To be operational, your roadmap, company policy or commitment will need to translate targets into actionable interventions. Choose and implement the type of interventions that best applies to your specific situation. These can be complementary and target various levels: industry, landscape or different tiers of your supply.
1. Redesign purchasing practices
Align your procurement practices with your living wage and living income strategy.
Supply chain management is complex due to the large number of stakeholders and the lack of data and transparency. Yet here, we distilled a few best practices and resources from leading companies that can be useful in your living wage and income journey.
Reviewing purchasing agreements
Investing in the relationship with your suppliers provides an incentive for suppliers and farmers to invest in living wages/income, with a greater chance of positive impact.
The following changes to the purchasing agreements have shown to increase the loyalty of farmers/suppliers, improve product quality and volumes, increasing small farmers and trader income, and better wages for workers:
- Simplifying the supply chain wherever possible
- Establishing longer-term contracts or sourcing agreements
- Buying directly from producers and commit to purchase their full output if possible
- Committing to minimum volumes and price guarantees
- Review and adjust product specifications
- Review and adjust ordering patterns
- Add favourable language related to social dialogue, collective bargaining and freedom of association in standards, codes and contractual agreements
Resources and best practices
Ethical Trading Initiative
Guidance to buying responsibly and influence wages.
Fair distribution of economic value in coffee supply chains.
Marks & Spencer
Enhancing smallholders and workers' lifes in the bean supply chain in Kenya.
Towards living wages for banana workers.
Assessing pricing and increasing transparency
Price volatility and low prices are among the major barriers for farmers to earn a living income and for producers/suppliers to pay a living wage to their workers. This hampers their ability to make investments.
Your company may consider:
- Providing market information systems: Supporting suppliers and farmers to have access to market information systems regarding prices, market sales, weather and pest risks can help them to make more informed decisions.
- Calculating prices: You can access your company data as well as complementary sources to obtain data that will help you assess the costs of sustainable production. Your company may want to look into calculating:
- Living income price: farm gate prices that enable farmers to make a living income and fair. The following methodologies can help your company with prices calculations.
- True prices: Calculation of the true price includes environmental and social costs for the product. The social cost is mostly related to the living wage gap i.e. employee earnings below the living wage. The following examples can help your company understand the price calculations.
- Supplier pre-contracting at agreed prices. Outgrower schemes or contract farming guarantee farmers or suppliers access to buyers at pre-agreed prices. Your company is then guaranteed a reliable supply at the desired quality.
Using certification schemes and premiums
Certification schemes and premiums can help your company to start addressing living wages and living incomes within existing frameworks.
- Certification schemes. Request information from the standards system your company uses regarding the ways their standard impacts farmer income. It will help improve the traceability of your supply chain.
- Incentives for meeting specifications. Price incentives can be established through a direct and transparent trading relationship, where the criteria for the price increase and the expectations of both buyer and supplier are detailed and agreed.
Examples of certification schemes and premiums
Sustainable agriculture standard including living wage and living income requirements.
Living income strategy for smallholder farmers.
Guidance for implementing a decent living wage.
Fair for Life
Fair and responsible supply chain standards.
Premiums in the coconut sector through blockchain technology.
Chocolate brand calculating and raising cocoa prices so farmers can earn a living income.
2. Intervene in your supply chains
In addition to the calculation of a living wage, explained in Step 2, your company will need to understand the environment in which it operates. Working towards paying living wages is a process and some enabling conditions will need to be in place to achieve this goal. A needs assessment in sourcing areas will help to determine which supply chain interventions will be most impactful to support workers and therefore provide the most return on your company investment. Your company may consider the following steps:
- Understand how your purchasing practices, suppliers’ human resources and pay systems affect suppliers’ abilities to pay workers living wages
- Understand the enabling environment in terms of social dialogue, freedom of association, collective bargaining processes and union representation
- Identify current working condition issues and risks
- Design corresponding solutions that address root causes
- Understand how partners can help implementation and determine potential roles
- Prioritize action based on severity of the need and potential for progress
Create enabling conditions for payment of living wages
In order to encourage a responsible attitude towards wages among their suppliers, your company can support practical actions, such as:
- Improving sourcing strategies and purchasing practices to ensure that suppliers have enough margin to increase wages
- Review your existing code of conduct and policies on wages, and identify opportunities to clarify your position
- In your agreements, specify that suppliers should comply with their country’s legal minimum wage and commit to living wages
- Helping suppliers to improve HR and pay systems
Fair Labor Association
Improving payroll software to ensure proper social security deductions
Turkish cotton sector
Apparel companies providing contracts for workers
Fair Labor Association
Improving worker compensation through proper documentation and payroll systems in China
Enable social dialogue, freedom of association & collective bargaining
To help empower workers to voice their needs and negotiate better pay, an enabling environment that supports freedom of association and collective bargaining is key. Your company might need to collaborate with other companies and organizations to bring the desired change at sector or regional level. Your company could engage in partnerships or initiatives that:
- Request that suppliers support social dialogue for wage negotiations by making it a prerequisite of doing business
- Wherever possible, support training of workers on freedom of association, social dialogue, transparent payment systems and collective bargaining agreements
- Support processes for collective bargaining agreements
- Encourage suppliers to establish grievance mechanisms for workers
- Facilitate representation of workers by unions
- Strengthen network of unions for stronger bargaining power
Improve working conditions
Wages are closely linked to working conditions. While working towards living wages can be mid-term to long term process, complementary actions can be taken to improve working conditions in parallel to activities that create the enabling environment toward living wages. Your company may consider exploring the following areas with suppliers:
- Protective equipment
- Capacity building on health and safety measures
- Housing and transport programmes
- Nutrition programmes
- Gender dynamics
To determine which supply chain interventions will be most impactful to support farmer partners and therefore provide the most return on investment, your company will need to conduct a needs assessment in sourcing areas. Your company may consider the following steps:
- Identify current barriers to farmer facing in production that can be helped through a supply chain intervention
- Engage with the exporting companies wherever relevant
- Design corresponding solutions that address root causes
- Understand how partners can help implementation and determine potential role
- Prioritize action based on needs, potential for progress and company’s roadmap
Specific interventions to increase farmers’ income
It is possible to a degree to raise farmer incomes through selected interventions. Your company will choose interventions based on the needs assessment, identifying the interventions that seem most applicable to address current barriers. The following interventions have shown to increase farmers’ income the most.
Support access to finance
- Promote financial literacy
- Support farmer business schools
- Promote savings-led groups
- Facilitate access to formal financial services
- Provide direct (micro-)credit
- Buy crop/weather insurance
Cocoa Growership Programme
End-to-end support for cocoa farmers using coconut farms to grow cacao trees
Ben & Jerry’s, Barry Callebaut & Fairtrade
Producer Development Initiative
Providing support services to improve productivity & access to finance
Support access to market
- Ensure transparent price and quality information
- Adjust payment terms and contracts to prevent side selling
- Provide necessary training and services that help farmers meet your company specifications
Provide access to inputs
- Companies provide inputs to the farmers at no cost or at subsidized rates before the planting season. After the harvest, these costs are deducted in proportion to the sale price.
- Companies provide information and training on the appropriate use of inputs.
Strengthen producer collectives
- Trainings on internal management, operations and financial management
- Tailored services based on farmer needs
Provide technical assistance
- Farmers field school
- Farms development plans
- Promote crop diversification
- Promote climate change adaptation practices
- Post-harvest loss prevention
Honey Care Africa
Providing farm equiptment, trainings & technical assistance
Livelihoods Fund & Mars
Training farmers on sustainable practices and crop diversification in vanilla production
Cargill Coop Academy
Training for farmers and cooperatives in Côte d’Ivoire
Implement poverty reduction programmes
- Housing program
- Nutrition program
3. Engage in industry and landscape initiatives
Consider either joining, or at least supporting, these initiatives to catalyse change at sectoral level and learn about and share best practices.
Identify an organization or initiative that is addressing issues that frame governance in your priority commodity or in your sector, either at a national or global level.
Examples of leading industry initiatives
Ethical Tea Partnership
Creating a sustainable tea industry for farmers, workers & the environment.
World Banana Forum
Making wages an integral part of sustainable production discussions.
Sustainable Coffee Challenge
Transitioning the coffee sector to be fully sustainable.
German retail commitment
Taking steps towards the realisation of living wages and living incomes.
Banana retail commitment
Dutch retailers’ commitment to close the living wage gap in the banana supply chain.
Your economic sustainability strategy relates to the environmental and social policies of the area you are sourcing from.
You may want to consider lending support and financial resources to initiatives that contribute to well-managed landscapes and improved incomes for producers and/or wages for workers in the sourcing areas. These initiatives support a combination of specific actions described above such as technical assistance, access to market, and access to finance, amongst others. These initiatives lead to sustainable intensification and diversification and may increase incomes as well as support collective bargaining, training, and social dialogue to create an enabling environment for living wages.
Examples of landscape initiatives
Cocoa & Forests Initiative
Commitment of cocoa-producing countries and companies to restore forest and increase livelihoods.
Ethical Trading Initiative
Eliminating exploitive practices in the garment/textile industry in Southern India.
Tropical Forest Alliance
Africa Palm Oil Initiatives creating a thriving and socially and environmentally responsible palm oil industry.
Do you want to know more about living income and living wages?
- Global Living Wage Coalition
- Living Income Community of Practice
- Living Wage Lab
- Ethical Trading Initiative
- Fair Labour Association
- Fairtrade International
- Living Wage Foundation
- Rainforest Alliance
- Sustainable Food Lab
- True Price
- WageIndicator Foundation
Take action resources
- The Living Income Community of practice & BMZ (2020). Guiding steps towards living income in the supply chain - How to mainstream living income in your company’s activities
- Farmer Income Lab (2018). What works to increase smallholder farmers’ income? A landscape review
- Farmer Income Lab (2019). Boosting farmer income: further insights from great cases
- Oxfam (2014). Steps towards a living wage in global supply chains
- Ethical Trading Initiative (2016). Base code guidance: living wage. Step by step guide on taking action towards living wages
- Ethical Trading Initiative (2015). Living Wages in Global Supply Chains: a new agenda for business. To help companies understand the wider wages landscape and their position and leverage within that landscape