As due diligence expectations rise across global supply chains, collaborative initiatives like the Living Income Community of Practice (LICOP) are helping businesses turn living income commitments into practical action. In partnership with SHIFT, LICOP has developed practical guidance to help companies identify and address living income risks as part of human rights due diligence. 

For companies working across global supply chains, living income is becoming harder to treat as a voluntary add-on. As due diligence expectations evolve, attention is shifting to how it is addressed in practice.

Ensuring producers can earn a living income and achieve a decent standard of living should sit at the centre of sustainability efforts. This requires companies to move beyond high-level commitments and demonstrate how they identify, prioritise and address this as a salient human rights issue within their operations and value chains.

The challenge now is operational. Businesses are increasingly focused on how to embed living income within their due diligence systems, from identifying where risks are most severe to taking action that leads to measurable improvements in producer livelihoods.

To understand why living income belongs in human rights due diligence, it’s important to consider its connection to internationally recognised human rights. Under the United Nations Guiding Principles on Business and Human Rights (UNGPs), businesses are expected to respect these rights. The Living Income Community of Practice (LICOP) defines living income as the net annual income a household needs in a given context to afford a decent standard of living for all its members. This includes food security, water, housing, education and a buffer for unexpected events. Without it, other human rights are harder to realise.

Where business practices contribute to persistent income gaps, companies risk undermining the right to a decent standard of living. This is why living income needs to be explicitly addressed in human rights due diligence (HRDD).

However, living income is not an end in itself.  It is a stepping stone towards a decent standard of living and the reduction of poverty and a multi-dimensional concept, linked to broader social and environmental goals. This is particularly evident in agricultural supply chains, where smallholders often face significant income gaps and heightened vulnerability to shocks.

According to the Fair Trade Advocacy Office (FTAO), smallholder farmers include small-scale farmers, pastoralists, forest keepers and fishers managing between one and 10 hectares. Together they supply over 35% of the world’s food, yet they are disproportionately likely to live in poverty. Many already face insecure livelihoods, tight margins and exposure to climate and market shocks, with persistent income gaps increasing vulnerability to human rights risks, including forced labour, child labour and unsafe working conditions.

For companies, this is not only a social issue but a material supply chain risk. Where producers cannot earn a living income, supply may become less stable, quality can suffer and the likelihood of disruption increases.

Integrating living income into procurement and supply chain decisions can help strengthen smallholder livelihoods and support more resilient supply chains. Increasingly, this is becoming part of a company’s licence to operate, with businesses expected to show how they address living income in a structured and credible way through procurement practices and human rights due diligence.

LICOP partnered with SHIFT to develop the Technical Guidance on Due Diligence for Living Income, helping companies identify human rights risks linked to low incomes and providing a practical starting point to prevent and address adverse impacts on farmers and their families. Grounded in the UNGPs, it sets out a risk-based approach that businesses of any size can use across sectors.

A first step is to identify living income as a salient human rights risk, meaning one where the potential impact is most severe in connection with company’s activities or business relationships. In practice, this involves identifying which commodities and geographies present the greatest risk.

This shifts how success is measured. The focus moves to whether company actions are helping to close income gaps in practice, through changes in business practices and behaviours, supplier relationships or collaborative initiatives. It also requires a more holistic approach, with living income embedded across corporate governance and supplier relationships.

No single actor can close the living income gap alone. It requires systemic change across multiple stakeholders, each with a role to play. Companies are expected to use their leverage, that is, their ability to influence the practices of other parties linked to adverse human rights impacts, to address income gaps and strengthen livelihoods across their supply chains. This may include supporting commitments to minimum or living income reference prices at sector level, recognising that price and purchasing practices are often key drivers of income gaps.

LICOP, IDH and the VOICE network convened a workshop to explore how companies can use the guidance to initiate, scale, or strengthen efforts to close income gaps within supply chains. Participants highlighted key barriers including siloed working, limited board-level buy-in, weak cross-departmental integration and regulatory uncertainty.

For this approach to succeed, living income needs to be embedded across a business, with sustainability, programme, legal, compliance and procurement teams aligned around shared goals. The workshop also highlighted differing team priorities, and the need for clearer internal business cases if companies are to prepare effectively for CSDDD implementation from 2029.

Governments play a crucial role in shaping the policy environment and embedding supportive practices in law. In February, LICOP and the FTAO convened a high-level roundtable at the European Parliament, hosted by MEP Saskia Bricmont to explore how risk-based due diligence can be reflected in corporate sustainability legislation to advance living income.

LICOP presented its guidance for companies, while FTAO launched Guidelines for a Living Income: Fair Recommendations for Living Income Guidance in the Corporate Sustainability Due Diligence Directive. The resource is intended to support the European Commission and regulators in clarifying expectations for legal compliance under the CSDDD, and underscores the need for greater coherence across legislation, corporate processes and reporting mechanisms to enable companies to navigate this transition effectively.

As companies begin to apply the guidance, the next phase will focus on shared learning about what effective living income due diligence looks like in practice. Designed as a living document, it will continue to evolve, informed by practitioner feedback, including insights on gaps, emerging issues and practical examples, case studies and reflections.

The guidance is part of a broader effort to help businesses move from commitments to measurable progress, strengthen credible systems and enable more collaborative action on living income. Supporting smallholders requires systemic action and this guidance clarifies the role companies can play in improving livelihoods and enable a decent standard of living.