Strengthening Socially Responsible Investment engagement for living wage implementation in the food retail sector

Abstract

In-work poverty is a significant issue in food retail operations and their supply chains worldwide. Increasing workers’ compensation towards a living wage that covers workers’ basic needs is essential for reducing working poverty. The purpose of this paper is to investigate how financial institutions can most effectively shape their Socially Responsible Investment engagement to encourage food retail chains to implement living wages. This research employs a cross sectional design of five European retail chains in Achmea IM’s living wage engagement. A sequential explanatory design was employed in which i) retailers’ living wage implementation was quantified through an analysis of the retailers’ reported information according to a developed rating methodology and ii) a qualitative analysis was conducted on engagement dialogues and follow-up interviews with the retailers to assess two potential strategies to increase engagement effectiveness. The first strategy concerns alignment of beliefs and attitudes between the shareholder and investees. The second strategy concerns the use of salience strategies. The influence of these strategies on engagement effectiveness was analysed at the individual- and organisational level of corporate social performance.

The findings demonstrate that in the evaluation of corporate social performance and engagement effectiveness it is relevant to recognise differences between the individual-, and organisational level. Moreover, this research identified three ways in which shareholders can increase the effectiveness of their engagement. First, shareholders can point to differences in corporate social performance between different levels. Second, for companies with a defensive response to shareholder requests, shareholders can increase the effectiveness of their engagement by employing more salience strategies. Third, for companies with reactive postures organizational level effectiveness might be increased in two ways. First, by adjusting its requests towards the beliefs and attitudes of the company in case the company’s reactive response undermines salience strategies. Second, in case the low shareholder salience causes the reactive response, the shareholder can increase effectiveness by increasing their shareholder salience strategies e.g. through voting.