Implementing Living Wages across complex supply chains

Though it's an important goal, implementing Living Wage policies across multinational operations is easier said than done. So this month, we've got four of WageIndicator's Living Wage ladies, combining decades of experience and multiple perspectives, to break it down. So read what Paulien Osse (Lead, WageIndicator's Global Living Wage Team), Janna Besamusca (Researcher, Utrecht University), Daniela Ceccon (WageIndicator's Director of Data), Vivian Hartlief (Project Manager at WageIndicator) and Pritha Bhattacharya (Writer, WageIndicator Living Wage newsletter), have to say!

Paulien: Janna, what's the smartest way to implement Living Wages across supply chains? Should companies use a carrot or stick when working with suppliers? Should they go factory-by-factory?

Janna: Well, what we’ve learned from our conversations is that things get more complicated when you’re trying to implement living wages in the part of the supply chain where factories aren’t owned by the global brand. We’ve seen you cannot just command a supplier to ‘raise wages to living wages now, or else’. Suppliers worry about their cost compared to local competitors, about how living wages affect their ability to retain other clients for whom they produce, local social dialogues, the mechanics of how to raise wage floors, what this is going to mean for their higher paid employees, and so on. Implementing the living wage in the supply chain in a way that improves the lives of workers, is going to require dialogue, negotiations, and probably a lot of trial and error. We need to find out together what works and what doesn’t.

Paulien: Dani, have you seen examples of this done smoothly?

Dani: Nice question! I can't mention any specific brand at the moment, but I think the "smoothness" depends on a lot of factors. First, it’s important to ask: what kind of problem was actually being solved? Are we talking about a big wage gap—say over 50%—or a small one? Is it a powerful brand with leverage, or a smaller brand with limited influence? Does the brand own the factories in its supply chain, or are they sourcing just a small fraction from a supplier? Some companies also face the added challenge of managing a complex global supply chain with thousands of suppliers.

Some brands are experimenting across all these different scenarios. As part of that, several support WageIndicator in publishing Living Wage estimates for 175 countries and regions. This helps bring transparency and consistency to the conversation, making it easier to pass on the concept and a credible estimate to suppliers. That convergence really matters when aiming for action.

Paulien: Vivian, what are you favourite examples of Living Wage implementation?

Vivian:   An example I’ve found very inspiring was a sector-wide collaboration, where companies joined forces to have a bigger leverage in their shared suppliers. Instead of each brand approaching their suppliers separately, they created a shared framework. That collective action helped shift the dynamic from fragmented buyer demands to a unified front - which gave suppliers the clarity and confidence to invest in better wages and working conditions. It showed me that we don’t always need to push change down the supply chain - sometimes we need to build sideways, aligning with peers and empowering suppliers at the same time.

Paulien: Dani, is Living Wage implementation in a supply chain truly possible, especially when that supply chain includes employees, contractors, self-employed workers, or small companies, like family businesses and farms?

Dani: I don’t really see the problem. No matter your role - whether you're a brand or a supplier - you can start by checking the gap between what’s currently being paid and the relevant benchmark: a Living Wage, Living Income, or Living Tariff, depending on the type of work and who’s doing it. Having that data (which we provide) gives you a solid baseline. From there, you can begin exploring scenarios to close that gap. It's about knowing where you stand, and then figuring out what steps make sense in your context.

Pritha: And how do we track home-based employers or workers without formal contracts with suppliers? Think of workers who are part of a company's invisible supply chain. Is a Living Wage only possible for workers with formal contracts?

Dani: In the end, nothing is truly invisible. A dress needs buttons, a phone has a tiny screw that makes it function—these parts don’t appear by magic. Work is often labelled “invisible” when a bigger player in the supply chain prefers not to acknowledge it.

Whether work is formal or informal, taxed or untaxed, regulated or not, at some point, the income shows up in a spreadsheet. That’s the entry point. And yes, many companies don’t have a full picture of their supply chain beyond Tier 1 or Tier 2. That’s exactly why the upcoming CSDDD is so important in this regard, because it’s forcing companies to map what’s really going on: and once you see it, you can start to act on it.

Pritha: Paulien, Who bears the cost of implementing a Living Wage in the supply chain—the cost of audits, documentation, and so on? Is it the supplier or the brand?

Paulien: When we talk about paying a Living Wage/Income/Tariff in the supply chain, we basically mean anyone who contributes should be properly paid. This doesn't happen in most cases.

You can argue that in the banana supply chain it'll happen step-by-step. In more complex ones, not really. Who should pay for the proof - the audit - I'm not sure. Should it be the companies or the strongest actors in the supply chain? I don't know yet.

What I do know is that a crucial reason we published estimates is to make the process easy for companies. It's pathetic to ask companies, small or big, to pay for a cost-of-living study that'll be outdated quick. Ideally bid social audit schemes should ear the cheques for the audit, paid for by those who need to prove they're implementing Living Wages.

Pritha: Dani, How do we reach farmers in the supply chain? Are farmers considered workers or small business owners in this context? Does it all depend on the contracts they sign—if they sign any at all? Would a Living Wage or a Living Income apply in their case?

Dani: Whether someone earns a wage as an employee or an income as a farmer or self-employed worker, the key principle stays the same: that person and their family should have at least a decent income floor. That’s where Living Wage, Living Income, and even the newer concept of a Living Tariff come in.

In this context, farmers are usually seen as small business owners, not employees. That’s why we talk about a Living Income—an estimate of what a household needs to earn to meet basic needs, based on family size, fertility rates, and local cost of living. It includes not just food, housing and other components, but also the social security contributions that are normally due by the employer. The other difference is that the Living Income covers the full family budget, assuming both adults are working in the family business.

And no, it doesn’t depend on contracts alone. Many smallholder farmers operate without formal agreements. What matters is whether the terms set by buyers allow them to meet that income floor. That’s why mapping and measuring income at farm level is so important, and why more companies are beginning to include Living Income benchmarks in their sourcing policies.

Pritha: Viv, how can brands and suppliers build trust to implement Living Wages successfully?

Vivian: Trust starts with transparency and shared goals. Think of open-costing models, long term partnerships, engaging suppliers as equals. Brands need to move beyond compliance and show genuine commitment. When suppliers see that living wages are not just a branding exercise, they’re far more likely to engage. Open communication, realistic timelines, and support - rather than pressure - are key to building that trust.

Paulien: Thanks for the discussion. Let's talk about improving Minimum Wages next time - in the end, that'll be effective for many more.