Uplifting livelihoods through better wages
Everyone deserves fair compensation for their work; enough for a decent standard of living. We must confront the fact, however, that many workers in our industry still do not earn sufficiently.
Recognising the importance of working towards closing this gap, we have set a clear ambition: For everyone in our value chain to receive a living wage or living income by 2040. That means earning enough for sufficient food, water, housing, education, healthcare, transport, clothing, and other essential needs, including provision for unexpected events.
Living wages are relevant for workers receiving direct payment from employers, while living income refers to the annual amount earned by any income earner; in the tea industry, this typically means smallholder farmers. Because wages are more stable and straightforward to measure than self-employed incomes, our current priority is working towards closing the living wage gap, focusing on progress over perfection.
In 2024, we played a key role in a living wage pilot convened by IDH, a leading global foundation working on living wages and trusted by both buying companies and producers. Four other major tea buyers took part in this pilot, as did four producers across three prominent tea-growing countries. The aim was to gain insight into the size of the living wage gaps and jointly work towards reducing the living wage gaps for tea workers by 50%. This pioneering initiative was the first time that different parties joined forces to drive progress on living wages in the tea industry.
Our involvement focused on two suppliers that contribute 8% of our Kenyan sourcing volume. The pilot started with suppliers determining the living wage gap using the Salary Matrix, a tool developed by IDH to compare workers’ remuneration and the living wage benchmark – which is an estimate for the cost of living in a region, calculated using the Anker Methodology. This engagement with producers was successful: producers supplied the necessary salary information (including bonuses and in-kind benefits), including sub-contracted workers.
Having calculated the average living wage gap in Kenya, the next step was to calculate our contribution towards closing workers’ living wage gaps. Our contribution to the pay-out was based on our volumes sourced. The pay-out resulted in increasing the remuneration of almost 2 100 workers through the payment of an additional cash-based bonus.
Following the disbursement of the bonuses, IDH commissioned an external audit to ensure that money reached the intended workers – namely those earning below the Living Wage benchmark. In 2025, we will build on the learnings identified in the pilot, further advocate for other organisations to take part in the initiative, and seek to expand the scope of living wage initiatives across LIPTON Teas and Infusions and our wider value chain.