distribution.
- Drive sector commitments: We facilitate the development and adoption of sector-wide pledges or declarations committing stakeholders to uphold living wage standards.
- Sector strategies: We build an understanding of the sector challenges, the sector-wide Living Wage gap, and share best practices in closing the gap. We hereby facilitate distribution of value towards higher wages, and develop collaborative strategies for implementation.
- Learning partner: We provide ongoing support and advice to help organizations sustain and improve their living wage initiatives over time, including; regular check-ins, performance reviews, and updates on industry trends and best practices.