What does it take to make living wages a reality?

Underpayment in the banana supply chain is a major challenge and poses the risk of additional human rights violations. A living wage strategy is vital for responsible businesses operating in this industry. To develop our own, we conducted a human rights risk analysis covering all products. Within fruits and vegetables, tropical fruits were at a particularly high risk of underpayment.

Lidl Germany conducted a human rights impact assessment (HRIA) of its Colombian banana supply chain in 2021, to better understand the challenges at play. The analysis revealed risks including gender discrimination, non-compliance with occupational health and safety measures, and underpayment of banana estate workers. By focusing on the issue of achieving living wages, Lidl aims to reduce several risks through a sustainable strategy.

In May 2022, Lidl became the first German retailer to set a goal of closing its own living wage gap in its banana supply chain. By working closely with IDH and FLOCERT, and producers at a local level, Lidl Germany, Belgium, Netherlands and Austria developed a process to close its share of the wage gap in 2023. This involved a four-step cycle, from training producers, capturing data, verification, and validation through onsite audits and finally, payment through individual action plans, developed with each farm with a living wage gap. The premium was distributed to workers through food vouchers, cash pay out, in-kind benefits or through raising wages. 

This process wasn’t without challenges, with fluctuations in harvest and changes in farm staff and country-specific security systems. The Lidl living wage banana report sets out how we overcame these obstacles in detail. The project was successful, and Lidl’s share of the living wage gap could be closed through this individual distribution approach. The approach Lidl has taken does not necessarily generate living wages for all the banana farm workers. For this to be the case, all the customers of each farm would need agree to purchase on these terms. There are further steps the industry must take to achieve a real living wage for all banana workers. We want to share our experience and work with all relevant stakeholders to make living wages a market standard for bananas. That’s why we are working closely with other retailers in living wage working groups and engaging in projects with the World Banana Forum. 

We recognise the importance of a social dialogue with worker representatives and are working on developing our project to include a gender perspective, with the aim of closing the gender pay gap too. We are re-evaluating our project annually and appreciate the ILO agreement on the issue of living wages, which will be considered as this project evolves.

Sainsbury’s has a long history of responsibly sourcing bananas. Our current supply base was developed 17 years ago, when we moved to source 100% Fairtrade bananas. Since then, we have contributed over £67m in social premiums to our banana sourcing communities to improve social infrastructure and community development. This has had a significant impact on living standards for banana workers and communities, however, it is still not enough to address all the social and environmental risks faced by our banana producers.

The joint retailer commitment on living wages in the banana supply chain made us think about how we go beyond making voluntary contributions and support growers and workers in our supply chain to embed negotiated living wages. By speaking directly to the suppliers, growers, and workers in our supply chain, we determined that for us, the answers lie in responsible purchasing practices alongside social dialogue with producers and workers. For this reason, we have committed to paying the Fairtrade Living Wage Reference Price and provided growers with long term sourcing and off-take agreements 3 years ahead of the industry commitment. 

Producers have been clear on how retailers can support them to implement living wages. At the World Banana Forum (of which Sainsbury’s is a member) producer federations have called for retailers to align with Fairtrade living wage reference prices to ensure they are paying a sustainable price. Long term contracts are also key enablers for producers, as it gives security of market access to growers, which enables them to invest with more confidence and participate in social dialogue that can lead to workers being paid a living wage. 

The UK commitment progress report highlighted that UK retailers only source on average 4.4% of a banana grower’s total production. This makes it clear that no retailer individually can effect change on their own, and that we must act collectively to secure the improvements needed. Learning from other sectors is also important, and our wide range of supply chains and products allows us to do this. 

The new ILO tripartite mandate to work explicitly on living wages is a momentous development for workers everywhere. The agreement makes it clear that amongst other things, the estimation of living wages should  include consultations with workers’ and employers’ organizations the consideration of regional and local contexts, and socio-economic and cultural realities.’

This shifts the emphasis away from debates just over figures, benchmarks, and voluntary contributions, to the more qualitative processes of industrial relations. Buyers, and in particular multiple retail buyers, have a responsibility to facilitate and financially support improved labour relations along the supply chain, by committing to pay fair prices that include social and environmental costs. These costs occur in production, transport, and distribution, including in the retailers' own operations. 

If workers are to benefit in the long term there needs to be a rebalancing and redistribution of the value shared along supply chains, and a mechanism to enshrine higher wages in collective contracts. These collective bargaining agreements are legally binding in national settings and the only way to secure living wages for good, especially when the margins for producers are so low or even non-existent. In other words, the purchase price paid by buyers needs to integrate the cost of the improvement of wages and conditions for the lowest paid workers and this commitment needs to be reinforced through multi-year sourcing contracts 

A relationship and dialogue with the independent trade unions that exist in all banana exporting countries is critical to the success of this approach. Trade unions are the best-placed and most credible guarantor that value transfers are reaching workers, whether through wages, voluntary contributions or other schemes. Alongside civil society groups, trade unions are also well placed to inform our understanding of the gendered risks to living wage, and the gender wage gap in countries where they exist. The costs of external auditing and verification, even ultimately of some certifications, can be channelled into this process of improvement driven by the retailers' commitment to living wages for all.