What is an adequate or living wage?
A wage that allows workers to meet their basic needs and also provides them with some discretionary income for other expenses. It is often higher than the legal minimum wage and reflects the actual cost of living in a particular location. A living wage takes into account factors such as the cost of housing, healthcare, education, and other basic needs. A living wage is a wage on which a worker and his or her family can live.
There are growing regulatory expectations. What do we do?
In April 2021, the European Commission adopted a legislative proposal for a Corporate Sustainability Reporting Directive (CSRD) that requires companies within its scope to report using a double materiality perspective in compliance with European Sustainability Reporting Standards (ESRS) adopted by the European Commission as delegated acts. With the adoption of the ESRS, companies are expected to implement the standards in the financial year 2024 and publish the report in 2025. Amongst many standards, in accordance with ESRS S1-10, companies will be required to report their adequate wage practices in line with applicable methodologies and benchmarks. Our detailed blog on the approach to comply with ESRS Adequate Wage Requirements explains more.
However, the implementation in practice remains challenging:
- Defining a living wage remains controversial.
- The data collection is complex and requires up-to-date, granular data to reflect the actual cost of living across geographies.
- Including the workforce in the value chain remains complex.
In the context of these challenges, Ksapa hosted a webinar alongside the Living Wage Institute to engage in a discussion addressing the following concrete aspects of solutions:
- How can the approaches be harmonized to reach a transparent, credible, and consensual definition of a living wage in accordance with regulatory and normative frameworks?
- Examining existing open-source data examples can be a reliable source when conducting a risk assessment.
- Exploring existing tools that can support the assessment and the implementation of a living wage strategy.
Possible solutions and takeaways from the webinar:
- Education. Calculating the living wage and agreeing to a number is not enough, employers and policymakers need to understand that they have a shared responsibility and value of labor and how to become proactive in that sense on how to define the living wage for the purpose of creating value and improving livelihoods as opposed to merely paying a salary.
- Calculating the living wage, is becoming increasingly standardized and technology is here to help.
- Ksapa has developed a concrete approach to allow companies to reflect on their practices and meet the regulatory requirements. Our methodological approach is consistent with the criteria set out by the Sustainable Trade Initiative (living wage identification, gap measurement, gaps calculation verification, gaps closing efforts, disclosure), using living wage benchmarks aligned with the Anker Methodology. We also rely on our Sutti app which could be deployed with the company’s workforce and suppliers.
- The Living Wage Institute produces the data hosted on the Living Wage Calculator in collaboration with MIT, and connect teams to the right living wage data for their needs as well as a bench of experts who can help them develop a living wage strategy
- There is increased interest in the question of a living wage beyond regulation. As business practices shift, there is recognition of its importance.
Articulate your approach because questions on living wage are not going away!
If you couldn’t join us or would like to listen to any aspects of the conversations again, you can replay the recording here.
Krystel is senior consultant, contributing to Ksapa’s consulting and advocacy missions, on the topic of business & human rights and more generally sustainability. Previously she was a Senior Legal Officer of the Human Rights and Business Unit at the Syrian Legal Development Programme (SLDP), where she developed an expertise in business and human rights in conflict-affected areas. Prior to that Krystel worked as a business and human rights consultant advising along with leading experts on a wide range of projects across the private sector, international organizations, and academic institutions. She is admitted to the Beirut Bar and worked as a lawyer in international arbitration and human rights. Krystel is fluent in French, English and Arabic.
