Company: MN (on behalf of the PLWF)
Category: Active Ownership Project of the Year (winner)
In the spirit of showcasing leadership and raising standards of responsible investment among all our signatories, we are pleased to publish case studies of all the winning and shortlisted entries for the PRI Awards 2019.
Project overview and objectives
The Platform Living Wage Financials (PLWF) is an alliance of 11 financial institutions representing over €2.3 trillion in assets under management. It was founded in September 2018 and uses its financial leverage to engage investee companies to address the non-payment of a living wage to workers in their global supply chains. It targets three sectors: garments, food and agricultural, and retail. It is the first collective approach from the financial sector to focus on a single human right. And it has led to broad interest from other financial institutions to advance living wages. The decision to focus on the living wage was driven by a number of factors:
- Wages ages in the sectors the PLWF addresses are often two to three times lower than living wage estimates.
- The living wage acts as a catalyst to achieving the UN’s Sustainable Development Goals, in particular Goal 1: no poverty, and Goal 8: decent work and economic growth.
- The living wage contributes to the promotion of other human rights, including the prevention of child labour and excessive overtime.
- Other important issues such as social dialogue, supplier capacity building, or responsible purchasing practices can also addressed.
- The approach helps companies to comply with the OECD Guidelines for Multinational Enterprises and the United Nations Guiding Principles (UNPGs).
- There’s been inadequate progress on this issue over the years and PLWF members believe it is the responsibility of the financial sector to take action.
The project in practice and challenges overcome
The PLWF’s strategy is to support entire sectors, rather than individual companies, in order to improve collective performance. It has focused on 44 companies across three sectors, to date. It identifies leaders and laggards within the sectors and moves its agenda forward by sharing best practices. PLWF then measures a company’s living-wage performance against 40 key-performance indicators derived from the UNGPs, with progress monitored each year. Each PLWF member is then able to make an investment decision based on a company’s progress – or lack of – towards providing an acceptable living wage.
In addition, each PLWF member:
- Has an active relationship with external stakeholders such as unions, NGOs, and multi-stakeholder initiatives.
- Engages external asset managers in order to expand its impact and activate the financial sector on its role in advancing the living wage.
PLWF faced three broad challenges after it was established in The Hague in 2018. The first challenge was to find a way to encourage companies to upgrade their operations in a way that improved the living wage, and also helped them to become more transparent on pay disclosure. To do this, PLWF created a strategy that embraced:
- periodic engagement of investee companies;
- harmonisation of collective engagement efforts;
- annual assessments;
- high-quality reporting, including via a dedicated website (www.livingwage.nl
- the production of best practice guidelines;
- and continuous integration of feedback from external stakeholders.
PLWF holds plenary meetings every six weeks in order to analyse the effectiveness of each of these strategies.
The second challenge was to establish an effective working relationship between the different platform members. PLWF overcame this by creating a management committee, three sector-specific working groups, an AGM working group and a working group based on engaging with external managers.
This new governance structure provides:
- clarity on each member’s specific role(s);
- helps to set concrete objectives for the future;
- and enables effective coordination of engagement and reporting.
The third challenge was to maintain the high quality of PLWF’s living wage-assessment methodology, which to date has drawn widespread respect and recognition. With a growing membership base and decentralized management structure, PLWF aims to preserve the high quality of its assessments via:
- external scrutiny of selected assessments by UK accounting firm Mazars;
- formal talks with external stakeholders (unions, NGOs, MSIs, etc.);
- regular participation by external stakeholders in plenary meetings;
- regular internal workshops to discuss the evidence required for companies to meet living-wage standards.
Success against objectives
PLWF’s work has achieved success on several levels:
Provided high-quality data: It has contributed to building a new data standard of social indicators that could feed into investment decisions in a more straightforward way.
Established the living wage as a proxy indicator: PLWF found that companies who pursued more sophisticated interventions on living wage tended to have highly developed policies and processes on other labour and human rights standards. The PLWF believes its work may help members to use companies’ performance on living wage as a proxy to identify both outperformers and underperformers on the ‘S’ of ESG.
Inspired positive action: Investor collaboration has already led to meaningful results. Both stakeholders and engaged companies have acknowledged the Platform’s added value. Some brands have stressed that the work of the PLWF has helped move things forward, and that financial institutions can help create momentum internally, and spread the message more purposefully. For example, by helping these companies stimulate internal discussions on living wage and prioritise the issue.
Made tangible improvements: In the very short period the project has been up and running, there have already been tangible improvements, especially in transparency, but also policy changes. For example:
- US clothing company, Hanesbrands, announced that it would amend its Global Standards for Suppliers to recognize the right of supply chain workers to fair compensation and work with its suppliers to realise it.
- PVH, another US clothing brand, has joined the ACT initiative on living wages.
- The Netherlands biggest supermarket chain, Albert Heijn, published an extensive due diligence document that ncludes a commitment to advance the payment of a living wage/income.
- Brazil’s biggest clothing department store, Lojas Renner, has included living wage in its policy.