Traditionally, companies have focused on risk to business and prioritised high-spend areas. However, in a world where environmental and social sustainability is important to investors, stakeholders, and the community, we also need to consider risks to people.
Modern slavery presents a significant risk to businesses and people today. The International Labour Organisation (ILO) estimates that 27.6 million people are trapped in forced labour, and are hidden within the globalised supply chains of companies. Forced labour generates a massive USD$236 billion in profits every year! This figure represents wages that are essentially stolen from workers through exploitative and coercive practices.
Modern slavery strips people of their basic human rights, like fair working conditions, a decent standard of living, and social protection. But the risk of undermining rights goes beyond modern slavery itself. Around 327 million wage earners globally are paid at or below minimum wage. That’s 19% of all wage earners. This can keep people in poverty and stop them from accessing a decent standard of living.
The key difference between a minimum wage and a living wage is that a living wage allows workers to afford a decent standard of living for themselves and their families. Yet, in many countries, the minimum wage doesn’t come close to meeting that need.
“The gap between the minimum wage and living wage by country. Countries in grey either do not have a minimum wage or have a minimum wage too complex to be represented in a single country figure.” – Wage Indicator
Not paying workers a living wage presents risks to both people and businesses. Some forward-thinking companies have recognised these risks and have set the standard by ensuring their workers are paid a living wage.
Unilever has committed to all of its employees and the employees in its value chain to be paid a living wage by 2030. Nestlé has a Living Wage Program that ensures all their employees earn a living wage. They plan to roll out this program to all Nestlé employees worldwide and are working with direct suppliers to address living wage risks and impacts.
Businesses may just see this as an extra cost, but the reality is that there are multifaceted benefits. A research paper found that significant benefits to businesses include:
- Higher worker retention and productivity due to higher job satisfaction
- Stronger supplier performance and resilience, as supply chains become less vulnerable to social and industrial unrest
- Enhanced reputation for upholding CSR through living wages, which is attractive to investors as it reduces risks and is a measurable indicator
- Better positioning to deliver on human and labour rights obligations. Opportunities include: the right to an adequate standard of living, just and favourable working conditions, food and nutrition, and housing to name a few.
To put the “cost” of these benefits into perspective, a Fairphone analysis shows that paying factory workers living wages costs only €1.50 per smartphone.
Currently no country requires businesses to pay a living wage. But a living wage is increasingly seen as a social equivalent of the ‘race to net zero’. The sooner companies start moving, the lower the cost of the transition will be for them.
Cejay is a Content Producer for Supply Chain Channel, Australia's learning ecosystem created to fill the need for information, networking, case studies and empowerment for everyone in the supply chain sector.
