In 2024, EcoVadis ramped up its efforts to enhance living wage disclosure across global supply chains. Our goal was to have 8,000 companies reporting their living wage metrics through the EcoVadis platform by year’s end. Through the combined efforts of pioneering companies, our own awareness-raising activities within the network and partnerships with organizations offering free benchmarks, we exceeded this goal by 2,000 companies – reaching a total of 10,000 reporters.
Toward Fair Compensation: What Is a Living Wage and Why Is It a Business Priority?
A living wage is one that enables workers and their families to afford a decent standard of living for the worker and their family, covering essentials such as food, water, housing, education, healthcare, transportation, clothing and other necessary expenses, including provisions for unexpected events. Unlike the minimum wage, which is the lowest legal pay rate a company can offer its workers, a living wage takes accounts for cost-of-living differences across regions.
It’s important for businesses to pay living wages – not just as a moral imperative but also because it benefits individuals, communities and businesses by improving productivity, motivation, loyalty and overall economic spending. At the same time, they reduce inequalities and promote social cohesion. The concept is also central to making the ongoing green and low-carbon transition more equitable.
Click here for more on why living wage is a business priority.
For businesses, paying living wages involves navigating complexities related to regional pay differences, broader workforce fairness strategies and extending these practices to supply chain workers.
Pioneering companies like Unilever and DSM-Firmenich have publicly committed to increasing salaries and wages throughout their own operations and supply chains. Leveraging EcoVadis supplier assessment and engagement solutions, they actively work with their partners to equalize and increase wages. Hear from these companies’ representatives on how they are addressing the unique challenges of implementing a living wage approach, as explored during our annual Sustain event.
Progress Made by the EcoVadis Network on Living Wage
Progress made on management systems to tackle living wage
Collectively, these developments highlight a concerted effort by various stakeholders to address wage-related inequalities. Suppliers assessed through EcoVadis Ratings have, since 2023, been asked to demonstrate policies, actions and results related to living wages. In this short timeframe, we have noticed an increase in the number of companies implementing living wage policies (9% to 13%) and reporting on their efforts (15% to 16%).
However, the percentage of companies implementing measures to close the living wage gap stagnated between 2023 and 2024 at around 8%.
The metrics related to living wages reveal significant shifts in company reporting practices and associated outcomes:
Increase in reporting baseline
The number of data points collected for the “percentage of all employees paid below a living wage (including direct employees, individual contractors and dispatched workers)” rose from approximately 1,900 in 2022 to 3,100 in 2023.
Similarly, the number of data points reported under “percentage of direct employees covered by a living wage benchmarking analysis” increased from 3,200 in 2022 to 5,350 in 2023.
|
Reporting Year |
2022 |
2023 |
|
Number of data points collected on” percentage of all employees paid below a living wage (including direct employees, individual contractors and dispatched workers)” |
1,900 |
3,100 |
|
Number of data points collected on “percentage of direct employees covered by a living wage benchmarking analysis |
3,200 |
5,350 |
This highlights increased corporate awareness of living wages and a growing interest in conducting initial gap analyses to establish baselines.
Increase in employees paid below living wage
The percentage of employees paid below a living wage (including all categories of workers) increased from 2% in 2022 to 4% in 2023.
This increase is due to more companies conducting benchmark analyses and reporting their 2023 data compared to 2022. However, given the short two-year timeframe of this analysis, it’s unlikely that companies could achieve a significant reduction in the living wage gap. Large-scale supply chain remediation efforts typically require several years to deliver meaningful results.
Conversely, the percentage of direct employees covered by a living wage benchmarking analysis decreased slightly from 94% in 2022 to 92% in 2023.
|
Reporting Year |
2022 |
2023 |
|
Percentage of employees paid below a living wage (including all categories of workers) |
2% |
4% |
|
Percentage of direct employees covered by a living wage benchmarking analysis |
94% |
92% |
These trends indicate increasing market awareness of living wage considerations. However, significant efforts are still needed to translate this awareness into tangible improvements in employee wage levels. EcoVadis firmly believes in the impact opportunity of living wages and is committed to helping close the gap in the years to come.
Key Priorities in the Living Wage Ecosystem
The movement toward implementing a living wage has gained significant momentum in recent years, offering hope that deeply rooted inequalities can steadily be addressed through wage increases. Businesses are increasingly adopting living wage commitments across their global operations and supply chains, reflecting a growing private-sector commitment to fair compensation. This progress is being bolstered by initiatives from a number of influential entities.
Incorporation of Living Wage into European Sustainability Regulations
The European Union (EU) has integrated living wage considerations into its sustainability framework through directives such as the Corporate Sustainability Reporting Directive, the Corporate Sustainability Due Diligence Directive and the Directive on Adequate Minimum Wages. These regulations aim to ensure that workers, including those in supply chains, receive fair compensation that meets their basic needs. This requires companies to promote decent living and working conditions across their global value chains, well beyond EU borders. EcoVadis solutions are helping companies conduct due diligence and identify, manage and report wage-related impacts at scale, in line with these regulatory requirements.
ILO's Efforts on Wage Policies and Living Wage
The International Labour Organization (ILO) has intensified its focus on wage policies, including living wages. In February 2024, the ILO convened a meeting of experts on the topic, resulting in a long-awaited authoritative guidance. It includes (1) a universal definition of living wage; (2) key principles for living wage standard setters; and (3) directions on how to operationalize the living wage concept by integrating it into national minimum wage-setting processes and social dialogue. The meeting underscored the need for transparency in calculating living wages and sparked momentum for future developments both within the living wage ecosystem and across the private sector.
Transparency and Standardization Initiatives
One of the barriers to the global adoption of living wage is the complexity of living wage estimates. Currently led by a few service providers, these estimates are often difficult to access, costly and highly variable. This has contributed to some corporate skepticism around the living wage concept as a whole.
To address these growing concerns, WageIndicator released its entire living wage benchmark database to the public earlier this year, building transparency and providing free access to over 2,600 living wage estimates. Similarly, WageMap, a consortium of living wage data and service providers including WageIndicator, is leading efforts to standardize living wage benchmarks. By harmonizing methodologies and creating a centralized access point for living wage data, WageMap aims to accelerate the implementation of living wages globally.
The EcoVadis working group on living wage includes 14 leading companies that have joined forces to advance the topics in their supply chains. It welcomes these concerted initiatives to provide clear tools and guidance for using living wage data effectively, aligned with ILO principles and supporting human rights due diligence.
Growing Interest From the Financial Sector
Beyond procurement considerations, the financial sector is also increasingly recognizing living wage as a critical metric for assessing social inequalities and impacts. Organizations like Shift have developed an accounting model to measure and value progress toward living wages, enabling the standardized and comparable reporting that is essential for incorporating social value creation into investment decisions. Additionally, EcoVadis endorses the Taskforce on Inequality and Social-related Financial Disclosures’ work on developing recommendations to help businesses and financial institutions understand and report on social-related impacts, including those related to living wages.
A Cross-Sector Working Group to Accelerate the Adoption of Living Wages
At EcoVadis, we firmly believe that collaboration within the ecosystem is essential for accelerating economic transformation. In 2025, EcoVadis will support leading procurement organizations on enhancing their living wage programs by establishing a collaborative working group. This group, consisting of nine members from our 12 Sector Initiatives, among which Groupe L’Occitane, DSM-Firmenich and AstraZeneca, will join forces to share best practices, engage their networks and drive increased disclosure and maturity within their supply chains.
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Authors: Julie de Mony-Pajol, Senior Impact Manager and Caroline Legrand, Sustainability Themes Senior Manager
