Scaling-up fair wage assessment and remediation exercises

Besides a general willingness to address wage issues along the supply chain a growing number of enterprises have asked for a full Fair Wage assessment process, which involves extensive interviews with managers and workers among their production units and suppliers, complemented by in-depth qualitative case studies. On the basis of such an assessment a full picture can be drawn of wage practices of suppliers and then of a brand’s production chain as a whole.
The exercise is aimed at better identifying the performance of each supplier – and thus of the brand – on the twelve key dimensions identified in the Fair Wage approach. These include wage levels and their ability to provide a living wage and a decent market wage, but also their regular adjustment – to reflect inflation and company performance. Other dimensions include pay systems and other wage practices at company level, for example, legal compliance and so on.

The first pilot projects were carried out for PUMA in 25 strategic suppliers in five countries – Cambodia, China, Indonesia, Malaysia and Vietnam. The findings led to a better understanding of the areas in which improvements are rapidly needed, and for which PUMA could push and support its suppliers accordingly. This led to a remediation process in 2012–2014 at four factories in Indonesia and led to concrete outcomes: results showed that all factories that participated benefited from more stable wage structures (with more motivating and efficient pay systems), which also helped to stabilize social dialogue at these establishments.
Peaceful and constructive wage discussions between factory employees and management have contributed to avoid disruption in factory operations despite ongoing industrial unrest in the rest of the region.
A Fair Wage assessment was also carried out for ADIDAS in 2013, at 29 strategic suppliers in eight countries (China, Indonesia, the Philippines, Thailand, Vietnam, Brazil, El Salvador and Mexico, with 1,807 workers interviewed and also a series of in-depth case studies in four suppliers in the Philippines).

H&M carried out this assessment exercise at 200 strategic suppliers (with nearly 5,000 workers interviewed), which made it possible to generate a very precise and detailed assessment of fair wage practices by country of operation, type of suppliers, and product. On this basis H&M selected three model factories for implementing its “Fair living wage strategy”: one in Cambodia and two in Bangladesh. The successful achievement of this pilot exercise in one year led H&M to seek to implement such remediation processes in all its suppliers by 2018, starting with 60 factories in 2015–2016 in Bangladesh, Cambodia and China.
The number of brands involved in such Fair Wage assessment exercises continued to increase over 2014, extending the scope beyond the garment sector, with Fair Wage assessments also carried out in the food sector for UNILEVER in Vietnam and also for the household furniture brand IKEA. The novelty of the exercise carried out for IKEA was that it started with an assessment among a few of its own stores in the US, Japan and China, before extending the same assessment process among its suppliers, starting in Turkey, and then Bangladesh and India. This process will also be scaled up in 2015 following this double track towards fairer wage practices for both IKEA’s own employees, and employees working for their suppliers.
The Fair Wage Network also received requests directly from suppliers, and for instance carried out a Fair Wage assessment exercise at the enterprise CHENFENG, China, in 2013–2014.

Cooperation with other NGOs allowed this assessment process to become known by – and thus extended to – other brands. A partnership with ETI-Norway led to the commitment of four of its members – VARNER, STORMBERG, NORRONA, VOICE – to the approach, and led to an assessment process in a few of their selected suppliers in early 2015. While these pilot factories will now move to the remediation phase, the assessment process will be extended to more brands and more suppliers in 2015. One of the aims of this process is also to motivate brands to cooperate with other brands with which they share a number of suppliers.
Acting together around the Fair Wage approach would increase the leverage needed to change wage practices in the field. Cooperation with other organizations, such as SOLIDARIDAD, FLA, and ETI, are foreseen in 2015–2016.

The progressive extension of this process, and the involvement of other enterprises and other NGOs, would help us to underline the business case that has been shown by the pilots carried out so far. Only on this basis will we be able to profoundly change both mentalities and practices concerning wage issues along supply chains.