In global supply chain context, the Living Income (LI) concept is increasingly recognised as a key indicator for understanding poverty. It has grown importance particularly when it comes institutional due diligence, such as the EU Deforestation Regulation and Corporate Sustainability Due Diligence Directive, and private sector sustainability programmes. Yet, several methodological questions still surround the use of this LI concept. How can we establish credible benchmarks cost-effectively? How do we measure household income rigorously at scale? And how do we ensure alignment across sectors and regions?

What is Living Income and why does it matter?

A LI is defined as the net annual income a household needs in a specific local setting to provide a decent standard of living for all its members (LICOP, 2023). It goes beyond simply measuring poverty — it looks at what families actually need to live with dignity and comfort, not just to survive. According to the widely accepted and well-known Anker and Anker (2017) methodology, a LI benchmark is calculated by summing the yearly costs of a nutritious diet, decent housing, other essential needs (such as education, healthcare, transport, clothing, etc.), and a small buffer for unexpected expenses. 

This benchmark is valuable for designing various interventions to improve smallholder farmers’ living standards across different value chains. It also helps identify which actions or interventions are most effective in closing the gap between what farmers currently earn and what they need for a decent life. 

This is why it is necessary to have a credible LI benchmark for designing and implementing relevant programmes aiming at closing the LI gap. Equally important is a comprehensive Monitoring, Evaluation, and Learning (MEL) plan with robust indicators for measuring income levels to properly evaluate the impact of these interventions. In a context of limited and competing resources, striking a balance between the methodological requirements and various actors’ needs for practical and scalable solutions is critical. 

Setting robust and comparable Living Income benchmarks cost-effectively

To construct an LI benchmark, the Anker methodology is considered the gold standard. But the approach used is very data-intensive and costly, as it requires, on average, a minimum of 60 person days for a full-fledged study, including primary and secondary data collection, compilation, and validation of findings (Bhattacharyya, 2018). As a result, only 40 LI benchmarks have been computed by a handful of organisations so far. Beyond the limited number of available benchmarks, the question around their update, and comparability across different sectors, regions, and/or countries is still open for debate. Institutional actors like the ILO and FAO are taking on initiatives to support the development of robust methodologies and foster their use.

Building on a set of criteria developed by the LICoP (Living Income Community of Practice), we published in June 2025, “A Comparative Review of Living Wage and Living Income Benchmarking Approaches”, to better understand which benchmarking approach is most suitable for different cases and contexts. In this paper, we selected the five leading benchmarking methodologies with publicly available documentation (excluding the Anker approach). The goal is not to assess the quality of these methodologies but rather to offer a comparative overview and facilitate users’ decision-making when selecting one.

Earlier, in 2024, we built the LI benchmark and LI Reference Price (LIRP) for the cocoa sector in Sierra Leone. The study, commissioned by the International Finance Corporation (IFC) as part of its effort to support the cocoa sector in Sierra Leone, used a smart combination of carefully selected secondary data points with rigorous primary quantitative and qualitative data collected across fifteen chiefdoms in the districts of Kailahun, Kenema, and Kono. The resulting LI benchmark aligns with LICOP criteria, and the LIRP is referenced by Fairtrade International on their reference price map. 
We plan to release an official guidance document detailing the approach used in this study by December 2025. It can be used in full to construct a new LI benchmark and assess the LI Gap in a certain geographical area, while also estimating a LIRP for a given value chain. Alternatively, parts of the tools can be used for a lean adaptation of an existing benchmark to a different context. 

Measuring household incomes for effective monitoring and rigorous impact evaluation

Once a LI benchmark is obtained and interventions have been designed, the next point of attention consists of estimating household total net income. Indeed, to track the progress in closing the LI Gap and understand which interventions are the most effective, it is crucial to have all income streams mapped out — from farming, non-farming, and other sources.

For more than a decade, KIT Institute has been working on these topics, especially within the cocoa and coffee value chains. It started with reference studies such as “Demystifying the Cocoa Sector in Cote d’Ivoire and Ghana”, and methodological guidelines and protocols such as “Guidance Manual on Calculating and Visualizing Income Gap to a Living Income Benchmark”, and “Connecting on Support for Living Income Activities”. More recently, our Impact Economics team has been recognised for conducting rigorous impact evaluation for numerous programs aiming at solving pressing issues within the cocoa value chain (closing the LI Gap, combating child labour, adopting sustainable farming practices, etc.). From pilot projects (EnRoute project in Cote d’Ivoire and Togo) to large-scale programs (Nestle Income Accelerator Program), we collected extensive data to assess farming households’ income and living income gaps. In addition, we build robust analyses to identify drivers of income and pathways to close the living income gap, including via segmented approaches. Building on these experiences, we actively contribute to the initiatives for harmonising the approaches to measuring cocoa farming households’ income. With the publication of the Cocoa Household Income Study (CHIS) methodology and the share of the KIT Cocoa Living Income Questionnaire, we provided the sector with detailed guidance on how to effectively capture robust and comparable measures of household income.

Contributing to the ongoing debates and alignment initiatives

As a frontrunner in the Living Income field, KIT Institute plays an important contributing role in research, methodology, and collaboration. Additionally, we have also been acting as a thought leader within the cocoa and LI communities. Indeed, within LiCoP, co-hosted by GIZ, ISEAL, and the Sustainable Food Lab, we have seats in the Technical Advisory Committee (TAC) and the Advisory Board (AB). As such, we participate in the debates about alignment and transparency in the sector. We also support other initiatives, such as the Fairtrade Stakeholder consultation about the LIRP or the IDH’s cocoa income inventory. We invite organisations working on Living Income to engage with our methodologies and collaborate on building the evidence base needed to truly close the gap for smallholder farmers.
 

If you would like to learn more about Living Income Work, please contact our advisor Oumou Diallo.