IDH & GIZ Living Wage Income Summit: ESG Takeaways

Earlier this year, nearly 75 years after living wages became a human right, the International Labour Organisation released its first guidance on living wages. 

The guidance comes as an estimated third of all workers- over a billion people- cannot afford a basic standard of living. 

IDH and Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH hosted the Living Wage Living Income Summit on the topic. 

Here, we look at key takeaways procurement professionals can glean from the summit and how companies can adapt their practices to these pressures.

The summit was hosted by IDH, which brings stakeholders from global value chains together to innovate and invest in solutions for sustainable and inclusive international trade, and Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH, a leading sustainable development service provider. 

It covered key milestones in the progress of private sector living wage commitments, including that 380 businesses have committed to 100% of its employees earning a living wage by 2030. 

Additionally, 230 companies committed to establishing a joint action plan with supply chain partners to work towards achieving living wages with measurable and time-bound milestones. 

Though these mark positive steps towards ESG goals for many companies, the summit also highlighted how far industries have to go. 

It discussed the failure of minimum wages, which are adopted in about 90% of countries, to meet workers’ needs and adjust to inflation- leaving workers worse off. 

New living wage guidelines

At the summit, IDH introduced more tools to support the introduction of living wages. 

These include buyer guidelines on how to close living wage gaps and a living income measurement data collection tool which helps companies by streamlining how they assess actual household income. 

“In the competitive market economy we live in, providing a voluntary contribution is a first step to support workers in supply chains,” says Marjan de Bock-Smit, Founder of ImpactBuying Group.

“The IDH guidelines on voluntary contribution provide practical tools to make sure that the contribution is truly received by the workers,” Marjan concludes. 

Tea procurement pilot

At the summit, it was also announced that IDH has launched a pilot with LIPTON Teas and Infusions, Twinings and Taylors of Harrogate to improve remuneration in some tea estates in Kenya, Sri Lanka and Malawi. 

The pro-rata based Living Wage Differential methodology being tested uses the living wage gap calculated by the IDH Salary Matrix. 

Companies then pay this differential in proportion to the tea volumes they procure from a given producer and the contributions will be transferred as ring-fenced funds to be paid out to workers. 

“Taylors are committed to improving wages and incomes across our supply chains,” says Frank Tanner, Responsible Sourcing Manager at Taylors of Harrogate. 

“We’re delighted to be involved in this pilot and to be taking the next step towards improving livelihoods in the tea sector.

“Making progress in this area is incredibly challenging and industry wide collaboration is critical, which is why we are proud to be partnering with producers and with other tea brands on this initiative.”

Coffee supply chains can be profitable for all

IDH also flagged its new research, which shows there is enough value for everyone to make a profit in the coffee supply chain. 

Currently, this profit does not reach farmers, according to the research explained at the summit. 

It invites coffee procurement professionals to re-evaluate their practices, with the new living wage guidance and resources to hand. 

“Current value distribution makes coffee production economically unviable for most farming families and the planet,” says Annette Pensel, Director of Global Coffee Platform. 

“This challenges the ambition of the coffee industry to become sustainable. 

“We invite the coffee sector to rethink the value system and act collectively to secure its future,” Annette concludes.

Procurement professionals from every industry can take something away from the Living Wage Income summit, and IDH’s further research around living wages, to improve their ethical and sustainable practices. 

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