Is mounting social inequality as urgent as the climate crisis?

“Let’s be clear too, that quite often people use the terms ‘living wage’ and ‘minimum wage’ interchangeably, but these are two very different concepts”, Ahola continues. “They may both have the same objective - that people can earn enough to provide a decent living and don’t live in poverty. That said, minimum wage is required by law and of course, companies like us comply with this law in all the countries we operate in. Living wage, however, is a voluntary construct and typically it is value-wise higher than minimum wage. Very few countries set these to be equal.”

The UN Global Compact Think Lab promotes living wage to companies and policy makers

According to Griet Cattaert, the focus must be on all three sustainability aspects of ESG (Environmental, Social, Governance). “The focus is often on the ‘E’, but we really have to look into the ‘S’. In addition, the challenge for all sustainability initiatives is about reporting. There are detailed assessment methods and tools for E’ but for ‘S’ there is a lack of consensus about what it constitutes, and it is very difficult to measure social impact in general. There is no universally accepted monetary amount that defines a living wage so it can be confusing for companies to understand the issue,” Cattaert explains.
 

 
The UN Global Compact Think Lab on Living Wage is where companies discuss issues about how they can convince more companies to engage in the living wage discussion, so more companies make bold commitments and send a signal to policymakers to adopt living wage policies. “In essence, it’s really about strong thought leadership with a very small group of companies, Cattaert says.

The UNGC has been working with UPM since 2019 on the topic of decent work in general, and how to improve working conditions in the company and its global supply chains. “We decided in a working group of 25 companies to start working specifically on the topic of living wage.”

UPM will analyse and correct living wages annually

UPM’s commitment in terms of living wage is to do an annual analysis, and if the global assessment shows unexpected wage gaps, they are corrected. UPM works with an independent third party to develop its understanding of living wage. “They provide us with an external objective source of benchmark for each of our operating countries to conduct our annual assessment. We will continue to develop the methodology to ensure that we continue to pay our employees as fairly as possible,” Ahola confirms.

Correcting the gender pay gaps

UPM’s commitment to ensure the gender pay equity to all employees and to review it annually is exceptional on both a national and global scale. Until today, there are only a few companies who have published the target, the annual review process and also the results of the review. The company-wide pay equity review was made in 2021. The results showed that UPM salaries and wages are mostly equitable. However, unexplained pay gaps were identified for approximately 2.3% of UPM employees (400 UPMers) in 10 countries. All of them received a pay adjustment as of 1 January 2022.

The annual review enables the monitoring of possible gender pay gaps and to make pay adjustments respectively. “There can, however, be pay differences if the reason is legitimate,” Ahola notes. “So, you explain the difference by the type or the level of the work, the experience, the performance, the location and more. These differences are fair if they are explained and understood by transparent criteria, but if there are unexplained differences, that’s wrong.”

The road to 2030

“In terms of social responsibility, UPM is ahead because they really want to look into their own business operations and supply chains and understand the issues. This is something major: if companies are reflecting themselves on how they are performing and are collecting data, that is the first thing you need to understand the issue. UPM is also committed to speak up on these critical social responsibility topics and are, therefore, definitely one of the frontrunners globally,” Cattaert concludes.

As UPM moves forward, expectations from stakeholders, including investors, are increasing. An open and honest dialogue is the key. “UPM is a large employer and committing with ambitious social responsibility targets regarding its own people. The next step for us is to start promoting living wages also with our suppliers. There are a lot of people employed across our supply chain, so this will be an even more important part of our work impact-wise,” concludes Vainikka.

Text: Dan Rider, Miltton