Dutch institutional investors press garment industry on living wage in supply chains

Initiative involves institutions with €725bn under management

Dutch financial institutions representing €725bn in assets under management are pushing companies in the garment sector to do more on living wages in global supply chains, with the launch of a new collaborative platform seeking to bring greater focus on the neglected ‘S’ in ESG.

The Platform Living Wage Financials (PLWF), which officially launches on September 27, is being coordinated by Dutch bank ASN and seeks to “encourage, support, assess, and monitor” companies on their commitment to paying a living wage throughout global supply chains.

Its eight members currently include asset managers Achmea Investment Management, Kempen Capital Management, MN, NN Investment Partners, Robeco, Triodos Investment Management, and Dutch insurer a.s.r.

The initiative, which bases its methodology on the United Nations’ Guiding Principles on Business and Human Rights framework (UNGP), sees itself as fulfilling the responsibility of financial institutions to “identify and mitigate salient human rights risks”, as stipulated in both the UNGPs and OECD Guidelines for Multinational Enterprises.

Influential human rights academic John Ruggie, whose name is synonymous with the UN principles, recently criticised the investment community for its lack of “expertise” and “frankly, interest in human rights”.

Echoing Ruggie’s concerns, Irina van der Sluijs, Senior Advisor Human Rights at ASN Bank told RI that there is an absence of data on the ‘S’ of ESG from data providers.

But, she added, the platform demonstrates that it is possible to take a “rational and analytical” approach a social issue like the living wage – which the platform regards as pivotal to tackling human rights generally.

PLWF recently published its first report ranking an initial 14 – including the world’s biggest fashion group Inditex (Zara, Massimo Dutti) and the UK’s Marks and Spencer – on their efforts to promote living wages for workers.

Data on the companies comes from sources such as annual reports, websites, codes of conduct, and from non-profits like the Global Living Wage Coalition.Van der Sluijs said that the PLWF initiative has “hit a nerve” amongst financial institutions. She told RI that French funds giant Amundi has shown an interest following a recent meeting in Paris and will be attending the launch in the Netherlands.

The eight participating Dutch investors will now use the report – independently assured by accountancy firm Mazars – to underpin its multi-year engagement strategy, which will initially focus on companies’ policies before turning to the practical steps they are taking.

Van der Sluijs acknowledged the complexity of the wages issue but warned that if companies do not show progress ASN Bank is prepared to act: “ASN Bank is never afraid to disinvest… especially when we have this methodology, this research, this engagement to back it up.”

She added: “If you [a company] are serious about the living wage you should be gathering your own data, you should know what your manufacturer is paying workers, and you should be able to talk to the manufacturer about it.”

Van der Sluijs also spoke of the potential for a body like the UN-supported Principles for Responsible Investment (PRI) to take over the secretariat of the initiative in the future.

One of the initiative’s partners, Achmea IM, is also currently “tweaking” PLWF’s methodology so it can be expanded to the agriculture and retail sectors, van der Sluijs said. “There is no stopping us, members can take up new sectors, new companies and that is the wonderful thing about the platform.”

Elsewhere, a complaint against Italian audit firm RINA Services S.p.A. has been filed with the country’s OECD outpost, the National Contact Point (NCP), over its social audit of a Pakistan factory which burnt down in 2012 resulting in the deaths of at least 289 people. The complaint, which has been filed by those affected by the blaze, alleges that RINA failed to identified child labour, forced overtime, and deficient fire systems in its audit of the Karachi-based factory owned by textile company Ali Enterprises.

RI covered the apparel sector in its recent ESG Frontiers series.