How to Advance Inclusion and Tackle Inequality Across your Value Chain: Unilever’s Living Wage Initiative
How Does a Living Wage Create Business Value?
Unilever's Chief Supply Chain and Business Operations Officer, Reginaldo Ecclissato explains how a living wage creates business value.
Introduction
For the last two decades, the multinational consumer goods company Unilever, known for brands like Dove, Sunsilk, LifeBuoy, and Magnum, has been using its scale and influence to push the agenda on sustainability.
At the heart of its Compass sustainable business strategy is a focus on contributing to a fairer and more socially inclusive world by raising living standards. Central to this is Unilever’s ambitious commitment to ensure that everyone who directly provides goods and services to the company will earn at least a living wage or income by 2030.
Unilever’s Chief Sustainability Officer, Rebecca Marmot, explains why the business decided to make such a bold move and the steps it has taken to navigate this complex undertaking.
Key lessons to take away
Recognize that paying a living wage enables workers to access other fundamental human rights.
Build a complete business case that draws on improved employee satisfaction, regulatory developments (including increased focus on human rights due diligence), commercial impacts (including risk reduction) and stakeholder expectations (including investors).
Use a holistic, long-term perspective to evaluate the commercial benefits of a living wage.
Work with external partners that bring subject matter expertise and implementation experience, along with influence and resources in local contexts.
Take a consultative and collaborative approach to co-create an effective model and build capability with leaders, internal teams, and suppliers.
Set a clear baseline from the outset that helps prioritize needs, track and report on progress and determine what is working and where adjustments may be needed.
Support suppliers with accessing and applying the skills, tools, and resources they need to implement changes.
Use advocacy to help drive collective action and build the enabling conditions for suppliers to implement a living wage.
What has Unilever achieved so far?
As of 2020, Unilever achieved its goal to pay at least a living wage to all employees and received independent accreditation from the Fair Wage Network in 2021.
In 2021, the business extended its commitment to ensure that everyone who directly provides goods and services to Unilever will earn at least a living wage or income by 2030.
So far, just over 70 of Unilever’s 450 largest suppliers (over 15%) have signed on to the Supplier Partner Promise to initiate a Living Wage.
“As a global business, we serve more than three billion people every single day. Our footprint is huge, so when we concentrate on an issue such as raising living standards of the communities we engage with, we do so not only because it’s the right thing to do, but because we see the real business benefit of doing so. It’s how we can have the biggest impact.”
- Rebecca Marmot
Key challenges and success factors for Unilever’s Living Wage program
1. Build a strong, complete business case that draws on multiple drivers and data
The business case is vital for getting buy-in and support from the C-Suite and leaders across the business. “You need to galvanize a critical mass of support internally in your own business first,” explains Rebecca. Conversations often stop at the top because of the inherent belief that living wage means a direct financial impact, but the reality is much more nuanced.
So how did Rebecca and her team make a compelling business case for paying a Living Wage? In addition to the moral imperative, she cites several key ingredients, including: 1) increased worker productivity and retention; 2) a more stable and resilient value chain; 3) more demand; and 4) positive impacts on people and communities.
Rebecca also advises companies to spell out the external pressures that reinforce the business case, including an ever-evolving regulatory environment, growing investor scrutiny, and consumer pressure. “The regulatory environment around sustainability has absolutely mushroomed over the past 18 months. In the EU, there are new corporate due diligence requirements for value chains. The shareholder interest has massively increased as well. One of our big retailers recently had a shareholder resolution on becoming a living wage employer,” explains Rebecca.
When it comes to business performance, it’s critical to look beyond immediate short-term costs and help the organization see the longer-term financial benefits. “I always think you need to have the hard data to back up what you’re doing,” observes Rebecca. Through strategic analysis and collaboration, Unilever and its partners determined that paying a Living Wage would deliver a positive financial return by increasing employee productivity and retention as well as consumer demand for its products. Rebecca notes that a one percent increase in minimum wages translates into a half percent increase in retail sales. In addition, the Living Wage initiative contributes to a more resilient supply chain by deepening relationships with suppliers, strengthening their labor forces, and reducing cases of industrial action.
“It’s time to rewrite the narrative: living wages are not a cost to businesses, they are a measurable and tangible contributor to business success.”
- Reginaldo Ecclissato, Chief Supply Chain and Business Operations Officer
2. Connect social and environmental issues
With sustainability strategies, there can be a tendency to bucket issues and programs into siloes. Over the course of its sustainability journey, Unilever has recognized the need to connect social and environmental issues and address the important links between a living wage and living income, poverty among farmers and rural communities, and environmental degradation.
“I would like to think that no one is actively setting out to destroy the environment. But you may well be contributing to deforestation if you’re a smallholder farmer and that’s your only option for income, without access to training and resources to improve your farming practices,” observes Rebecca. “We’re not going to make the progress we need on climate and nature if we don’t put living wages or incomes first.” She also points to the importance of putting farmers at the center of Unilever’s ambitious agenda for regenerative agriculture.
3. Collaborate and learn from others
The scope and complexity of taking on an initiative like implementing a Living Wage can easily feel daunting and too much for an organization to handle. After all, most organizations don’t have the internal knowledge, resources, or experience to tackle this kind of undertaking. Rebecca is quick to point out that Unilever, like other companies, can’t do this on its own.
“It’s really hard. It can feel scary and overwhelming. Companies don’t need to do this on their own. We’ve learned a lot by listening to other people,” observes Rebecca.
Rebecca emphasizes the value of reaching out to collaborate with and learn from partners in other organizations with deep subject matter expertise and experience in local markets. She advises any company starting on this journey to seek out industry groups and coalitions focused on the Living Wage agenda, including UN Global Compact, Business for Inclusive Growth, IDH – the Sustainable Trade Initiative, the Fair Wage Network, AIM-Progress and Oxfam.
Unilever sponsored a study with the University of Cambridge, Business Fights Poverty, and Shift, which made the case for a living wage. It identifies that a living wage substantially increases worker productivity and enhances disposable income, which in turn supports the growth of business. They are currently working with international organizations and other companies to drive public availability of credible and transparent living wage data. This is necessary to further enable implementation and encourage other companies to take action.
“It’s crucial to collaborate with other organizations, learn from them, and go on the journey together. There’s plenty of guidance out there, for example the living wage Roadmap by IDH – the sustainable trade initiative, and the living wage playbook by Aim-Progress, from people who are more knowledgeable than we were when we began this process. Connecting with those groups can be really helpful.”
- Rebecca Marmot
4. Establish a baseline to identify needs and measure progress
Unilever faced a range of challenges setting a baseline due to the scale and reach of the business and complexity of the issue. This included understanding and navigating the full gamut of employees and workers, local contexts and different methods for calculating a living wage across regions, and differences in IT systems across the business.
“In really big companies, just establishing a baseline can be very challenging. You need to make sure that you’re reaching every single person,” explains Rebecca. “It’s really making sure you have that granular level of data, and it takes time to ensure you have all of the right data.”
“At the start, many of our people were unaware that Unilever was not already paying a Living Wage to employees,” says Rebecca. A 2015 assessment showed Living Wage concerns in 37 countries, with around 12,000 employees receiving less than the living wage for their country.
Unilever worked closely with expert organizations to align on a clear definition for a living wage and a methodology for its calculation relevant to each local context. “We had to work with partners in India to develop multiple methodologies for instituting a living wage, working in the context of local communities, goods, and living conditions,” says Rebecca.
5. Identify clear, ownable roles for key functions and business partners
Rebecca advises companies to be very clear about the tasks, responsibilities, and targets of each function of the business. The role needs to fit with the interests, objectives, and capabilities of the specific business function, from procurement and human resources to marketing, sales, and finance.
On the brand marketing side, Rebecca mentions several examples. Unilever’s ice cream brand Magnum has done a lot of work on the provenance around cocoa, considering how important chocolate is to the product. In cocoa farming communities, this includes looking at ways to increase yields, produce higher quality cocoa, and enable women to earn more money. They are also supporting women with income diversification opportunities and entrepreneurial training programs. In another case, Ben & Jerry’s has a living income accelerator program.
“Each function needs to clearly understand and buy into their specific role. For example, the procurement team owns supplier relationships and engagement. The finance team plays a key role in developing KPI's and gathering data. Marketing teams can engage consumers and build equity around the key role of farmers and climate-smart agriculture in supplying cocoa for our chocolate brands.”
- Rebecca Marmot
6. Set priorities and support suppliers with navigating the journey
With such a massive supply chain, Unilever needed to figure out where to start. They decided to begin by focusing on the largest and most strategic 450 suppliers. The team also identified six priority markets: Brazil, China, India, Indonesia, Philippines, and Vietnam. Rebecca explains these represent market hotspots where there is a big gap between the minimum wage and living wage and where the social safety net is weakest.
While many suppliers want to provide a living wage, they often feel constrained by limited resources and knowledge, competitive markets, and the need to maintain profitability. Rebecca believes that demonstrating the business case is a vital first step, followed by providing practical support with developing an implementation roadmap and getting access to knowledge and resources.
“When we brought this idea to our supply chain, we told them we knew this would be difficult – but we would work with them to make progress,” explains Rebecca. “We sat down with some of our big partners to look at how we could improve productivity and what that means for upskilling workers.”
For each region and supplier, it’s important to develop a clear roadmap, provide support, and take it step-by-step. “You will need to offer and provide resources to help suppliers engage in the process. We developed supplier toolkits and made them freely available, engaging in external knowledge sharing just as the company would internally.” Unilever also helps connect suppliers with a critical group of stakeholders on the ground in their market that can help provide support.
So far, over 15% of strategic suppliers have signed onto Unilever’s Living Wage / Living Income Partner Promise. The Promise asks companies to commit to a number of actions, including: identifying and addressing living wage gaps; engaging workers on issues and solutions; advocating for a living wage in industry groups; and transparently reporting on progress.
7. Leverage advocacy, policy, and collective action to help drive change
The scope of the Living Wage initiative makes advocacy and collaboration essential components of Unilever’s strategy. These efforts focus on building a coalition of partners and fellow advocates and influencing governments to help establish the conditions that make it possible for suppliers to offer a living wage and remain commercially strong.
Rebecca encourages others to use Unilever’s approach of finding companies with similar values and beliefs, and looking at what might be possible to accomplish together.
Encouraging governments to put supporting legislation in place is also key. "We need to get governments to set legal minimum wages at the living wage level and to look at enacting policy reforms and incentivizing companies to move forward. It also takes the right kind of enforcement and compliance,” she says.
She emphasized that a living wage should be seen as the floor and not the ceiling when it comes to wages and that any discussions around living wage should never take the place of or interfere with the role of trade unions and the right to bargain collectively.
Rebecca advises leveraging mutual interests when working with governments and notes the key role that a living wage can play in helping to grow a country’s economy and make progress on the UN Sustainable Development Goals (SDGs). In each priority country, Unilever collaborates with partners to develop a tailored national program that includes working with employment ministries and civil society, including international and local NGOs.
“We aim to mobilize like-minded companies to close the gap between minimum and living wages and incomes in their operations, influence governments to institute and implement living wage and income policies, and to build cross-sector coalitions to drive systems change on living wages/incomes.”
- Rebecca Marmot
Some final advice
“Start by getting your own house in order, do a baseline assessment and close the gaps.”
“You can save plenty of time, resources, and energy by learning from other organizations and experts who have already gone through a similar process. You don’t need to do this on your own. Use their resources, avoid their mistakes, and capitalize on known paths to success. We’re very happy to put people in contact with the groups that we’ve been working with,” offers Rebecca.
“It requires a willingness to collaborate and work with interested partners, join initiatives, and be a part of the global community working to bring a living wage to workers all around the world.”
“We have focused on where the gaps between actual and living incomes are greatest, where the social safety net for workers is weakest, and where we can make the most impact based on our presence and scale in local markets.”
