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Blog | Tuesday March 19, 2024

Five Ways Companies Can Help Smallholders and SMEs Prepare for Upcoming Regulations

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A host of incoming regulations, such as the EU Regulation on Deforestation-free Products (EUDR) and the Corporate Sustainability Reporting Directive (CSRD), as well as national laws such as the German Supply Chain Act, French Duty of Vigilance Law, US Uyghur Forced Labor Prevention Act (UFLPA), and China’s new ESG disclosure rules, are set to transform the global business landscape.

One concern leveled by critics of such regulations is the potential impact on smallholders and small- and medium-sized enterprises (SMEs). Smallholders may not currently comply with the EUDR regulation and therefore would not meet compliance requirements to trade with downstream businesses. Critics fear that supply chains might consolidate around compliant, larger companies, resulting in a business ecosystem where large companies predominantly work with each other. This could sideline smaller, less compliance-ready smallholders, resulting in reduced diversity and resilience in supply chains, as well as continued inequalities for smallholder farming households.

The first implementation of the EUDR will apply from December 2024 and is seen by some as an opportunity for downstream companies to develop programs and processes that will enable them to respond to the fast-approaching regulations. In particular, the companies will need solutions that address the potential implications for smallholders in value chains affected by the regulation, specifically cocoa, cattle, coffee, palm oil, rubber, soya, and wood. Due to the EUDR, Indonesia initially accused the EU of “regulatory imperialism.” Along with Malaysia, also a major palm oil producer, Indonesia later initiated dialogue with the EU to address concerns regarding the increased regulation requirements for smallholders.

Smallholders make up 84 percent (more than 450 million) of farms globally. Despite their importance to global supply chains, smallholders and SMEs often struggle with regulatory compliance due to their size and limited resources, and they rarely receive support to recognize and reap the benefits of complying. Informal workers, homeworkers, and vulnerable groups like women and migrants face similar challenges and are often excluded from many companies’ social policies and due diligence processes.

A Window of Opportunity

Timing to develop effective interventions is limited, but there is still a window of opportunity. To support diverse and resilient supply chains, downstream companies would be wise to invest in inclusive compliance approaches for smallholder farming households and SMEs.

Large businesses could spearhead initiatives to support smallholders and SME inclusion, such as pre-competitive company collaborations at jurisdictional scale, including public-private partnerships and open-source studies on the implementation and learnings from regulation implementation. Landscape approaches, or multi-stakeholder collaborations focused on a specific geographic area, can support alignment around common goals and actions to enhance sustainability performance. Such approaches can improve sustainability; mitigate risks in value chains; rebalance power, risk, and reward; promote digital inclusion, and focus on farmer-centric governance and data ownership.

Businesses that take a holistic, long-sighted approach to compliance will be supporting the development of new global standards and could reap first-mover benefits, particularly if other markets were to follow the EU’s lead. Contrary to the common perception of regulation as a business burden, it can facilitate and even strengthen business performance, driving companies to be more ambitious and creative, while promoting transparency and traceability.

Below are five recommendations for downstream businesses to support smallholders and SMEs in complying with incoming regulations.

1. Financial Compensation and Strategic Investments

• Ensure a living income or wage and consider fair pricing and revenue-sharing models to enable smallholders to invest in meeting new requirements.
• Use a downstream business’ finances to support smallholders to meet the reporting requirements and operational costs, such as infrastructure, certification, and documentation processes.
• Invest in more sustainable practices, such as regenerative agriculture, to enable smallholders to meet incoming standards.

2. Implement Capacity-Building Programs, Resources, and Training

• Invest in programs to strengthen the ability of smallholders and SMEs to comply with human rights and environmental standards. Downstream businesses could then encourage the suppliers to adopt self-assessment practices and enhance their due diligence processes. 
• Offer free training, webinars, documents, and other online resources or technical assistance to suppliers.
• Provide sample documentation on policies, ensuring suppliers understand and can implement necessary processes effectively.

3. Foster Long-Term Partnerships

• Invest in long-term partnerships with both suppliers and implementing partners. This will drive impacts through continuous evaluation of improvements at a farm or factory and redirect financial flows to help smallholders make the appropriate investments in long-term solutions.
• Foster consistent, credible, and equitable stakeholder engagement.

4. Adopt Systemic and Flexible Approaches

• Take systemic approaches and invest in landscape or jurisdictional programs. Conduct research, implement data systems, and promote digital inclusion. Support open-source databases.
• Be creative and flexible with suppliers, considering their specific contexts and challenges. This can include accepting a variety of certifications and verifications, including local versions; giving relative importance to priority local issues; and adapting the requirements for different types of suppliers so they reflect their different contexts.

5. Influence Policy to Ensure Inclusive Development of Standards

• Work with governments to ensure that regulations are functional and effective and that the choice of metrics being requested from suppliers is feasible.
• Join sector-wide collaborative initiatives, particularly in sourcing and production markets, to influence policy, support compliance, raise standards across the board, and play a crucial role in helping companies identify and address shared risks and opportunities.

In addition to these actions for downstream business, governments can create an operating environment conducive to compliance. For instance, cocoa producer Ivory Coast has provided over 700,000 electronic cards to nearly three-quarters of farmers to support the tracking and tracing of cocoa in response to the EUDR.

Regulators should make efforts to maximize the capacity of smaller businesses and independents to comply. The EU regulations, while stringent, offer funds and assistance to countries most impacted by them, including support tools for SMEs. However, there is a notable lack of financial and capacity-building support for suppliers, an issue highlighted by the limited examples of European buyers investing in their partners' development. This gap is often filled by local civil society organizations and EU development aid agencies.

There is also a pressing need for suppliers, especially those in the Global South, to be actively included in creating sustainability-related legislation, which is predominantly being developed in the Global North.

The evolving landscape of regulations presents both challenges and opportunities for SMEs and smallholders. A balanced approach that considers the unique needs of smaller businesses and fosters inclusive, sustainable growth will enable incoming regulation to achieve its intended impact.

Blog | Thursday March 14, 2024

Business Leadership Amidst 2024 Elections Around the Globe

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Election night is a big thing in every newsroom. Pizzas are ordered and journalists hunker down for a long night of watching the returns arrive. In 2024, at a global newsroom like the one I help run, we're going to have scores of election nights. All across the globe, voters will be heading to the polls in what is shaping up as one of the biggest years ever for elections. It's worth taking a pause, as a group of us did in Davos, to consider the many risks that those elections could face, and what the role of business ought to be in ensuring that the polling is free and fair.

Marc Lacey, Managing Editor of The New York Times

The stage is set for 2024 to be the biggest ever year for elections. This is the inescapable truth that was at the core of the dialogue we convened at the World Economic Forum Annual Meeting in January.

In Davos, geopolitics, AI, disinformation, citizen trust, and questions around leadership presented a perfect storm of risk this year when more than half the world’s people live in countries where elections are scheduled. Already, 20 companies have made specific commitments to deploy technology to combat the deceptive use of harmful AI content in the 2024 elections at the Munich Security Conference in February.

But, if the ability of global institutions to fulfill their duty is being questioned, as over half of the world’s voters go to the polls, then what are the stakes for businesses?

Do business leaders have a duty to ensure that democratic processes are protected, and if so, what is it? When employees, citizens as well as consumers demand businesses take a stand on the issues that matter, why might business leaders feel hesitant or ill-equipped to do so? BSR and Kite Insights hosted a discussion to explore that very subject: Business Leadership Amidst 2024 Elections Around the Globe. A discussion that one of our speakers, Sandrine Dixson-Declève, Co-President, Club of Rome, said was ‘one of the most important’ of 2024.

Rebuilding Trust amidst AI, Deepfakes and Misinformation

In a year with over 64 national elections (plus the EU) around the world, Sandrine’s reflection is well-founded. New York Times Managing Editor Marc Lacey, who moderated the roundtable, took it a step further, inviting the speakers to ponder if these ‘60+ elections’ should in fact constitute “one big election”. In today’s polarised societies, elections can feel like an emotional referendum on which national and political institutions voters trust most, if any.

The upcoming European Parliament election embodies this question of institutional trust in the context of the rise of far-right populism, noted Daniel Sachs, Founder and CEO, P Capital Partners, and Vice-Chair, Open Society Foundation. At the same time, he pointed out how “populism and polarisation are not necessarily an ideological battle. If you poll why people switch to the fringe, it’s because they want change from the status quo and they don’t see centrist parties as credible leaders of that change”. So, perhaps a valuable question for business leaders to ask themselves is how can they represent and facilitate inclusive systemic change while remaining politically central or even neutral?

One option might be how you show up publicly in the right way. But artificial intelligence has disrupted and destabilized how leaders are perceived publicly and whether the public information about them is authentic, pointed out Teresa Hutson, CVP of Tech for Fundamental Rights, Microsoft.

AI may be the next big business opportunity, but it also poses unique challenges to democracy and elections. Digital innovations, such as generative AI, are producing a seemingly infinite number of ‘deepfakes’, or digitally generated artificial content, ready to distract and deceive the public. Mistrust and populism are amplified by such misinformation and disinformation.

Teresa Hutson shared her concerns around how nation-state and non-state actors are already targeting democracies and sowing the seeds of disruption through online deepfakes. In India, for instance, where 945 million people are eligible to vote in what was called the “largest coordinated event in history”, the impact of audio deepfakes on voters is particularly worrying. “If you are on the internet, you can be faked”, Teresa said. And, in a world where deepfakes are so good that candidates themselves cannot always see the difference between their own voice and digitally generated copies, “how can you ensure voters are getting quality information while able to distinguish trusted speech from a deepfake?”.

It's an unnerving thought. That’s why Teresa and Aron Cramer, President and CEO, BSR, call on other tech companies and civil society to work together to enable online communities to respond in the face of misinformation and disinformation: “Businesses can use their voice to move regulation in a positive direction, they have the legitimacy to speak up”, said Aron, while acknowledging that this can be an uncomfortable space for business leaders to operate.

How businesses—and business leaders—can build trust in the context of 2024’s elections?

Nonetheless, in this perfect global risk storm, business has again emerged as the most trusted institution, according to the recently published Edelman Trust Barometer. On issues like climate change and inequality, over half of survey respondents want business to do more; and just a tenth of respondents feel business is overstepping on these issues.

Why might consumers and employees trust business? “People trust what they know”, commented Teresa Hutson. Workers might be inclined to trust their employers in the same way that people trust their family, neighbours, or university: because they are close to them and well-understood. At the very least then perhaps there is time for some kind of localized informal legitimacy and even duty for business leaders to engage in these topics on behalf of their employees.

Today, individuals have immeasurably more power than ever, meaning that people increasingly demand and expect what Aron Cramer calls “a DIY world: people want what they want, when they want it”. This consumer and people-led world marks a departure from the great political or civic institutions that traditionally drove change. “We are wrong if we think the battle of democracy is won at the ballot”, said Daniel Sachs. In a time when institutions are weak and businesses enjoy public trust, “it’s no longer enough for the private sector to support civil society to challenge institutions. We need to engage in non-partisan democratic systems change”. Facilitating and unlocking the latent potential in citizen and employee-led action can help them do that in a way that is a more comfortable space to business: through democratic innovation.

For some business leaders, the most obvious action is to influence change through politics. But ‘influence’ can be a dirty word in the murky world of public-to-private sector relationships, as Aron noted. In some democratic systems, business is seen as having too much influence, highlighted Sandrine Dixson-Decleve: through political capture of regulators by corporates; lobbying of lawmakers; and obstruction of intergovernmental processes like United Nations climate change meetings. If influencing regulation is uncomfortable ground for businesses, then business leaders should perhaps seek to steward systems change, helping inform and guide governments toward the level of change that societies need. This is the ethos behind Steve Waygood’s concept of macro stewardship, which could serve as a helpful framework for business leaders in a year of unavoidable political interdependency.

We get the political leaders we deserve. How do we get the political leaders we want?

So, how should business leaders go about engaging and inspiring the political leadership we want and need?

First, businesses can look at their own leadership to ensure that it is diverse, equitable, inclusive, and empathetic. To facilitate systemic change, businesses must themselves be the change they seek to influence by creating an environment where inclusive leadership is rewarded, not attacked.

When women public figures face gender-related abuse, observed Sandrine Dixson-Declève, that further reduces women's incentive to step up and lead in business and politics. Both Sandrine and Daniel Sachs reflected that the negative way we speak about political leaders in society and culture has made it an undesirable career and diminished society’s trust in leaders, a cultural narrative that businesses could help revert. “We should talk respectfully about it and encourage others” to enter politics, Daniel commented.

Business leaders can also take decisive action toward systemic change in areas they’re directly involved with. This means anticipating and proactively mitigating the potential harms of their products, suggests Teresa Hutson. For instance, AI-generated audio helps people who have lost their voice, but it can also be used to create audio deepfakes. Similarly, thoughtful engagement between private and public sector leaders around the challenges that businesses understand best can help strengthen the role democratic institutions can play in systemic change. “Business leaders need to engage in the dynamic of change of political systems”, as Daniel Sachs put it: less so in the individual issues of the day and more so in the practice of informing, incentivising, and stewarding systemic change, because healthy democratic systems and stable elections are good for business, for society and for the planet.

With over half of the world’s population voting in an election this year and the perfect storm of geopolitics, AI and misinformation, this year’s elections are facing broad, deep and new risks. Business leaders have the opportunity—and duty—to help re-establish trust that leads to outcomes that enable progress on crucial social, economic and environmental questions, and contribute to building social cohesion amidst polarization and fragmentation. But where might a business leader start? Three possible steps resonated throughout the discussion:

1. Promote citizen engagement and action, including your own employees.
2. Raise awareness of the risks in the digital information ecosystem, so that the citizens and employees have reliable information on which to base their judgements.
3. Use your voice as a leading business to reinforce the importance of democracy and rule of law.

People

Sophie Lambin

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People

Marc Lacey

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Blog | Wednesday March 13, 2024

It’s Time for DEI to Evolve, Not Dissolve

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The backlash against DEI has resulted in many U.S. companies reducing their commitment to diversity. However, the debate about DEI in boardrooms, civil society, and media is not grounded in the right place. Diversity in and of itself is not a strategy, it’s an outcome that sustains livelihoods and saves lives.

Part of the challenge is the careless and imprecise way that language around DEI and diversity has been deployed. 

These terms first emerged as companies began reacting to the new challenges and opportunities created by the shift in workforce demographics, prompted by the rise of affirmative action policies in the 1960s. “Diversity” became a business euphemism to make up for the lack of it, using the term primarily as a branding exercise to imply “now we have it” rather than a bottom-line driven business development strategy. That resulting misuse and abuse of the term, has resulted in the misleading characterization of the “diverse” candidate as a reference to any candidate representing someone who is not a white male.

Too often with DEI, the focus has been on words and not on actions, connections, social justice, and impact. But, vastly more important is where and how businesses create cultural connections internally and externally, including how they build relationships in the community, and who is invited to participate in investment portfolios.

Inclusion is an action that builds trust. Building trust requires being treated fairly and with dignity and respect. It requires dismantling all forms of discrimination and subordination that are barriers to equal opportunities. It also involves reparative justice for those who have been victims of systemic inequities. 

Full inclusion in a competitive global marketplace is inclusive of a multi-generational, multi-racial, multi-ethnic, multi-abled population that empowers multicultural consumer engagement and product innovation. Effectively harnessing the skills, insights and power of a broad range of perspectives requires creating internal and external systems and operations strategies. These should align with the demographics and communities served, encompassing the workforce, products, service delivery, and community involvement. 

However, a renewed focus on diversity and inclusion is not enough. There must be a clear recognition from businesses that not all candidates have equal opportunities, and companies can ensure fairness and justice to rectify imbalances. This means there must be equity in wages as well as access to opportunities for growth, leadership, and investment. Equity helps build the foundation for resilience that can lead to a future-fit workforce and a sustainable supply chain for a global economy. 

It's also important to address another mischaracterization of DEI, which is that it is somehow antithetical to outstanding performance. Let’s be very clear about this: DEI and excellence are not mutually exclusive. Just ask Millennials, the most sought-after talent pool in a highly competitive global workforce market. Most will tell you that they value diversity and prefer to work for companies with a strong and credible commitment to DEI. According to data from Deloitte, 69% of millennial and Gen Z employees are more likely to stay for five or more years at a company with a diverse workforce—with Glassdoor research adding that 76% of employees cite DEI in strategy as “non-negotiable.” 

DEI is not merely a workforce strategy; it has evolved into a set of broader business policies centered around the principles of JEDI (justice, equity, diversity and inclusion). Companies committed to impact center the four focus areas of JEDI in their business strategies.

First, they address board diversity. Board members are uniquely qualified to help companies to act on their DEI commitments and to achieve or surpass their diversity goals to create more just and sustainable companies. They ensure a level of accountability that can undergird the kind of transformation that shifts systemic racism toward systemic equity.

Boards that can tap into the unique perspectives of diverse directors with lived experiences of discrimination, especially in industries that confront the worst disparities (i.e., healthcare, financial services, food, agriculture, etc..),are better equipped to develop solutions that help a company achieve impact across the four areas of JEDI, and create long-term business value. 

Second, being a future-fit organization requires a business strategy that includes historically marginalized groups such as indigenous peoples, immigrants, LGBTIQ+, and people with disabilities. Companies can start by recognizing who is not at the table. Concurrently, companies can create and leverage Employee Resource Groups (ERGs). Often organized based on common identities, interests, or backgrounds, ERG’s typically seek to support employees by providing opportunities to identify emerging leaders, to network, and create a more inclusive workplace. It’s estimated that about 90 percent of all Fortune 500 companies currently utilize ERGs in some form. Employees have a multicultural network that can be used to engage valued voices within the organization.  Externally, these same employee networks can support outreach to professional organizations, helping to develop relationships, and strategic partnerships that can enhance the talent pipeline and strengthen supply chains. 

Finally, companies can apply the same rigor to their global supply chains that they do for human resources. Corporate investment in a diverse supply chain helps to revitalize struggling communities by improving the local taxpayer base which in turn can help solve critical systems and infrastructure problems in areas including education, housing, and and healthcare, which in turn creates and incentivizes investment opportunities for new businesses. For example, companies can put their working capital or 401K funds in a black-owned bank, woman-owned pension fund, or LGBTIQ+-owned investment firm. 

Today’s business leadership requires courage to create powerful connections and deliver the necessary, meaningful impact to build trust. Focusing on the human value chain can make organizations more resilient to meet the challenges of changing demographics, societal divisions, and ever-shifting political and economic headwinds.

When it comes to DEI, some businesses play the game, some change it. Your company can be a player or a transformational change maker—which would you prefer to be? 

Blog | Monday March 11, 2024

RISE: A Reflection on Women’s Advancement Beyond Supervisory Roles in the Garment Industry

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Despite the fashion industry being a female-dominated industry—82% of customers and 60% of workers in the garment supply chain industry are women—women in leadership roles in factories remain low. In Bangladesh, for example, only 9% of supervisors and managers are women while 84% of the women are working in lower-paying roles. The limited opportunities for women to advance provides industry and its partners with a chance to re-evaluate career paths that better reflect the needs and aspirations of factory workers. 

At RISE, an initiative to support collaborative industry action to advance gender equality, we gathered women workers perspectives on how they define career advancement. In Bangladesh and India, we spoke to 132 factory workers, 24 managers and 20 community members. We then supplemented these findings during interviews and discussions with more than 50 global stakeholders including international buyers, international organizations, local suppliers, academics, and women's organizations.

At the same time, we mapped 25 separate programs in garment supply chains that address women’s leadership and advancement. Over 90% of them focus on workers’ and supervisors' capacity building to promote women to supervisory roles. Whilst a valuable part of the solution, these programs don’t fully address the concerns of workers. 

Women identified various barriers to upward mobility approaches, including a significant increase in stress and work responsibilities—including being the subject to new forms of violence and harassment, risk of being ostracized from the community because it goes against social expectations, risk of not fulfilling family responsibilities and expectations of a new role, and risk of losing rights such as ability to unionize and access to mandatory childcare—to name a few. While a supervisory position may result in an income increase, women workers felt this might not compensate for these new risks. 

By taking a too narrow view on progression and leadership, there is a risk that programs targeted at women might overlook additional paths for advancement beyond supervisory roles. 

Against this backdrop, RISE wants to collaborate with the industry to redefine what women’s advancement and leadership means. Here are three key findings from the research and mapping that we bring with us into this.

1. Adverse social norms compound what is already an uneven playing field 

Women face systemic hurdles in their pursuit of progress on the factory floor due to informal social systems such as rooted gender norms and biases and formal ones like legislative frameworks.  

Social norms such as management preferring men over women to fill a leadership position or a job that requires machine operation directly impact women’s ability to advance. Often, women are held to higher skill level standards than their male counterparts, and traditional skills and traits perceived as ‘male’ such as confidence, charisma, a loud voice, and control over others are preferred by factory management. Also, the lack of family support discourages women from pursuing advancement opportunities in the industry; some women avoid growing in their careers due to fear of losing family and community networks.  

“The RMG sector is trying to incorporate more women in leadership positions, but the barrier comes mainly from the family.”

Factory Manager, Bangladesh

In addition, companies and other industry players should be aware that the regulatory framework in some countries penalize women that advance into supervisory positions, and initiatives that seek to increase the number of women in those positions might have unintended consequences. For example, in Bangladesh workers moving to supervisory positions might be refrained from unionizing; and access to rights as childcare benefits and overtime payment are unclear; which makes such roles unattractive for women.  

2. Unpaid care work and childcare responsibilities must be taken into consideration when exploring women’s advancement. 

Many of the women workers we spoke to said that caring and providing for their family is an important duty which they associate with success and societal status. Conversely, in some workplaces, women’s caring duties can be seen as a burden and obstacle to investing in women’s progression, a view expressed by some managers and male peers during our interviews. In addition, the lack of quality childcare services and care public policies adds up to the challenge. We heard from women that a lack of good quality, accessible and sufficient childcare is a significant challenge. In Bangladesh, carrying out unpaid care work is the main reason women leave the factory, which can reduce their income by up to 85%.  

3. Any women’s advancement intervention should consider the future state of the industry. 

In exploring new approaches to women’s advancement, it is critical to look at considerations of women's advancement within a future of work scenario, including how women will be impacted by industry changes, such as automation, climate change, circularity, migration patterns and economic uncertainties. 

The industry is experiencing a decline in women labor, in countries like Bangladesh, the proportion of women garment workers has continued to decline from 80% in the 1980s to 54% in 2021. As such, there is a unique opportunity for the industry to broaden women’s advancement to increased opportunities beyond entry-level, with increased decision-making influence and increased income. The garment and footwear industry must create multipronged and long-term pathways for its workers to progress and thrive.  

Women’s advancement should not be about “fixing” women or advocating for them to follow traditional career progression routes that were molded for men. Rather, an approach to advancement addressing gender norms and responsive to women’s needs, realities, and aspirations has the potential to increase their income and agency within the workplace, their household, and communities. It can lead to broader career options beyond the linear progression from line operator to supervisor while contributing to business resilience and sustainability. 

In practice, this includes opportunities for vertical progression of women to supervisors or managerial roles while at the same time enabling horizontal advancement through access and representation in good quality and highly demanded jobs, such as machine operation. It also allows women to voice their concerns, make decisions by participating in collective action through unions or workers’ committees and be represented in the marketplace as business owners.

Amidst the current decrease of female labor participation in the industry in some countries, advancement should also contemplate expanded opportunities for women outside the factory. To succeed in this endeavor, looking at systemic challenges such as childcare provision and changing social norms and creating an enabling legislative environment is also essential.

This is why we call for industry partners to help us shape—through an industry roadmap—a new narrative of Women’s Advancement together with women workers. If you are interested in collaborating reach out to Laura Macías lmacias@bsr.org. 

RISE would like to thank research partners Consiglieri Private Limited, Colors Consulting, and Eva Ehoke.

People

Sharmishtha Nanda

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Blog | Friday March 8, 2024

Closing the Gender Gap: Addressing Wage Inequality

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The theme of International Women's Day 2024 is “Inspiring Inclusion.” A key component of inclusion is to ensure women receive equal pay to their male counterparts for equal work to create "a gender-equal world" and end discrimination. According to a recent report, there is no equality for working women in any country in the world, and women are at a greater risk of not being paid a living wage due to existing inequalities.

There has been minimal change in gender pay gaps in recent years. In 2022, women earned an average of 82 percent of men's earnings, which has only improved by 2 percent since 2002. The stagnation over the past two decades contrasts sharply with the progress witnessed in the 1980s and 1990s. At the current rate, it will take 257 years to close the gender pay gap.

Women often make up a significant portion of the labor force in many industries, particularly in textiles and agriculture. However, they frequently face discrimination, unequal pay, and limited access to resources and opportunities.

An approach to supporting women workers in these industries is to ensure that companies are advocating for a living wage across the supply chain. In today's landscape, there's a growing expectation for companies to uphold human rights standards across their global supply chains. One area that often goes unexamined is the disparity in wages between male and female workers. This discrepancy could serve as an indication of underlying discriminatory practices.

Where Does Gender Come into the Living Wage Conversation?

It is reported that it will take more than 300 years to achieve full gender equality. Research indicates that achieving gender equality can add US$12 trillion to the global economy.

Gender equality is closely intertwined with discussions about living wages in the following ways:

• Gender wage gap: Addressing living wages involves ensuring fair compensation for all workers, regardless of gender. The reality is that women account for 80 percent of the global labor force in the apparel sector, but the actual labor costs account for just 0.6 percent of the retail price.
• Unpaid care work: Women often bear a disproportionate burden of unpaid care work, such as childcare and household chores. This limits their ability to participate fully in the workforce and contributes to their vulnerability to low wages. Implementing living wages can help alleviate financial pressure on women and recognize the value of their unpaid care work. The WageIndicator Foundation, Anker Research Institute and Living Wage for US methodologies assume two working adults per family, with one of the two adults working based on the national labor participation rate to account for unpaid care work. 
• Childcare costs: Until recently, many living wage methodologies did not explicitly account for the cost of childcare, even though this is often a prerequisite for women to be able to work. The Organisation for Economic Co-operation and Development (OECD) estimated that "without any support measures, in EU countries on average, gross full-time childcare fees for two children aged two and three represent nearly 25 percent of the median full-time wage for women.” To address this issue, the Anker Methodology now includes a post-check on education costs, including preschool and nurseries for regions where these costs are commonly incurred, and the Living Wage for Us methodology includes the average cost of childcare per county in the US.   

Benefits of Closing the Wage Gap in Value Chains

In many value chains, women make up the majority of the workforce. There is disparity between men and women in work and pay due to gender stereotypes and social norms. This is despite increasing access to education and higher rates of participation of women and girls in the labor market.

Additionally, women farmers often have less access to resources such as land, credit, seeds, fertilizers, and agricultural training compared to men. This limited access can hinder their productivity.

If there was no gender gap in farm productivity and no wage gap in the agrifood system, it could increase gross domestic product (GDP) by 1 percent or nearly US$1 trillion dollars. As a result, this would reduce global food insecurity by 2 percent and reduce the number of food-insecure people by 45 million.

Many women are further discriminated because of intersecting identities such as age, class, ethnicity, caste, migration status, gender identity, faith, sexual orientation, and other factors. This may not be evident to companies as there is a lack of data, meaning women workers in value chains are "invisible."

Data is Key to Closing the Gender Gap

Most businesses are aware of the need to address pay fairness and introduce a living wage across all global operations, but there are a range of operational and strategic hurdles and cost implications. For example, living wage levels fluctuate depending on the location and the calculation method employed.

There is a lack of data across multiple regions on topics such as fair pay, gender, and ethnicity pay gaps. Using data to examine living wages will enable employers to analyze, comprehend, and narrow the gap.

Steps for Companies to Address the Gender Gap

1. Invest in data: Gathering data on all employees, gender, job categories and hours of work will help employers to understand and close gender pay gaps for all genders within company operations. For instance, companies can use data to look at gender distribution for various job categories and identify any disparities in wages.
2. Incorporate a gender lens into living wage analysis: Companies can select from multiple gender-sensitive approaches to calculate the living wage. One recent development is the concept of a single-earner living wage benchmark, which considers how many families do not have a two-parent household. 
3. Build internal management and capacity to incorporate gender-transformative approaches into living wage strategies: Involve both women and men in participatory and inclusive processes aimed at closing the gap in living wages and promoting gender equality. Offer training to address unconscious gender bias, stereotypes, and cultural norms that restrict women's job opportunities. Ensure that procurement, recruitment practices, and other aspects of the business model do not hinder the payment of living wages in core operations and value chains as part of capacity building efforts.
4. Develop a gender-inclusive strategy for living wages to close the gender gap: Some companies are starting to conduct their annual living wage analysis alongside their gender equity analysis to identify where these risks are overlapping.
5. Implement living wages in tandem with action on other issues such as gender equality and child labor. Living wage is the starting point, and not the end goal. Companies can consider assessing systemic barriers to achieving living wages and collaborate with partners to address them. Cross-sectoral action is essential for successful implementation. For instance, ACT is a global initiative driving systemic shifts on living wages and economic inequality.

Having worked with over 35 companies for 20 years on this matter, BSR understands that this is a complex and daunting task to undertake. For more information on BSR’s work on living wage, contact us.

Blog | Wednesday March 6, 2024

Demystifying Social KPIs under CSRD: Six Recommendations for Business

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With the introduction of the Corporate Sustainability Reporting Directive (CSRD) and the expected Corporate Sustainability Due Diligence Directive (CSDDD), companies in the European Union and beyond are required to report on their social and environmental impacts within a broad range of sustainability topics, creating a growing focus on what can be quantified and verified. The directives will make it mandatory for companies to mitigate and report on impacts throughout their entire global value chain, which many find challenging as there is less visibility and control over sustainability issues upstream and downstream.

In the case of environmental issues, this is fairly straightforward both in terms of what the regulators are asking companies to disclose, and already well-established metrics and tools to measure GHG emissions reductions. When it comes to the social part of a company’s ESG agenda, however, setting targets and measuring impact is not as simple. 

Challenges of working with the social impact agenda have been expressed by several BSR members, who are less certain about the right way of setting social targets and KPIs, precisely: what to measure and how to measure it. Through several projects with members, we have been able to develop a roadmap on how to identify meaningful social KPIs and targets covering the entire value chain.

Key recommendations include: 

• Benchmark against regulation and best practice: Start with researching existing and upcoming regulations, industry frameworks, and guidelines on social sustainability; this will give an overview of what is already in the market and help prioritize. Benchmark yourself against best-in-class peers, to identify priority topics and leadership practices from companies that have already gone down this road.

• Prioritize: While the CSRD requirements help set the right direction, it is a daunting task to try to cover everything in one go. Start focusing on the areas where you are mature, and pilot identified social KPIs here.

• Build on what already works: A crucial step is a mapping exercise to capture what metrics are already in use within the organization, to avoid coming up with ‘on-top-of measuring.’ This gap analysis will not only help to build on what you already have, but also make it easier to see how new social KPIs can be embedded into existing set-ups. 

• Engage internal stakeholders from the start: Make sure to involve the right internal stakeholders; soliciting expert input serves to reality-check the value of the proposition, but also to make sure there is buy-in, letting people contribute to the agenda. As one of our members put it—“to make the project successful, people need to be able to relate to it internally.” 

• Dig where you stand and align with materiality: Social initiatives tend to be more successful when aligned with existing corporate strategies, as they can take advantage of operating capabilities and capitalize on existing knowledge. At an early stage, test and make sure that your social KPIs and targets support and reflect the strategic and operational focus of your organization, and are anchored in your materiality assessment.

• Involve the digital team: They play a crucial role in collecting relevant data and making sure it is valid; involve them in the pilot phase and work closely together to ensure the data collection is rigorous and realistic. To operationalize your social KPIs, you need to ensure accuracy and security in how the data is gathered.

Identification and measurement of social impacts provides a great opportunity for businesses to explore what truly matters to their affected stakeholders and the organization. We recommend embracing this process as a discovery, with CSRD as a reference for what to comply with, best practice examples from peers, and a thorough consultation process within the organization. The outcome ought to be tailored to your overall impact and role in society, bringing people together, and creating a shared understanding of the journey to come once the social KPIs are set.

For more information on setting Social KPIs under the CSRD, contact BSR’s Sustainability Management team.

Blog | Tuesday March 5, 2024

A Foundational Guide for Business on Social Justice for 2024 and Beyond

Preview

Amid ongoing political polarization and uncertainty in the United States, BSR’s Center for Business & Social Justice offers The Social Justice Guide for Business: Moving Beyond Crisis to Action for meaningful engagement on social justice issues.

In the current landscape, businesses are under increased scrutiny when they engage on social issues. Simultaneously, stakeholders expect business leadership on various social justice issues—this paradigm shift is the new normal. Companies are expected to continue to act on social justice in practice, if not in name, including issues such as climate justice, democracy, economic inclusion, racial justice, gender equity, LGBTQ inclusion, caregiving, unionization, and community impact.

Given dynamic expectations from workers, consumers, investors, and communities, coupled with concerns about potential backlash, a social justice lens on business strategy provides a new way forward.

Data from 2023 confirms the direction in which stakeholders are pointing, despite the headwinds:

Workers in the U.S. want their company to take meaningful action. 

• More than 8 in 10 employees report being satisfied with their job at companies where their leaders speak up about critical events and issues. 

• By a 4:1 margin, workers want to be a part of a business that promotes social justice internally through workplace policies and practices. 

• By a 5:1 margin, adults say it would make them more likely to want to work for a company that advances social justice through investments, donations, and advocacy.

Most consumers are already voting with their wallets.

• More than 7 in 10 consumers today expect companies to take public positions on issues including human rights, climate change, racism, and gun violence.

• A brand’s commitment to diversity and inclusion can make 42 percent of consumers more likely to buy their product—up 17 percent from 2022 and 49 percent say brands should do more regarding social advocacy.

• Consumer expectations are moving rapidly beyond what performative action can deliver—76 percent of consumers believe a company’s leaders should reflect the diversity of the communities where they do business. 

Investors believe environmental and social factors can materially impact long-term financial value.

• Investors are increasingly seeking greater transparency and accountability from business in their workplace policies and practices, climate risk and impact. 

• Nine in 10 investors said companies have a responsibility to help address societal problems that are important to customers, employees, and investors. 

Business leaders need to wrestle with how to prioritize positive and equitable social outcomes as a primary strategic objective. Companies will face trade-offs and need to make choices along the way. 

The Guide will help business leaders who, despite having publicly embraced and committed to addressing social injustice over the past four years, are now pumping the breaks in reaction to political blowback. It can help business break out of the cycle of scrambling to respond to flashpoints that often leave companies prone to missteps and vulnerabilities.

While a social justice approach isn’t meant to be easy, it’s also not ‘all or nothing.’ The guide aims to provide consolidated guidance on approaching social justice based on sound business principles, helping companies tackle social justice issues in a methodical and meaningful way, acknowledging the multiple corporate functions this work touches.

To unpack the term social justice and shift from theory to action, the Guide offers strategy and implementation advice in three sections: 

• How Companies Engage: offers a high-level overview of how companies currently engage on social issues, outlines six forms of corporate social engagement, and includes links to existing tools and resources that are currently leveraged by corporate leaders in their social impact initiatives. 

• A Social Justice Approach: defines the key terms related to corporate social justice and provides a framework for engagement to help businesses address social justice issues. 

• Advancing Social Justice: provides high-impact, actionable recommendations for overcoming those barriers and supporting a more equitable society while minimizing risks to business. 

The Guide is designed by and for large companies across industries with complex value-chains, diverse stakeholders and is focused on the U.S. region.

Social justice often isn’t anyone’s job at a company yet implicates many functions and roles including DEI, Sustainability, ESG, Public Affairs, Investor Relations, Stakeholder Engagement and many more. The Guide can be applied by executives empowered to make organizational decisions and is also designed to support practitioners looking for approaches grounded in methodology. 

The interaction between business and social justice is evolving, and this guidance serves as the basis to spark dialogue and collaboration with urgency and purpose. Use of the Guide will generate improvements and interest in future versions that go deep by industry, function and issue area.

The Center for Business & Social Justice welcomes input, ideas, and feedback on the Guide.