DEG describes the development effects it supports using the five dimensions of its own Development Effectiveness Rating (DERa). The impact dimension of “Decent jobs” aims to measure the employment impact of DEG’s financing business. The DERa takes into account both the number of jobs created and compliance with ILO core labour standards and IFC performance standards, since DEG believes that the quality of jobs is just as important as their number. The audit of social standards is mainly aimed at preventing and mitigating serious social risks, such as preventing child or forced labour or paying minimum wages. This approach is usually referred to as the “do-no-harm principle”. It focuses mainly on compliance with national and international minimum standards for decent work.
With its new impact and climate strategy, DEG has set itself the goal of providing even more intensive support to its customers with their sustainable transformation. With regard to working conditions, it seeks not only to minimise risks in developing and emerging countries, but also to help improve the quality of employment at the same time. To this end, it aims to assist customers with the planning and implementation of suitable measures – including, for example, healthcare, training and upskilling, improved career development opportunities or initiatives for greater job security. Improving the quality of employment for DEG customers can help reduce operational, financial or reputation risks. Furthermore, better-quality employment leads to higher productivity and better product or service quality. There is less absenteeism, work is done with greater precision, there is more innovation, and as a result the business grows more strongly over the long term, representing a win-win for employees and the company.
As part of a jointly commissioned study, the Development Bank of Austria (OeEB) and DEG have examined the topic of “job quality” and reviewed the current international state of knowledge.
The study examined job quality* on the basis of six sub-aspects and one cross-cutting issue:
Income and prosperity
Qualifications and career prospects
Terms of employment
Work-life balance and intrinsic characteristics of work
Health and well-being
Representation and participation
Gender equity as a cross-dimensional aspect
* The conceptualisation of these six dimensions is based primarily on the work of the OECD, the ILO and the Global Impact Investing Network (GIIN).
The results of this study will be used in future to further develop DEG’s financial products and services as well as accompanying advisory services. The aim is to increase DEG’s contribution to its customers’ transformation towards an even greater development impact, and to consolidate DEG’s role as a strong and resilient partner for achieving the SDGs.
DEG has stepped up its commitment to some of the issues relating to job quality in recent years. For example, DEG is among the DFIs that helped to launch the 2X Challenge and the 2X Collaborative in 2018. The 2X Challenge aims to create an alliance of willing DFIs and to consolidate and step up the commitment to greater gender equality and increased economic participation by women. The focus is primarily on facilitating access to finance and financial services for female-led businesses, businesses owned by women, or businesses whose products and services are specifically targeted at women, and that are based in developing or emerging countries. Compliance with or attainment of these standards is assessed using the 2X Investment Criteria. These have now become established as a new global standard and strategic framework in development finance. Since the 2X Challenge began in 2018, DEG has contributed a total volume of around EUR 1.36 billion.
Another job quality issue to which DEG is devoting increased attention is that of the “living wage”. In many developing and emerging countries, but also some industrialised countries, the statutory minimum wage is often not enough to satisfy basic needs. Instead, people are living from hand to mouth or in poverty because they cannot cover those basic needs with the pay they are receiving. Under its development policy mandate, DEG therefore aims to support its customers during their transformation in order to combat poverty and increase economic equality and prosperity. DEG uses established approaches such as the Living Wage Road Map of the IDH Sustainable Trade Initiative to obtain information about regional, national or local living wage levels. According to the Global Living Wage Initiative, a living wage is what an individual needs to pay for their basic needs and those of their family after a week’s work. The DEG investment programme AfricaConnect published a new impact strategy at the beginning of 2023. A key part of this impact strategy is to reward entrepreneurial commitment to social issues that goes beyond the minimum legal requirements. Before an investment is made, a check is carried out to see whether a company already pays its employees a living wage, or is willing to reach a binding agreement with DEG on a specific development path to close the pay gap with the living wage. If the company meets either of these criteria, DEG grants interest rate subsidies on the planned loans.
Invested volume (in EUR): 14m
Agrofruit grows, distributes and sells tropical fruits, mainly conventional and organic bananas, and exports them to more than 20 countries, including the United States, Mexico, Guatemala, Ecuador, Peru, Panama, the Netherlands, the UK and Germany. The company is part of AgroAmerica, a group founded in Guatemala in 1958, which currently employs around 13,000 people. The company’s philosophy is based on the business model of “doing well by doing good”. This is expressed in a clear focus on social and environmental sustainability for customers, employees and the surrounding communities. In terms of the quality of employment for employees, in 2011 the company made a commitment to gradually close the gap between what it was paying at the time and a living wage. The company calculates the level of the living wage for agricultural jobs using the IDH Salary Matrix (https://www.salarymatrix.idhtrade.org). The results of Agrofruit’s internal living wage calculations show that there are no longer any gaps between the wages paid and the regional living wage. Agrofruit thus ensures that it pays a living wage to all employees. DEG has been financing Agrofruit since 2014, thereby supporting a pioneer in employment quality for its work team.