Elevating supply chain resilience through a living wage

Small businesses often find themselves navigating the complexities of supply chain management with limited resources in terms of both budget and workforce. Yet there is a significant opportunity for small enterprises to bolster their supply chain resilience, and boost their competitive edge, through the United Nations Global Compact Network Australia’s (UNGCNA) groundbreaking initiative, Forward Faster.

The Forward Faster initiative empowers organisations of all sizes to achieve sustainability goals, with a central focus on the concept of a ‘living wage’, a cornerstone for driving sustainability, ethics, and resilience in supply chains. A living Wage transcends the notion of a minimum wage, ensuring that workers can afford basic needs such as food, shelter, and healthcare, while also providing for unforeseen emergencies

Small businesses in Australia have a unique opportunity to play a pivotal role in addressing this global issue and improve the lives of the most vulnerable people across their operations and supply chains. As of mid-2023, there were over 2.5 million small businesses across Australia, making up around 98 per cent of the national total, with the ability to be more agile and adapt more rapidly than most larger businesses. Forward Faster offers a platform for these businesses to engage with their suppliers, trace the origins of their products and services, and ensure the protection of human rights throughout their supply chains.

The initiative sets out two essential targets for business leaders:

  1. Ensure that 100 per cent of an Australian organisation’s employees earn a living wage.
  2. Establish cooperative action plans with contractors, supply chain partners and key stakeholders, both within Australia and globally, to work toward achieving living wages and/or living incomes, setting measurable and time-bound milestones. 

Small businesses can derive significant benefits from embracing these targets. Firstly, it makes good financial sense. An ethical and sustainable supply chain reduces reputational risks and enhances operational resilience. Additionally, paying living wages leads to increased employee engagement and productivity, which in turn reduces turnover, lowering recruitment and training costs.  

I run a small business myself, so know that balancing costs is crucial for profitability; it’s equally important to consider that contented employees are more productive, leading to a healthier and more robust company. When contemplating a living wage within small business operations and supply chains, it’s essential to assess the broader perspective and long-term advantages. Although it might lead to slower growth in the short term, it’s a more effective strategy for retaining employees, elevating morale, reducing absenteeism, and fostering sustained productivity.

Importantly, committing to a living wage for staff and suppliers has enormous social benefits. Not only does it support workers’ standards of living and improve health and wellbeing, but it helps tackle modern slavery. The Global Slavery Index estimates 41,000 people are living in modern slavery in Australia, 29.3 million in the Asia Pacific, and 49.6 million globally. One of the best ways to address modern slavery risks is through a Living Wage commitment. Since many of the larger clients of small businesses must now report on modern slavery risks under the Modern Slavery Act 2018, committing to a living wage helps you demonstrate how you’re managing your risks and boosts your competitive edge.

Making the change to ensure a living wage across your supply chain may not be as expensive as you think. For instance, according to Good On You, if clothing brands passed the entire cost of paying a living wage across their supply chains to consumers, it would simply cost an additional one per cent of the retail price.  

Here are five pragmatic steps for small businesses to embark on their journey towards a living wage:

  1. Education and Awareness: Start by educating yourself, your employees, supply chain partners, and relevant NGOs about the living wage concept. The UNGCNA Academy provides invaluable resources to guide small businesses in their initial steps.
  2. Policy Formulation: Develop a living wage policy or commitment inspired by best practices within your sector, utilising the UNGCNA’s guidance framework as a cornerstone.
  3. Wage-Setting and Communication: Review your wage-setting practices and transparently communicate them to your stakeholders, including your staff, peers, clients, and suppliers. Transparency is paramount in building trust.
  4. Setting and Monitoring Objectives: Define measurable goals and rigorously monitor your progress. Celebrate the milestones achieved, as progress holds more significance than pursuing an elusive notion of perfection.
  5. Collaboration: Explore opportunities to collaborate with stakeholders, recognising that partnership is the key to effective leadership in the corporate arena.

As we approach the midway point in our collective pursuit of the 2030 Sustainable Development Goals, small businesses hold the potential to take credible, ambitious, and measurable actions by embracing the living wage concept. This not only empowers these businesses to make a tangible difference but also strengthens their supply chains, fostering resilience and setting them on the path to sustainable success in the corporate world. In this endeavour, small businesses have nothing to lose and everything to gain.