Actual delivery by largest companies in certain sectors falls below what they have committed.
The Platform Living Wage Financials (PLWF) organisation has published its first annual report on investor engagement with companies, which highlighted a lack of action in many sectors.
The report covers companies in the garment, footwear, agriculture, food, and the food retail sector.
Only eight of the thirty-two companies received a higher score in 2021 compared to last year, said PLWF. Of these eight, six scored three or more points better. A total of five companies, PUMA, H&M, Hugo Boss, Ralph Lauren, and VF Corp progressed to a higher category of development.
PLWF judged investee companies’ performance on living wages against a set methodology, which involved a questionnaire and used an independent accountancy firm to collate the results.
Titled ‘The Importance of Long-term Investor Engagement on Living Wage’, PLWF’s report said that while work is being undertaken, the companies monitored still need to make more progress in increasing wages.
The report focused on five key engagement points going forward to improve efforts. These were that “companies should understand living wage and/or living income is a salient human right issue and embed this in their corporate policies.”
Other engagement points included: “efforts to increase transparency and traceability in their supply chains for companies”; more focus on living wage gap data analysis; companies should show how they cooperate with multi-stakeholder initiatives and labour unions in their living wage programmes and scale up pilot projects on living wages; and “governments need to live up to their responsibility to protect and need to use legislation as a tool to create level playing fields.”
The annual reports aimed to assess companies on payment of living wages in their direct operations or supply chains. It provided a benchmark to determine which companies have led on the issue and which need to do more.
Netherlands-based PLWF, which was founded in 2018, consists of 18 financial institutions, with more than €4 trillion in assets under management. The organisation works with 33 publicly listed garment and footwear brands, 12 food producing companies and 12 food retail companies.
Household name brands were among some of those that lagged, especially in the garment and footwear sector. In 2020, PLWF “observed that of the companies we assessed, 20 are undertaking the collection of wage data, either as part of a pilot scheme or a broader commitment to assess the living wage gap across their operations.”
“We view this as tangible progress because in order to fix a problem, one must first measure it. That said, overall, progress has been limited since last year’s assessment cycle,” the report said.
“An increasing number of companies and investors acknowledge the importance of a living wage in those industries where wages are often below the poverty line,” the report continued. “It is now time for companies to translate their commitment on living wages into better purchasing practices, proper grievance mechanisms and wage-data collection.”
“Garment and footwear companies took initial steps by mapping the issue and should now be ready to take concrete action, while agriculture, food and food retail companies still need to identify the issue and formulate a policy,” said the report.
The report both praised and criticised companies’ reactions to the pandemic. “Although Covid-19 statements provide meaningful information, these do not replace structural improvements needed throughout the supply chains.”
Currently, PLWF’s strategy is to increase its leverage at companies by encouraging the use of escalation mechanisms such as votes against management. It is also developing strategies around filing of shareholder proposals at investee company AGMs.
The report’s highlighting of a lack of concrete action by both government and business should lead to more definitive efforts in the future, said stakeholders.
Irina van der Sluijs, Co-founder of PLWF & Engagement manager at ASN Bank, said that awareness checks and policy on paper checks were key to seeing strategy development.
“Companies need to go to the core, and this will hurt financially, but government can help to create a level playing field so to keep a competitive advantage,” van der Sluijs said. “Governments should set a baseline, so companies are being pushed into a more balanced business operation.”