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As a topic that provides a tangible measure as part of the Social of ESG strategies, many organisations are asking how can this be achieved and embedded to encourage pay fairness whilst being integrated into the wider reward strategy for the global workforce?
One thing is clear: a growing number of businesses are aware of the need to take the living wage seriously. In order to satisfy regulatory requirements and UN targets, address external pressures and attract and retain talent, organisations are acting now.
There’s been a marked increase in the consideration of the living wage, and its role in creating a sustainable business whilst ensuring that all employees receive a wage which is sufficient to allow a reasonable standard of living - this is for their own operations, and increasingly across their, often complex, supply chains. This has been increasing in prominence due to the difficulties people are facing due to the cost of living crisis and also recent economic volatility. Our global survey has shown that although there is a common recognition that it is an appropriate strategy to adopt, there are only a limited number of organisations who currently have mature strategies and / or clear commitments and policies in this area.
There is global momentum for action on living wages. The United Nations Global Compact (UNGC) — a global sustainability initiative of the United Nations — launched the Forward Faster campaign in July 2023 with a call to action in September 2023, which sets out two targets for companies to advance living wages and incomes in their own operations and supply chains:
- Target 1: 100% of employees across the organisation earn a living wage by 2030.
- Target 2: to establish a joint action plan (or plans) with contractors, supply chain partners and other key stakeholders to work towards achieving living wages and/or living incomes with measurable and time-bound milestones.
Information gathered in our survey has provided an overview of the current global position for the adoption of a living wage and how this may develop in the future, whilst also highlighting wider considerations.
Living wage considerations are a key part of wider sustainability measures
For many organisations the living wage is linked to their need to develop the social aspects relevant to their overall Environmental, Social and Governance (ESG) strategy within a business. There can be many attributes within this (linked to employees, customers, community and supply chain), however the living wage is recognised as a tangible measure which can be adopted for employees and also within the supply chain. The E in ESG has been much more at the centre of business focus as well as media and activist campaigning in the past, however, the S—for social, and thus relating to people and social issues—is gaining a great deal more attention and rising in prominence.
One influencing factor relevant to any strategy is emerging regulations and the requirements for increased transparency (e.g. the the 2020 Adequate Minimum Wages Directive of the EU Commission, the upcoming Corporate Sustainability Reporting Directive (CSRD)) which are prompting businesses to increase their focus on social issues and to identify that they are an integral component of their overall sustainability strategy. Not only this, there is increasing pressure externally from investors, ESG agencies and external bodies, including the United Nations (UN) Global Compact.
Paying a living wage, and publically committing to this, alongside broader consideration of pay fairness, is a step forward for businesses in the move to promoting and guaranteeing workers sustainable, fair pay whilst also supporting and working towards the UN’s Social Development Goals (SDGs).
Living wage is being considered alongside broader aspects of workforce fairness
From our findings and the external environment, one thing is clear - the concept of living wages has become an expected and integral part of the Social considerations within ESG, and is now becoming recognised as such by regulators, investors, ESG ratings agencies, organisations and workers. Organisations recognise that it is not possible to consider their social strategies in isolation (say in terms of diversity and / or pay targets), and as such are taking a more holistic approach. Consideration is then being given to how to facilitate the change management and embed their strategy and targets across the whole organisation.
Both PwC and WageIndicator Foundation have come together to report on what we see as a solution which can assist with this worldwide problem, for both businesses and society: a living wage.
We surveyed 205 participants across 43 global territories—clients of PwC and WageIndicator— on their positions on paying a living wage, from which we have put together this report with new data on the multi-faceted aspects of paying a living wage and challenges faced on the route to doing so on a global scale. We explore the various benefits and potential such an undertaking has in empowering workers to live in a way that enables them to afford their needs to lead a decent life. However, there can also be challenges to overcome, and which will need to be planned for (eg. which benchmark to adopt, availability of data on a global scale, costs, reporting and upcoming regulation, implementation across the supply chain).
There is no one way to approach the topic, but we believe that understanding the various drivers and complexities is a first step on the route to living wages.
Living wage: An emerging standard
Global research into the role of Living Wage in creating a sustainable business
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