Improving labour standards through investor engagement

Active engagement to improve living wages

Case Study

A living wage allows a decent livelihood, taking care of housing, food, healthcare and other basic needs, and the means to support children and education. In 2016, Triodos Research started to actively engage with textiles and apparel companies on this topic.

Fair pay

The right to earn a decent wage, sufficient for a person to live on, should be an inalienable right. However, for many workers, particularly in the textiles and apparel industry, this is still unattainable. Although they may earn a legal minimum wage, in many developing countries this is below the actual living wage. Living wage has been a topic of discussion on the global stage through the International Labour Organization in the 1920s and the UN Declaration of Human Rights in the late 1940s, but the need to improve wages remains. That is why there is an urge for companies to take responsibility and pay a living wage.

A focus on living wage

In 2016, Triodos joined an initiative led by ASN Bank and including Dutch Pension investor MN, aimed at improving the wages in the textiles and apparel industry. With Erasmus University, ASN Bank conducted a study of 14 companies in the industry on the topic of living wage. The study showed where they can improve in the value chain and was presented to the companies, as a starting point for further dialogue on the subject. Eight of the companies surveyed are in the Triodos Sustainable Investment Universe: adidas, Asics, Gap, Gildan Activewear, H&M, Inditex, Nike and Puma. Parallel to this study of 14 companies, Triodos approached two other companies in our investment universe, VF Corp and TJX Companies, to gather information and initiate a constructive dialogue about living wages in their supply chain.

Putting engagement into action

Jointly, Triodos, ASN Bank, and MN produced a living wage manual that presents a clear roadmap on how companies in the textiles and apparel industry can implement living wage in their supply chain. It builds upon industry expert views, promising pilot programmes, and best practices currently in place. Last June, this guide was sent to the 14 companies surveyed, requesting feedback and an update on progress and plans. In addition, we reached out to sector- and civil society groups that work with the companies to advance living wages, like Fair Labour Association (FLA) and ACT (Action, Collaboration, Transformation).

Leaders in living wage

Thus far adidas, H&M, Inditex and Puma are leading the pack. They show the most progress in the implementation of living wage in their supply chain. H&M has a clearly defined vision on the topic and both its ambition and policy are published. Both H&M and Inditex are committed and concrete aspects of the living wage initiative are in the works, such as joining ACT, together with leading trade unions in the industry. Initial responses of the other companies to the manual are modest. Both Nike and Gap informed us that they will carefully review the recommendations made. However, the affiliated brands of FLA, including adidas, Gildan Activewear, Nike and Puma, are committed to paying living wages in their supply chain and are expected to develop an action plan on how to implement this. Unfortunately, of the two companies we approached separately, VF Corp was recently removed from the Triodos Sustainable Investment Universe, as the latest assessment showed that the company no longer belongs to the best in class of the industry. The response of TJX to our dialogue activities so far has been disappointing and we are considering next steps.

Triodos impact goals

With the collaborative living wage engagement, Triodos will get a better picture of where companies are and what their ambitions and targets are for the next three to five years. The ultimate goal of the engagement is to bring better wages to workers in the textiles and apparel industry, more rapidly. A living wage helps to alleviate poverty and hunger, and to bring better health of the workers and their families, as laid down in SDGs 1, 2 and 3. Collaborative engagement itself contributes to SDG 17: Partnerships for the goals. In the following years, we will continue to motivate companies to implement living wages in their supply chain, but also to speed up the process through collaborative initiatives that involve other relevant stakeholders including NGO’s, government organisations such as the OECD, and trade unions.

Note: The issues explored in this article are relevant for sustainable investments on the stock market. Triodos Investment Management believes that our socially responsible investments are a powerful means of promoting our values and working for greater sustainability, while enabling us to offer a complete range of attractive investment options to customers who choose to invest on the stock market.

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