Living wages in luxury supply chains: a practical due diligence guide
GoodBlog | read time: 9 min
Published: 11 September 2026
A high price does not necessarily mean a high wage. Luxury products can command significant prices while the people involved in producing them may not receive wages or incomes that allow them to maintain a decent standard of living. The price paid by consumers can be several steps removed from what workers and producers actually receive, particularly where supply chains involve multiple tiers, subcontracting or informal work.
For luxury companies, this can make it difficult to establish whether people across the supply chain are earning enough and whether the company’s own practices may be contributing to any identified risks. Understanding these risks requires companies to consider how work is organised across their supply chains, who is involved in producing goods or materials and how they are paid.
Understanding the living wage
A living wage is the remuneration a worker receives for a standard working week that is sufficient to provide a decent standard of living for themselves and their family. It is based on the cost of essential needs in a particular location, rather than simply the minimum amount an employer is legally required to pay.
This distinction is important because a worker can be paid the legal minimum wage while still earning less than a living wage, with the gap between the two varying according to the cost of living in a particular location and changing over time. Assessing living-wage risks therefore requires companies to understand what workers actually receive and compare this with a credible living-wage benchmark that reflects the relevant location and current cost of living.
For luxury companies, assessing living-wage risks requires more than reviewing supplier policies. Companies need to establish what workers are actually receiving and how this compares with an appropriate living-wage benchmark. Where a gap exists, due diligence should then consider what is contributing to it and what action may be appropriate.
Why codes of conduct and audits are not enough
Codes of conduct and social audits are important tools for managing labour risks. A company can use its code to set expectations around wages and its audit programme to check how those requirements are being applied by suppliers. However, these tools do not necessarily establish whether workers are actually receiving a living wage. This requires reliable information about what workers receive and how their remuneration compares with an appropriate living-wage benchmark.
Recent investigations into Italy’s luxury manufacturing sector illustrate some of the difficulties involved. Investigations involving several major luxury brands have uncovered alleged labour exploitation in subcontracted workshops, including very low pay, unsafe working conditions and excessive working hours. In some cases, production had been subcontracted several times before reaching the workshops where workers were employed. Where companies do not have full visibility of these arrangements, information gathered through a direct supplier or a periodic audit may not provide a complete picture of conditions further down the supply chain.
Codes and audits therefore remain important, but their findings need to be considered alongside other evidence to establish whether workers are actually receiving an appropriate wage. This may require companies to supplement supplier and audit information with other sources of evidence, including worker engagement and credible wage benchmarks.
Who earns a wage and who earns an income?
Living wage and living income share the same underlying aim: ensuring that people can earn enough to support a decent standard of living for themselves and their families. The distinction is in how that income is earned. A living wage applies to people in an employment relationship, while living income is used for people who earn their income through self-employment, small-scale production or other economic activity.
For employees, the relevant question is therefore whether their remuneration meets a living-wage benchmark for the location where they work. For self-employed workers, smallholders and other producers, the focus is on whether the income they receive from their economic activity is sufficient to support a decent standard of living for themselves and their household.
This matters when carrying out human rights due diligence because the information needed to assess the risk will differ. Assessing factory workers may require information about wages, working hours and deductions, for example, while assessing smallholders requires consideration of household income and the costs associated with production.
| Type of worker/producer | Luxury example | Relevant assessment |
| Employed workers | Factory or processing workers in contract manufacturing | Living wage |
| Self-employed or informal workers | Mica pickers, informal harvesters, homeworkers | Living income |
| Smallholders and other producers | Shea, cocoa, vanilla or botanical producers | Living income |
Where income and wage risks may arise in luxury supply chains
Wage and income risks can arise at different points across a luxury supply chain, from the production of raw materials through to manufacturing. The nature of the risk will depend on the type of work, how workers or producers are engaged and how the supply chain is structured. Informal work, seasonal production, fragmented sourcing and limited bargaining power can all make it harder to establish whether people are earning enough.
The following examples illustrate materials and activities where these risks may arise, though it is important to note that they are not exhaustive and the presence of a particular material or location does not in itself indicate that workers are being underpaid.
| Material / activity | Example sourcing locations | Workers / producers | Factors to consider |
| Mica | India, Madagascar | Informal and small-scale miners | Informality, low and irregular income, limited bargaining power |
| Shea | West Africa | Smallholders and women collectors/processors | Seasonality, market access, bargaining power |
| Cocoa butter | Côte d’Ivoire, Ghana | Smallholders and farm workers | Farm-gate prices, household income, wider labour-rights risks |
| Palm oil | Indonesia, Malaysia | Plantation and migrant workers | Wage deductions, recruitment practices, piece-rate pay |
| Vanilla | Madagascar | Smallholders and seasonal workers | Price volatility, seasonality, income security |
| Argan oil | Morocco | Smallholders and cooperative members | Value distribution, market access, bargaining power |
| Essential oils | Various producing regions | Seasonal agricultural workers | Seasonal employment, piece-rate pay, gender inequalities |
| Gold and precious metals | Artisanal mining regions | Artisanal and small-scale miners | Informality, income levels, hazardous working conditions |
| Leather goods manufacturing | Italy | Factory and subcontracted workers | Pay levels, excessive hours, unauthorised subcontracting |
A practical approach to living-wage due diligence
1. Map the supply chain and identify who may be affected
A robust assessment begins with understanding where products, ingredients and materials come from and how they move through the supply chain. This should include relevant tiers of suppliers and, where possible, subcontractors and informal production. The aim is to understand who is carrying out the work and how they are engaged within the supply chain, whether as an employee, self-employed worker or smallholder.
2. Identify and assess wage and income risks
Once the relevant parts of the supply chain have been identified, companies can assess where workers or producers may be at risk of not earning enough for a decent standard of living. The assessment should consider the type of work, location and employment arrangements, alongside factors such as informality, seasonality and bargaining power. For employees, this means considering wages against an appropriate living-wage benchmark. For smallholders and self-employed workers, the focus should be on living income.
3. Prioritise the most salient risks and impacts
As not every risk can be addressed at once, prioritisation should be based on the severity and likelihood of the potential or actual human rights impact, taking into account factors such as the number of people affected and how difficult it would be to remedy the harm. This helps direct resources towards the areas where action is most needed.
4. Engage with workers, suppliers and other relevant stakeholders
Supplier information alone may not provide a complete picture of how workers are paid or the conditions in which they work. Companies should therefore consider how they can obtain and test information from people affected by their activities, where this is feasible and appropriate. This may include direct engagement with workers and their representatives as part of an assessment, through established worker engagement or grievance mechanisms. Where direct engagement further down the supply chain is not practical, relevant information may also be obtained through suppliers, producers, worker organisations, local experts and other organisations with knowledge of the relevant context.
5. Take action to prevent and address impacts
Where wage or income gaps are identified, the next step is to work with suppliers and other relevant business partners to understand and address the factors contributing to the impact. The actions should be proportionate to the nature and severity of the impact and should include clear responsibilities and timescales where appropriate. Where the company’s own practices contribute to the problem, these should also be addressed.
6. Monitor whether action is effective
Progress should be monitored against the action plan to assess whether the measures taken are improving conditions in practice. This should go beyond confirming that an audit has been completed or a policy introduced. Relevant indicators may include changes in wage or income gaps, feedback from affected people and progress against agreed actions. Where measures are not producing the intended results, the action plan should be reviewed and adapted.
7. Communicate progress and provide access to remedy
Companies should communicate relevant information about their due diligence approach, the risks identified and the action being taken to address them, where appropriate and in line with applicable reporting requirements. They should also ensure that accessible grievance mechanisms are available to workers and producers who may be affected by their activities or supply chains and that these mechanisms support access to effective remedy where concerns are raised, or harm is identified.
Testing your purchasing practices
Purchasing practices can contribute to conditions that make it more difficult for suppliers to meet appropriate wage and labour standards. The issue is not simply whether a price is high or low, but whether the commercial relationship gives a supplier a realistic ability to meet the labour standards the company expects them to meet. Sustained cost pressure or short lead times, for example, may contribute to excessive working hours, less formal forms of employment, or production being passed to workshops that are less visible to the buyer.
Human rights due diligence should therefore examine whether the company’s own purchasing decisions are contributing to an identified risk. If workers are regularly working excessive hours to meet production targets, for example, it is relevant to understand whether the targets or lead times agreed with the supplier are contributing to the problem. Companies may also need to examine whether agreed prices allow for appropriate labour costs and how changes in orders are managed.
The OECD’s due diligence guidance and the Ethical Trading Initiative’s responsible purchasing guidance both recognise the relationship between purchasing practices and working conditions. Companies can use these principles alongside supplier and worker information when reviewing whether their own commercial practices may be contributing to identified risks.
What does the CSDDD mean for living wages?
The EU Corporate Sustainability Due Diligence Directive (CSDDD) explicitly recognises the right to fair and favourable conditions of work, including a fair wage and an adequate living wage for employed workers and an adequate living income for self-employed workers and smallholders. This reflects the wider recognition of a living wage as an essential aspect of decent work.
For companies within the scope of the CSDDD, inadequate wages or incomes can constitute an adverse human rights impact requiring action under the Directive. The CSDDD does not establish a single living-wage rate that companies must apply across their supply chains. Instead, companies are required to identify and assess relevant adverse impacts, take appropriate measures to prevent or mitigate them and address impacts where they occur.
From commitments to outcomes
A credible approach to living wages requires more than supplier commitments or policies. Companies need to understand where risks arise, establish what workers and producers actually receive, consider the factors contributing to any gaps and take action where needed.
GoodCorporation helps businesses assess and strengthen their human rights due diligence, including identifying and prioritising human rights risks, engaging with workers and other stakeholders and assessing whether existing policies and processes are effective in practice. Our work can help companies understand where wage and income risks arise within their supply chains and develop practical actions to address them.
To discuss how GoodCorporation’s human rights services could support your organisation, get in touch with our team.
Frequently asked questions
A minimum wage is the legally required minimum amount an employer must pay a worker, where a statutory minimum applies. A living wage is based on the cost of meeting a worker’s basic needs and those of their family and is calculated using an established methodology rather than being determined solely by law. A worker can therefore be paid above the legal minimum while still earning less than a living wage.
There is no universal legal requirement for companies to ensure that every worker in their global supply chain receives a living wage. However, human rights due diligence frameworks increasingly require companies to consider wage and income risks within their value chains. The EU Corporate Sustainability Due Diligence Directive includes living wages and living incomes within its human rights provisions. The OECD Guidelines also provide expectations around responsible business conduct and workers’ remuneration. The UN also recognises ensuring a living wage as an essential aspect of decent work. The specific legal requirements will depend on the company’s jurisdiction, size and scope.
A living-wage benchmark is generally calculated based on the cost of meeting a worker’s basic needs and those of their family in a particular location. Companies assessing wage risks in their supply chains can compare actual remuneration with an appropriate benchmark, taking account of how wages are calculated, working hours and deductions.
