Lessons for ESG activists: The case of Sainsbury's and the living wage

• Published date: 01 March 2023
• Author: Tom Gosling
• Date: 01 March 2023
• DOI: http://doi.org/10.1111/jacf.12550

DOI: 10.1111/jacf.12550

ORIGINAL ARTICLE

Lessons for ESG activists: The case of Sainsbury’s and the living wage

Tom Gosling

London Business School, London, UK

Correspondence

TomGosling, London Business School, London, UK.

Email: tgosling@london.edu

Sainsbury’s, one of the UK’s large supermarket chains, found

itself in the crosshairs of ESG activism in 2022. That was when

ShareAction, a well-known responsible investment NGO, filed

the first Living Wage resolution in the UK.1

The proposal was this:

Topromote the long-term success of the Company, given

developing expectations on rewarding key workers, the

opportunities and risks associated with the increased

costs of living for workers in the UK, and growing

expectations that responsible businesses pay the real Liv-

ing Wage, we as shareholders direct the Company to

accredit as a Living Wage Employer by July 2023.

A commitment to pay the “real” Living Wage to all

workers is in line with the recent investments by Sains-

bury’s in direct employees’ pay. This should be done

at reasonable expense and nothing in the resolution

should be read as limiting the board’s discretion to take

decisions in the best interests of the Company.

Among the 10 co-filers were blue-chip names in the UK

investment world, including Legal and General, HSBC Asset

Management, Fidelity International, Nest, and the Brunel

Pension Partnership.

This Living Wage resolution was rejectedby roughly five out of

every six of the Sainsbury’s investors that voted on the resolution

at the company’s Annual General Meeting on July 7, 2022. To

understand how and why this measure failed to gain acceptance,

it’s useful to start by noting the difference between The Living

Wage and the National Living Wage, which is briefly described in

the box below.

1Available at https://shareaction.org/news/shareholders-file-living-wage- resolution-at-

sainsburys accessed 16th February 2023.

This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and reproduction in any medium, provided the original work is

properly cited.

© 2023 The Authors. Journal of Applied CorporateFinance published by Wiley Periodicals LLC on behalf of Cantillon & Mann.

Briefing: The Living Wage and the National Living

Wag e

The Living Wage is a non-statutory concept overseen by

the Living Wage Foundation. To receive accreditation by

the Foundation as a Living Wage Employer, companies

must commit to paying not only all directly employed

staff, but any third-party contracted staff providing a ser-

vice for the company, at least the “real Living Wage.”

At the time of the resolution, that amount was £11.05

per hour in London and £9.90 per hour in the rest of

the UK. By comparison, the statutory National Living

Wag e wa s £9.50 for workers aged 23 and over regardless

of location. Those aged 22 and under are subject to the

National Minimum Wage, which at the time ran from

£9.18 per hour down to £4.81 per hour for those under

18 or apprentices.

The Living Wage is calculated on a bottom-up basis

and designed to reflect the amount required to live a

decent life in the UK. By contrast, the rather confusingly

renamed National Living Wage is a statutory minimum

set within a framework that aims to reach by 2024 a

government target of two-thirds of median UK earnings.

The rate of progression is set based on guidance from a

statutory body called the Low Pay Commission,2which

takes into account general economic conditions while

aiming to avoid negative effects on employment and the

economy overall. The Commission considers input from

both employers and employee stakeholders in coming to

its recommendation.

2For a detailed description of the Low Pay Commission’s mandate and access to recent

reports see https://www.gov.uk/government/organisations/low-pay-commission accessed 16th

February 2023

8wileyonlinelibrary.com/journal/jacf J.Appl. Corp. Finance. 2023;35:8–15.