The Organisation for Economic Co-operation and Development (OECD), an intergovernmental organisation with 38 member countries, has published a handbook to assist companies in applying the OECD due diligence framework for supporting living incomes and living wages within global supply chains.

The handbook published on October 16, specifically focused on the agriculture, garment and footwear sectors, which have been identified as high-risk areas for inadequate incomes and wages.

It underscored the growing demands from workers and civil society, particularly highlighting the protests by readymade garment workers and trade unions in Bangladesh, Cambodia and Myanmar.

These movements have prompted companies to adopt practices that support living wages and incomes, it said.

The OECD guidelines also mentioned the increasing activism among workers and trade unions in these regions.

Protests, strikes, and negotiations for wage increases have become more common as workers challenge irresponsible corporate practices.

Such practices include inadequate wage payments and the denial of severance during crises, like the COVID-19 pandemic and economic downturns, often defended by the use of Force Majeure clauses.

Globally millions of workers earn below living income and wage estimates, exposing them to poverty and other human rights risks, as minimum wages, though set by governments to prevent exploitation, often fail to cover essential expenses, the OECD said in its publication.

It said that the handbook could assist companies in determining whether they were linked to significant risks and impacts related to living incomes and wages.

Where such risks are identified, it supports them in addressing these impacts, regardless of the company’s size, geographic location, or position within the supply chain, the handbook said.

The OECD guidelines said that in the garment sector, wages were often below the poverty line due to a number of factors, including high competition and poor purchasing practices, which increased the likelihood of excessive overtime and insecure contracts.

‘Workers are particularly at risk in countries with inadequate public services, and where compliance systems, such as the labour inspectorate, are weak, and freedom of association and collective bargaining not protected,’ the report mentioned.

The handbook outlined six steps that illustrated how due diligence could help companies address living income and wage gaps in their operations and supply chains.

The suggested six steps are to embed due diligence for living incomes and wages into policies and management systems, identify and assess living income and wage gaps in operations and supply chains, cease, prevent, and mitigate these gaps, track implementation and results, communicate commitments and actions to address living income and wage gaps and cooperate in remediation when appropriate.

The handbook said that to address income and wage risks, companies should establish or adapt existing due diligence policies and management systems, potentially including a living income and wage statement and roadmap.

They must allocate sufficient resources and oversight, ensure coordination among compliance, legal, procurement, and sustainability teams and engage with business relationships across the supply chain to effectively implement the policy, it said.

The OECD recommended that companies should map income and wage risks in their operations and supply chains, prioritising these risks based on severity and likelihood.

They need to collect data on actual incomes and wages, compare this data against credible living income and wage estimates and assess their involvement in any identified gaps, the organisation mentioned.

The handbook suggested that companies design and implement a plan to address living income and wage risks, prioritising areas with the most significant gaps and focusing on root causes for sustainable, long-term improvements.

This plan might include internal measures such as fostering long-term relationships, supporting suppliers and workers through direct pricing increases and certification premiums, addressing purchasing practices and engaging in wage-setting aligned with International Labour Organisation principles, it said.

The OECD guidelines also mentioned that companies should consider national-level engagement to promote effective wage-setting mechanisms and industry-level collaboration to harmonise efforts.

To assess the effectiveness of due diligence, companies should monitor progress on relevant indicators, such as the reduction of living income and wage gaps over time and against established targets, the handbook said.

Workers, their representatives, trade unions, farmers and cooperatives should be actively involved in the ongoing monitoring of these indicators.

The guidelines suggested communicating progress on addressing living income and waging gaps by outlining policies and management systems, due diligence procedures, stakeholder engagement activities, and overall progress and outcomes.

The OECD also observed that to determine when to provide or cooperate in remediation, assess the company’s involvement in specific living income and wage gaps, including how its practices, such as purchasing strategies, may contribute to these gaps or undermine collective bargaining efforts.