Why brands must disclose more data about wages in their supply chain

Levi Strauss caused a storm among ethical trade campaigners when it refused in 2006 to commit to paying workers in its supply chain enough to live on.

The Ethical Trading Initiative, a club to improve supply chain labour standards, barred Levi’s because it would not take the group members’ pledge to use suppliers who paid a living wage. This means paying workers enough to meet more than just their basic needs.

Levi’s argued that no one could define a living wage, so no brand should be expected to pay it. But other companies have been less direct about their inability to ensure that factory workers are paid this wage.

Many UK and US retailers have taken the living wage pledge. Point five of the ETI base code, entitled “Living Wages are Paid”, says: “Wages should always be enough to meet basic needs and to provide some discretionary income.”

But take a look at members’ own supplier codes of conduct and reporting on them, and the commitment to pay a living wage gets diluted.

For example, Gap’s code of vendor conduct, on its website, says: “Factories are encouraged to provide wages and benefits that are sufficient to cover workers’ basic needs and some discretionary income.” So Gap encourages, but does not force, suppliers to pay a living wage.

And company reporting against the living wage commitment is poor. Tesco is typical. It reveals in its 2009 corporate responsibility report that in the previous year, 21% of “improvement actions” to correct factory labour problems were related to pay (the total number of improvement actions is not given). But Tesco fails to disclose what percentage of its suppliers were found to be paying workers enough to live on, and how this was measured.

The truth is, brands currently struggle to get suppliers to pay even the legal minimum wage, overtime and benefits – let alone a living wage (see cover story, from p12). This is as true in the factories of Los Angeles as it is in Jakarta.

Tackling the root causes of low wages is complex and will take time. But, as a bare minimum, companies must be transparent about what workers in their supply chains earn and how far that money goes. This is certainly possible for them to do.

Metrics matter

For a start, brands have access to suppliers’ salary data. And auditing standards such as the SA8000 certification already include a living wage test, using a formula that can be tailored to different countries and regions.

Brands should report on how wages paid in their supply chains match up to a series of wage benchmarks: the legal minimum, industry average and a number of living wage standards. Also, brands should, ideally, find a common approach to reporting on wages – although this would be hard to agree on. In the meantime, those that really are serious about the living wage should push ahead and disclose exactly how they are putting this commitment into practice.

If there is one lesson of the last 20 years of ethical trading efforts, it is this: the more light that is shed on the murkier parts of a supply chain, the higher the chances that improvements in labour standards will follow.


What to find out more about industry inititatives like Ethical Trading Initiative and SA8000 certification? Check out the Guide to Industry Initiative in CSR - a new report just publlished by the Ethical Corporation Insititue

Related Reads

comments powered by Disqus