Introducing the Platform Living Wage Financials
Today we proudly present the official launch of the Platform Living Wage Financials (PLWF). MN is a proud founding member of the Platform Living Wage Financials (PLWF), an unprecedented coalition of eight Dutch financial institutions representing over €725 billion of Assets Under Management.
Under the umbrella of PLWF, MN and other financial institutions come together to encourage, support and monitor the companies we invest in to address living wage in their global supply chains.
Why did MN decide to launch an engagement programme on living wage?
Current wages are often not enough
Research shows that in sectors such as the garment and footwear, food and agri, or the retail sector, wages paid to supply chain workers are often on the poverty line and well-below living wage estimates. Therefore, they are not sufficient to cover workers’ basic expenses, such as food, clothing, housing, health care, and education.
Minimum wages may not amount to a living wage
In some countries, the statutory minimum wage may be equal to living wage, but usually this is not the case. Whilst the minimum wage is legally set by the central government and should be sufficient to ‘ensure survival’, a living wage should be set at a rate that allows for a ‘dignified standard of living’ and a basic quality of life. Statutory minimum wages are often too low, not revised regularly, and they may be set without adequate stakeholder consultation. In some countries, minimum wage legislation is completely missing. That is why the wages paid to supply chain workers, especially in developing countries, are often insufficient to cover workers’ basic living expenses.
We are committed to human rights
At MN, we recognize that the payment of living wage constitutes a fundamental human right. As a pension fund administrator investing on behalf of 2 million pension beneficiaries, we aim to provide good pensions and to ensure sound returns. Disrespect for human rights in the supply chains of the companies that we invest in may materialise in the form of reputational and supply chain risks both for us and the companies involved.
Simultaneously, we are aware our investments have an impact on the world around us. Therefore, we also identify possible negative impacts of our investments on surroundings, workers and communities. Not paying a living wage violates workers’ rights. As a responsible share- and bondholder committed to the United Nations Guiding Principles (UNGPs) and OECD Guidelines for Multinational Enterprises, we ask companies to identify, prioritize, and mitigate their human rights risks and offer remediation and grievance mechanisms to potentially affected stakeholders. Our work within the Platform reflects this: we ask companies to consider (salient) human rights risks attached to the non-payment of living wage and we ask them to respond in adherence with international guidelines and applicable legislation.
We are committed to the United Nations Sustainable Development Goals
The provision of a living wage also contributes to reducing poverty and stimulating economic growth. We thereby perceive the engagement trajectory as a concrete contribution to advancing the United Nations Sustainable Development Goals, specifically Goals 1: ‘No poverty’; and 8: ‘Decent work and economic growth’.
Through the promotion of living wage, other social risks are mitigated and the overall socio-economic wellbeing of communities along global supply chains tends to improve
Through the promotion of living wage, we are contributing to the mitigation of other social risks in the supply chains of our investee companies, such as child labour and excessive overtime. Since the provision of living wage leads to a number of knock-on effects, addressing the topic of living wage is highly effective with regard to the positive change that we can achieve.
Our investee companies experience internal improvements in production efficiency and worker satisfaction
When living wage is paid, this also brings about internal benefits for our investee companies. Even those companies that we engage on the issue and that do not clearly recognize living wage as a fundamental human right do acknowledge that paying better wages to supply chain workers usually leads to improved productivity. This may be, for example, due to improved worker satisfaction and reduced turnover rate. The overall efficiency of companies’ production models may also improve as companies review their purchasing practices and work with their suppliers to improve performance and identify production efficiencies.
Leadership on living wage implementation highlights companies’ internal strengths
Finally, good employee relations, including a commitment to paying a living wage, may signal strong company management. Companies that pursue more sophisticated interventions on living wage tend to also have advanced policies and processes in place on other labour and human rights issues. Our engagement and assessment efforts suggest that there is a correlation between being a leader on living wage implementation and being a leader on labour standards and human rights due diligence. Therefore, the analysis of issues surrounding living wage can help MN identify underlying company strengths or provide early warning signs of mismanagement, which may otherwise be overlooked.
For us, the benefits of paying a living wage are, therefore, clear. Workers who earn a living wage can meet their own basic needs and those of their families as well as to put aside savings, thus being more likely to find their way out of poverty. They work regular working hours instead of excessively working overtime to make ends meet, and they are more likely to send their children to school instead of sending them to work. In short, our focus on living wage also advances the respect for a number of other fundamental human rights in global supply chains and underlines our role as a responsible investor.
Towards an inclusive solution
Given the complexity and systemic nature of the issue of living wage, it is necessary to involve a diverse range of stakeholders to come up with a lasting, inclusive solution.
Individual companies cannot solve this issue on their own. This is precisely why MN works with 14 large garment and footwear brands, and the PLWF as a whole has an even broader reach. By guiding and assessing the companies to determine which companies have been leading on the issue and which need to do more, we aim to motivate the ‘laggards’ to follow their better-performing peers.
The investor collaboration shows added value
As a coalition of eight Dutch financial institutions with over €725 billion of Assets Under Management, working together has added value. We have been recognized by other financial institutions for our leadership on the issue of living wage and financial institutions from across Europe have expressed their interest to follow the efforts of the Platform going forward.
Similarly, we were pleased to welcome seven representatives of the companies that are among the engaged ‘targets’ of the Platform during the official launch event of the collaboration on 27 September at MN: Asics, Asos, Adidas, Burberry, Esprit, H&M and Marks & Spencer. For us, this constitutes a recognition that our investor collaboration already leads to meaningful results, for example, by helping these companies stimulate internal discussions on living wage and prioritize the issue.
Living wage goes right into the heart of the business. The issue relates to pricing, competition, and consequently to customers who are used to cheap clothing and fast fashion. How to reconcile the two? How to ensure that living wages are paid, but also that the company remains competitive in a very competitive market? Is a fast-fashion business model at all suitable to enable living wages for workers who manufacture our clothes? There are no easy answers to these questions.
Companies should clearly recognize that the provision of living wage constitutes a fundamental human right and that implementing a vision, policy, and practices around living wage would ultimately advance their business. Going forward, we would like to see that companies embrace their ownership over the living wage implementation process and that they engage in an open and honest dialogue about what works, what does not, and what support is needed.
It is high time for the financial sector to take resolute action on living wage
At MN, we recognize that despite the attention the topic of living wage has received over the years, there has been insufficient progress on the way toward sector-wide living wage implementation.
Paying a living wage should not be an option, but a necessity, and to achieve that, the garment and footwear sector needs to change its production practices and move toward a more inclusive business model. We commit to exploring out-of-the-box solutions to realizing living wage and creating further incentives for our investee companies to upgrade their operations in a way that improves living wage and other human rights, and consequently strengthens societies worldwide.