Principle 5: Sustainable Costing

Contents

Ensure your price negotiations enable responsible production.

Overview of Principle 5: Sustainable Costing 

The prices you pay your suppliers need to cover all costs of responsible production and enable your suppliers to make a reasonable and sustained profit margin. 

This includes making sure your costing mechanisms allow all labour costs to be covered, including increased wages to reach a living wage.

Principle 5 focuses on sustainable costing by ensuring:

  • Price negotiations are fair.
  • Costing mechanisms enable labour costs to be covered.
  • Increases to wages (e.g. through national minimum wage rises or collective bargaining agreements) are covered by the purchasing company.
  • Rising production costs (e.g. inflation, transport, materials) are reflected in the price paid.
  • The gap between current wages and living wage levels is assessed.
  • Root causes of wages below living wages—including purchasing practices and pricing—are analysed. 
  • Workers are involved in time-bound plans and actions to close the living wage gap.
  • Costing strategies actively support wage increases towards living wages.  

Read Principle 5 of the Common Framework