Adequate Wages Topic Methodology
The first installment in our social impact accounting methodology is available as an exposure draft
*UPDATE: The public comment period for the Adequate Wages Topic Methodology concluded on April 30 2024. The Exposure Draft, along with public comment responses, are available below for review. Updates on next steps are included in the Development Process below.
Adequate Wages Topic Methodology Publications
Exposure Draft
February 8, 2024
Public Comment Letters
April 30, 2024
Introduction
The Adequate Wages Topic Methodology addresses the global issue of inadequate wages by measuring and valuing the impact of wages on people.
As of 2020, over 1 billion working people worldwide earn wages that are inadequate for a decent standard of living. The importance of adequate wages is enshrined in Article 23 of the Universal Declaration of Human Rights, adopted by the United Nations (UN) in 1948, which states: “Everyone who works has the right to just and favorable remuneration ensuring for himself and his family an existence worthy of human dignity, and supplemented, if necessary, by other means of social protection.”
The Adequate Wages Topic Methodology guides preparers of impact accounts to measure and value, in currency, the impact of wages on people.
The content of the Adequate Wages Topic Methodology builds on IFVI & VBA’s General Methodology 1: The Conceptual Framework for Impact Accounting and will be complemented by other Topic and Industry-specific Methodologies.
Highlights
- The methodology accounts for two distinct wage impacts:
- Remuneration impact: Wages of any amount provide well-being to a worker. The methodology also recognizes the evidence that the well-being impact of each additional unit of wage tends to fall as wages rise.
- Living wage deficit impact: If wages fall below the local living wage, workers will be less able to maintain a decent standard of living, harming their well-being.
- Remuneration impact and living wage deficit impact are included in alignment with General Methodology 1, which emphasizes the measurement of absolute impact to provide for a comprehensive and foundational set of impact information. The inclusion of both impacts is also conceptually consistent with the poverty research literature and the impact accounting system’s emphasis on stakeholder well-being.
- Data expected from preparers of impact accounts builds upon reporting requirements in ESRS S1: Own Workers and ESRS S2: Workers in the Value Chain, while also extending into greater detail for the purposes of valuation.
- The methodology relies on the concept of a living wage – and the need for independent benchmarks for a given jurisdiction. Recognizing the multitude of different living wage benchmark providers, the methodology establishes minimum and preferred criteria for a benchmark in order to ensure global accessibility while also ensuring quality of the benchmarks.
- Importantly, this methodology expands on existing methods of valuation by taking a well-being approach to determining wage impacts and builds off the research of the Sustainable Development Solutions Network establishing linkages between income and well-being.
Influences
The development of this methodology builds on frameworks and protocols published by leading organizations in the impact management ecosystem and sustainability-related disclosures required by governing jurisdictions and international standard setters, including:
- European Sustainability Reporting Standards (ESRS)
- Sustainable Development Solutions Network
- Global Living Wage Coalition and the WageMap consortium
- Organisation for Economic Co-operation and Development (OECD)
- Shift Project
- Capitals Coalition
- Valuing Impact
Development process
The development of the GHG Emissions Topic Methodology is governed by the Valuation Technical & Practitioner Committee( VTPC)and follows the Due Process Protocol.
- Development of a Adequate Wages Topic Methodology was approved by VTPC as part of the 2023 Work Plan.
- Research and development began in June 2023. VTPC discussion meetings were held in September and December 2023.
- The VTPC approved the Exposure Draft of the Adequate Wages Topic Methodology on January 11, 2024.
- The public comment period was held from February 8 – April 30, 2024.
- A preliminary analysis of the public comment period was presented to the VTPC in June 2024. The analysis indicated divided perspectives on two core proposals of the draft, including the scope of the methodology (inclusion of remuneration and living wage deficit impact) and valuation methods.
- To inform next steps, additional engagement with stakeholders is underway. Based on this engagement, formal next steps will be determined, with goals of a revised draft to be developed by the end of the year.
Adequate Wages & GHG Webinar
IFVI and VBA hosted a webinar on February 29 to introduce the exposure drafts for our first Topic Methodologies: Adequate Wages and Greenhouse Gas Emissions (GHG).
