Insights from OECD and Team Löning: How to embed living incomes and living wages in agriculture supply chains
The agricultural sector faces notorious challenges in ensuring fair wages and decent working conditions. For businesses operating in global supply chains, adopting robust human rights due diligence (HRDD) practices is not just a moral imperative but also a strategic necessity.
Taking into account the comprehensive guidance from the OECD Handbook on Due Diligence for Enabling Living Incomes and Living Wages in Agriculture, Garment, and Footwear Supply Chains published in October 2024, we spoke with our consultants—Rita, our partner in Spain and co-head of Löning Academy, and Sofía, an impact measurement expert. With extensive experience supporting clients in the agri-food industries across Europe, Latin America, and South Asia, they explored the importance of fair wages in the agri-food sector, the business benefits of HRDD, and practical steps for embedding these principles into supply chains.
1. What are the most common risks regarding living incomes and wages in the agricultural sector?
The agricultural sector faces significant systemic risks that hinder the realisation of living wages and decent working conditions. It is widespread practice for workers to earn less than the national minimum wage, while unstable seasonal work contracts deprive workers of consistent income and job security. Migrant labourers particularly face exploitative conditions, such as excessive working hours, restrictions on basic rights like taking breaks and lack of adequate housing. They very often don’t have freedom of association and the effective recognition of the right to collective bargaining. Women migrant workers face gender-based discrimination and violence including sexual harassment. These typical risks exacerbate workers’ social exclusion and vulnerability.
Technological advances, like automation and mechanisation, further marginalise manual labourers and impact wages. Also, sudden shifts in market demands and purchase orders can often force agricultural workers into unplanned overtime without fair compensation.
The unequal access to information among workers and language barrier add to the critical challenges faced by agricultural workers. Many workers lack the legal knowledge or language skills to understand their rights and negotiate better terms, leaving them/which leaves them unable to advocate for fair treatment. However, the situation is some degree institutionalised due to bilateral government agreements to recruit seasonal workers, for example between Spain and Morocco.
In the Spanish context, recruitment agencies for temporary work, play an important role in working conditions. As these agencies operate in both the host and sending countries, they have been heavily criticised for illegitimate practices and offering unethical conditions to migrant workers in the first place. These systemic risks underscore the urgent need for HRDD practices to ensure fair wages and working conditions in agricultural supply chains.
2. What are the benefits of conducting HRDD for companies?
For businesses involved in global agricultural supply chains adopting HRDD practices is more than just ethical—it’s a smart business strategy. Let’s explore why:
Regulatory compliance: Governments are introducing stricter requirements for sustainability and labor practices, particularly in Europe. Ensuring fair wages and decent working conditions helps businesses align with these laws and guidelines, including the OECD principles.
Sectoral sustainability: The survival of the agricultural industry hinges on addressing both social and environmental challenges. Neglecting these issues risks long-term instability, potentially collapsing entire supply chains.
Competitive advantage: Ethical and sustainable practices make a company more attractive to socially conscious consumers and investors. They show stakeholders that the business is forward-thinking and committed to positive impact, boosting market appeal and profitability.
Reputation management: Companies that overlook human rights issues risk significant reputational damage, losing the trust of consumers and struggling to attract top talent. In an era where customers and employees value ethical practices, maintaining a clean image is crucial for long-term success.
3. How can companies integrate the principle of living incomes and living wages into Supply Chain Due Diligence?
To truly address wage and income gaps in global supply chains, the OECD Handbook recommends that companies adopt a holistic action plan based on contextual understanding and consultation with supply chain partners, including farmers and cooperatives. Effective risk mitigation strategies may include these steps:
Start with risk assessments and policies — The OECD Handbook emphasises the importance of risk assessments in identifying vulnerabilities. Businesses should use these insights to establish robust policies, such as Codes of Conduct and supplier agreements, to formalise commitments to fair wages and working conditions.
Talk to your stakeholders — Stakeholder engagement is at the core of HRDD. By working closely with workers, suppliers, and local communities, businesses can better understand and address systemic challenges. The Handbook provides methodologies to foster trust and develop context-appropriate solutions.
Join sector initiatives — Sector initiatives provide businesses with opportunities to pool resources, share best practices, and set industry-wide benchmarks for fair wages and responsible sourcing. Such collaboration not only enhances credibility but also reduces duplication of efforts, streamlines reporting, and helps businesses align with international standards more effectively.
Build knowledge and skills — Companies can train suppliers, harvest managers, and workers about human rights, fair wages, and their entitlements which empowers them to negotiate and advocate for better conditions. Equipping workers with this knowledge can drive change from the ground up.
Integrate environmental and social practices — Sustainability isn’t just about the environment. While responsible farming practices like water conservation and biodiversity preservation are critical, companies must also prioritise social sustainability. Ensuring fair labour conditions benefits everyone in the supply chain.
Foster long-term relationships — Building long-term buyer-supplier partnerships provides predictability and shared value. This can allow suppliers to invest in improved working conditions and capacity-building initiatives. Committing to purchasing volumes at a certain price can create a ripple effect of resilience and fairness throughout the supply chain.
Be transparent — Businesses must prioritise communicating their social and environmental impact clearly and accurately externally, showcasing the steps they’re taking to make a difference in their supply chains.
