FAQs

Farmers in global supply chains should be able to generate living wages and incomes (see Chapter 2.1). In order to achieve this goal, the German Retailers Working Group joined forces in 2019. By signing a joint voluntary commitment, representatives of the German retail sector have committed to actively engage in the development and implementation of responsible business practices in their global supply chains and to gradually work towards fair remuneration along global agricultural supply chains of their own brands.

The group members ALDI Nord, ALDI South Group, dm-drogerie markt, Kaufland, and REWE Group agreed on a first pilot project on living wages and decent work in the Ecuadorian banana sector, which is to be extended to other reference countries in the coming years. This first joint project serves as a pilot to understand, test and adjust viable approaches to promote living wages in banana supply chains and other commodities. It shall serve as a blueprint to adopt and expand good practices in further sourcing countries beyond Ecuador.

The following German retailers (hereinafter named “the Retailers”) are part of this initiative: ALDI Nord, ALDI SOUTH, Kaufland, REWE Group, dm-drogerie markt.

The initiative is coordinated by Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH. GIZ is a service provider mandated by the German government in the field of international cooperation for sustainable development and international education work. More information here.

The initiative seeks to partner with relevant stakeholders, first and foremost banana producers and suppliers but also standard setting organizations and NGOs, to develop a common vision and practical solutions for mainstreaming living wages in the banana sector.

In 2020, Lidl, together with ALDI Nord, ALDI SOUTH, Kaufland, REWE Group, dm-drogerie markt had signed the joint commitment to gradually promote living wages and incomes in the supply chains of their own-brand products. Lidl was also involved in the planning and first implementation of this joint banana initiative of the Working Group.

In May 2022, Lidl decided to pursue an individual approach together with Fairtrade, outside the working group, to implement living wages in the banana sector. Since then, Lidl is no longer a member of the German Retailers Working Group. The Working Group will maintain a regular exchange with Lidl as a project partner to share good practices and lessons learnt.

In 2019 around 632 million people still lived in extreme poverty (below USD 1.90 per day). Workers in agricultural supply chains around the world continue to earn less than a living wage, which means that many are unable to cover the costs of essential needs for their families, such as decent housing, food, education for their children, and others. Recognizing the role global trade and value chains play in this context, ALDI Nord, ALDI South Group, dm-drogerie markt, Kaufland and REWE Group joined forces in the German Retailers Working Group on Living Income and Wages in a commitment to work collaboratively with you, our suppliers and producers, to improve the wages and incomes of agricultural workers. We recognize the significant potential of living income and living wages for eradicating poverty, for supporting decent work, for ending child and forced labor and for promoting the agricultural industry as an attractive employment sector for future generations. The working group is coordinated by the German development cooperation, GIZ.

The joint project of the German Retailers Working Group aims to promote living wages and decent working conditions in a holistic manner, establishing enabling conditions at production, supply chain, sector and policy level. The holistic approach aims for the following four strategic objectives (see below). 

In order to reach these objectives, the Working Group agreed upon a joint roadmap that includes the following key pillars for implementation:

1. Launch and roll-out of Living Wage Banana in German market

• This process is of particular relevance for suppliers and producers since it will be directly linked to sourcing agreements with the Retailers. The Retailers seek close collaboration with suppliers and producers on how to define, implement and verify LW Bananas, and welcome any feedback and recommendations. Chapter 4 summaries first ideas on how characteristics and criteria of LW Bananas could look like.  

1. Implement structural measures to promote living wages and decent working conditions in the Retailers’ global banana supply chains, such as promoting strong worker representatives together with all the actors along the supply chain, setting up dialogue structures between supply chain actors and increasing consumer awareness.

• These measures will not be directly linked to sourcing agreements between retailers, suppliers and producers. Comments and involvement of suppliers and producers will be welcomed in the near future.

More detailed information on objectives, milestones and envisioned activities can be accessed in the Project Roadmap (English | Spanish).

One banana producer usually sells to multiple buyers. A harmonized approach mainly reduces complexity, effort and costs for producers as they do not receive different requirements from their supply chain partners and duplications in verification activities can be reduced. Intermediaries can also benefit from increased efficiency if their retailer customers agree on common framework conditions for implementing living wages.

In addition, it has become apparent in the past that an industry wide engagement might be needed to overcome relevant obstacles such as the first mover disadvantage. The joint vision and forces of the participating retailers for raising the bar towards living wages can accelerate action and maximize impact.

Instead of pursuing individual solutions, the focus of the Working Group is therefore on pre-competitive collaboration on a joint approach. The Working Group members ALDI North, ALDI SOUTH, Kaufland, REWE Group and dm-drogerie markt pursue this joint approach, as this is considered the most effective and sustainable way to anchor living wages in the sector.

The concept of a living wage is based on the needs for an adequate standard of living and takes into account the cost of living for workers and their families – in contrast to minimum wages, which are usually set politically.

As a fundamental human right, living wages are an integral part of key international agreements such as the Universal Declaration of Human Rights, the UN Guiding Principles on Business and Human Rights, and the OECD Guidelines for Multinational Enterprises.

According to the internationally acknowledged definition of the Global Living Wage Coalition a living wage means the basic cost of living for a family is attainable by the adult wage earners each month. A Living Wage is paid when a worker receives remuneration that is sufficient to afford a decent standard of living for the worker and her or his family in their location and time. Elements of a decent standard of living include food, water, housing, education, health care, transportation, clothing, and other essential needs including provision for unexpected events.

Both, Living Wage and Living Income are derived from the idea of achieving a decent standard of living as defined above. Thereby, Living Income applies the concept of a Living Wage to smallholder farming households. In developed countries self-employed are protected through government safety nets but such nets do not exist in developing countries. The concept of Living Income closes this gap as it addresses self-employed, in particular smallholder farmer in developing countries. A Living Wage applies to an individual worker whereas a Living Income applies to one household. Moreover, a Living Wage is a monthly renumeration whereas a Living Income refers to a yearly renumeration for a farming household gained from all their income sources.

The living wage is calculated by first establishing the cost for the basic but decent life in a specific region, inclusive of food, housing, education, healthcare, transportation, clothing and other essential needs for a family including unexpected events. The exact costs reflect local items and prices. The total costs for a family are then divided by the typical number of working adults to reflect other wage earners contribution to the family earnings. This value indicates the necessary take home pay for one wage earner, or the net living wage, in a specific region for a single month. Finally, this net living wage is adjusted to consider taxes and deductions.

The Working Group follows the Anker Methodology to estimate living wage benchmarks that are internationally comparable and locally specific. The Anker Methodology is widely accepted by the international community and has been endorsed by the Global Living Wage Coalition (GLWC). The methodology has catalyzed global action on living wage and has been used to estimate living wage in rural, urban, and peri-urban areas around the world. Living wage benchmarks are available on the GLWC website, including estimates for relevant banana producing countries such as Ecuador, Colombia, and Costa Rica.  

A living wage gap is the monetary difference between a living wage benchmark and the actual net remuneration received by a worker. An internationally acknowledged tool to assess actual remuneration and wage gaps is the IDH Salary Matrix (see Chapter 6.1.3).

The “salario digno” is the living wage concept as defined by the Ecuadorian labor law. According to Article 328 of the Ecuadorian Constitution, the “salario digno” must be adequate to cover one's own needs as well as the basic needs of the family. This understanding is very similar to the living wage definition endorsed by the GLWC and the Anker Methodology (see Chapter 2.3).

The Ecuadorian state determines the fixed minimum amount that a worker shall receive monthly as payment for his or her work or service for a public or private entity. In addition to the normal and regular pay, the Labor Code stipulates that workers receive additional mandatory social benefits. The Labor Code states that workers are also entitled to the payment of a thirteenth and fourteenth salary. The thirteenth salary is equal to one-twelfth of the remuneration received during a calendar year. The fourteenth salary is additional basic remuneration. These allowances may also be paid monthly.

The difference between the living wage concept endorsed by the GLWC and the “salario digno” in Ecuador lies in the calculation method. Please find in Chapter 2.3 an explanation of how a living wage is calculated using the Anker methodology. In comparison, Article 8 of the Organic Code of Production, Trade and Investment states that the “salario digno” must equal the cost of a family's basic basket of goods divided by the number of recipients in the household. The cost of the basic basket and the number of recipients in the household are determined annually by the National Institute of Statistics and Census (INEC) and serve as the basis for determining the living wage set by the Ministry of Labor (MDT). The MDT set the value of the living wage for 2021 at $445.41 net. Adding the 13th and 14th salary plus reserve fund minus the social security contribution an employee with a permanent contract working more than one year should have received $462.19 net in 2021.

In comparison, the 2021 benchmark report of the GLWC indicates a net monthly living wage of $462 for workers in rural banana producing areas at the Southern coast region of Ecuador. Thus by law, every worker in Ecuador that holds a formal contract and has been employed more than one year should have received a living wage in 2021.

The designated project scope encompasses each member’s Cavendish banana portfolio sold to the German market, covering all respective product lines excluding explicitly branded bananas. In the case of the retail member dm-drogerie markt – as a retailer without fresh bananas in its range – the scope includes processed Cavendish bananas in own-brand products, such as juices or fruit purees. For the long run, members also welcome a close collaboration with banana brand manufacturers and the inclusion of branded bananas into the scope of engagement in order promote living wages for all workers in all their banana supply chains around the world.

Retailers are committed to launch and roll-out LW Bananas according to the following time-bound milestones:

What it is:

This initiative works towards the roll-out of LW Bananas that are produced in compliance with paying a living wage to banana workers. The Retailers acknowledge that ensuring living wages is only possible if responsibility is shared between all relevant supply chain actors.

Hence, a LW Banana may either come from a farm that received a LW differential paid by the Retailers (see Chapter 6.2.1) to reduce or close a prevailing wage gap, or from a farm where it has been verified that a living wage is already paid to all banana workers (see Chapter 6.1.6 on the added value of verification).  

For more information on the characteristics of a LW Banana please consult Chapter 4.2. Chapter 7 provides an overview of the specific requirements for LW Bananas that shall be anchored in sourcing agreements between Retailers and their business partners.

What it is not:

The Retailers’ objective to purchase LW Bananas does not mean that Retailers aim to end supply relationships with farms that are not yet paying a living wage to their workers. Instead, those farms with a prevailing gap shall receive support to increase workers’ wages towards a living wage.

A LW Banana does not necessarily mean that there is no living wage gap on the farm where it has been produced. A LW Banana may come from a farm that still shows a living wage gap even if this farm participated in the project. This is because banana producers usually supply to multiple buyers and markets, meaning that a commitment from all relevant buyers is essential to fully close prevailing living wage gaps. The Retailers will 

take responsibility for the volumes of LW Bananas they purchase from their supply chain partners. This means that a prevailing wage gap will be reduced proportionally by means of the LW differential paid by the Retailer, depending on the share of volumes purchased by the respective Retailer in relation to a farm’s total production (see Chapter 6.2.5)

LW Bananas shall not be an additional product line on the Retailers’ shelves. Instead, Retailers aim to integrate LW criteria throughout their existing banana portfolio. LW Bananas shall become standard for bananas sold by participating retailers on the German market, following a roadmap to steadily increase volumes, reaching at least 50% of total banana volumes* by 2025 (see Chapter 3.2 for details).

*The referenced total volumes exclude explicitly labelled bananas.

Retailers aim to agree on an implementation framework for LW Bananas to reduce complexities and additional burdens for suppliers and producers and to scale impact through bundled efforts.

In order to account for the specific context and needs of a farm, different elements are suggested based on the current status of wages paid (see blue box). More detailed considerations on how to implement those elements are outlined in Chapter 6.  

Key objective of this initiative is to support producers to reach and maintain the payment of living wages for banana workers and to promote decent working conditions:

Farms with a prevailing wage gap shall not be excluded from retailers’ sourcing portfolios. Instead, retailers are committed to directly support and remunerate producers working towards closing the gap by paying a LW differential (see Chapter 6.2 for details).

Farms without a prevailing wage gap shall be strengthened and supported to increase transparency on wage and working standards and to use this information in price negotiations with buyers. This shall support producers to sustain high wage and working standards over the long run, also in unstable times. The Retailers are open to discuss the need for additional support for farms that are already paying a living wage to their workers.  

Retailers recognize that the payment of living wages is only one essential piece of decent working conditions. Therefore, another objective of this initiative is to analyze other work-related social risks of workers and to develop solutions to prevent and reduce them (see milestones 6 and 7 of the Roadmap).

For additional commitments of the Retailers in the context of promoting Living Wage Bananas please consult Chapter 7.1.

Among others benefits for producers could entail:

• Producers with a prevailing living wage gap could receive a price premium to pay workers higher wages.
• Producers that are participating in this initiative could benefit from preferential and long-term sourcing agreements. 
• Producers can voice their opinions and take active part in a transformation of banana supply chains built on fair and inclusive business relationships.
• Producers could increase their knowledge & capacities to comply with upcoming criteria of sustainability certifications related to living wages and decent work.
• Producers could increase knowledge about their work force and wage structure to inform their Human Resource Management.
• Producers could profit from a more content work force, which could result in higher labor productivity.
• Producers could profit from reputational gains. 
• Producers could profit from knowledge shared and networks build during the collaboration between actors.
• Harmonization of LW criteria among Retailers allows for efficiency gains and reduces burden of handling differing requirements. The Working Group is in close exchange with other European retailers to seek further alignment.

Among others benefits for suppliers could entail:

• Suppliers that are sourcing LW Bananas for the Retailers could benefit from improved performance ranking in Retailers’ supplier evaluation.  
• Suppliers could increase knowledge on working conditions of banana producers.
• Suppliers could profit from reputational gains.
• Suppliers can voice their opinions and take active part in a transformation of banana supply chains built on fair and inclusive business relationships.
• Harmonization of LW criteria among Retailers allows for efficiency gains and reduces burden of handling differing requirements. 

The project aims at transforming the banana sector towards living wages through various instruments such as responsible purchasing practices, strong and active workers’ representations, transparency on wages and working conditions and a deepened producer and supplier dialogue. Therefore, a comprehensive overview of the wage situation is indispensable. The project especially aims at reaching farms with an existing wage gap. Most importantly, a prevailing wage gap on a farm will never lead to an exclusion of this farm from the Retailer’s sourcing portfolio. Instead, the project wants to enable these farms to close the gaps by paying additional living wage premiums. Those producers that are already paying a living wage to their workers shall be supported to maintain these high social standards, also in unstable times such as the current pandemic. In both cases, assessing, validating, and monitoring wage levels of banana workers is essential in order to:  

• Calculate and pay price premiums to close gaps
• Support producers in developing wage improvement plans, in calculating costs and required price mark-ups
• Support suppliers in internalizing costs related to living wage payments
• Assess and monitor impact of living wage payments on wage levels and decent working conditions
• Create transparency for consumers to increase demand for sustainably produced bananas to justify possible price increases

Next to the Dutch initiative*, our German initiative is one of the two biggest banana initiatives ever conducted by a joint collaboration of retailers and can have a great leverage effect.

Filling out the salary matrix holds the possibility of benefits for producers:

• Receiving a living wage premium: if a wage gap is found on a farm, this farm could receive living wage premiums by the retailers from 2022 onwards to close this gap.
• Producers can help to design the project for positive impact and bring in their perspective:
  • The producers’ feedback on the activities is very valuable for the Retailers and will play an important role in the further development and design of the project.
  • Where a living wage already exists, this project will work towards ensuring that there will not be any disadvantage for those producers in the future, in case this may have been the case, caused for instance by higher labour costs. In addition, the Retailers are open to discuss the possibility of rewards for farms that already pay a living wage to their workers.
  • Dialogue structures, where it is assured that all parties can express their opinion and ideas, will be initialized.
• Become familiar with the IDH Salary Matrix (see Chapter 6.1.3) and get ahead of new Rainforest Alliance criteria on living wage: The Salary Matrix is a tool that is used by Rainforest Alliance for wage gap analyses, and which is a core requirement for complying with the Rainforest Alliance standard from July 2021 onwards (Core Requirement 5.4.1**), with exception for Ecuador. The project works in closecollaboration with Rainforest Alliance to pilot the new requirements and strengthen farm capacities to comply with them.
• Get market advantage in light of the already existing and upcoming due diligence laws in Europe: due diligence legislation in Europe is on the rise. This means the requirement of decent wages and proof for it will receive more importance.

*The German and Dutch initiative are in permanent exchange and aiming at alignment but are NOT the same initiative. The Dutch banana initiative is coordinated by IDH. Find more information on the Dutch commitment here: Banana Retail Commitment - IDH - the sustainable trade initiative (idhsustainabletrade.com)

**For the complete standards, see: 2020-Sustainable-Agriculture-Standard_Farm-Requirements_Rainforest-Alliance.pdf

The tool used for the analysis of wages and potential wage gaps is the digital IDH Salary Matrix. The Salary Matrix is a practical tool to help you evaluate how the total remuneration received by your employees (including wages, bonuses, cash and in-kind benefits) compares to the relevant living wage benchmarks for your region. The tool supports supply chain efforts on wage transparency and shared responsibility for addressing living wage gaps.

More than hundred banana producers around the world have already tested the IDH Salary Matrix. We are also using it because consistent and aligned living wage gap analysis is crucial to the effectiveness and credibility of strategies to close gaps and achieve decent standards of living for workers.

Some sustainability certifications already ask producers to assess workers’ wages and potential wage gaps by using the Salary Matrix tool. The Working Group welcomes any efforts taken by the standard setting organizations to work towards an aligned methodology to analyze wages and wage gaps. This uniformity will ensure clarity and reduce complexities and inefficiencies for producers.

Producers and suppliers that are not already familiar with the digital Salary Matrix, can find training videos, guidance documents and support at the IDH website. We highly recommend reviewing these resources, as they will make filling in the Salary Matrix easier.

For more detailed information on the Salary Matrix tool, please consult: IDH Salary Matrix for living wage - IDH - the sustainable trade initiative (idhsustainabletrade.com)

Background: The Rainforest Alliance has authorized the Exception Policy on the Living Wage Matrix in Ecuador, since it considers that the requirements of the Ecuadorian Legislation and the procedures to comply with the Living Wage exceed the requirements indicated in RA’s Sustainable Agriculture Standard for farms and Chain Supply, therefore: Certificate Holders in EC, who must comply with the provisions of the country’s legislation, do not have to apply the Annex S8 Wage Matrix. The Certificate Holders have the obligation to provide the Certification Entities with access to all the information that allows verifying compliance with the legal requirements related to the Living Wage, as well as their supporting evidence of compliance delivered by the competent government entities.

German Retailers Working Group position: The German Retailers Working Group agreed on accepting the Exception Policy of the Rainforest Alliance regarding the use of the Salary Matrix in Ecuador. This is, first of all, to omit a double burden for Rainforest Alliance certified producers in Ecuador: Starting from 2023 onwards, to comply with the sourcing criteria of the German Retailers banana producers only have to fill out the wage data analysis of the government and do NOT have to fill in the Salary Matrix additionally. This also takes into account that the wage data entered into the wage monitoring tool by the Ecuadorian government is more detailed than the data entered into the Salary Matrix. With this decision the Working Group also acknowledges the work and efforts of the Ecuadorian government to secure a decent wage.

We recognize that the suppliers and producers have been at the forefront of living wage efforts in the banana sector. With our commitment we want to strengthen these efforts and try to accelerate the progress jointly.

Although, the wage level in Ecuador is relatively high and current evidence indicates that – if existing – the gaps between the prevailing wages and the living wage benchmark are small, detailed information on the wage situation of workers in our banana supply chains of German retailers are not yet available.

To obtain a comprehensive overview of the wage situation, we aim at analysing wage gaps for as many of our Ecuadorian supplier as possible, followed by an extended analysis of wage gaps in other relevant sourcing countries to cover all our banana supply chains. 

Next to the Dutch initiative*, our German initiative is one of the two biggest banana initiatives ever conducted by a joint collaboration of retailers and can have a great leverage effect. The wage gap analysis is an essential step to find ways of and solutions for improving the wage situation of millions of farm workers worldwide. We would be more than glad for you to become part of it.

*The German and Dutch initiative are in permanent exchange and aiming at alignment but are NOT the same initiative. The Dutch banana initiative is coordinated by IDH. Find more information on the Dutch commitment here: Banana Retail Commitment - IDH - the sustainable trade initiative (idhsustainabletrade.com)

Living wage projects, led by diverse groups of partners and stakeholders, are taking place all over the world. As focus on this important topic has continued to grow, so too has the need for uniformity around how living wage gaps are calculated. Consistent and aligned living wage gap analysis is crucial to the effectiveness and credibility of strategies to close gaps and achieve decent standards of living for workers. For buyers or traders that have supply chain partners all around the globe, alignment around both the living wage concept and how living wage gaps are measured is fundamental to building trust and the capacity to scale up. For producers and manufacturers that are asked to calculate the living wage gap at their production level, uniformity will ensure clarity and reduce inefficiencies.