Challenge: Managing change
As a company we do not act in isolation. Our business strategy and social and environmental programmes need to respond to multiple economic and societal developments in key sourcing countries.
External factors such as rising energy prices or the emerging labour shortages in key sourcing regions require both our sourcing strategies and suppliers to be very adaptable in order to manage these risks and achieve growth.
While economies in major sourcing countries are further maturing, we still see shortcomings in their social infrastructures. Recent cases of factory closures in Indonesia and the subsequent plight of the workers once more showed insufficient social safeguard measures taken by the government.
A number of strikes occurred in factories in Vietnam in 2007. These events indicate that workers are increasingly comfortable with collectively expressing their demands, particularly with respect to wage concerns. We noticed factory management needed guidance on conflict management and good faith negotiations practices in order to reach acceptable solutions for both parties and worked closely with the ILO in the development of such guidance.
China's new Contract Labour Law and other legislation related to the prevention of water pollution and clean production are signs that the Chinese government wants to tackle the challenges their country faces. We encourage our business partners to establish effective management systems to be prepared for integrating these new laws into their daily operations. We have also organised specific training sessions for our suppliers and invited local experts to answer their questions on the application of these new laws.
We will continue to diversify our sourcing portfolio across all product types. Countries such as China, Indonesia, Vietnam and India will remain our primary sourcing regions. In the medium term, our plan is to reduce the proportion of the sourcing volume in China by increasing capacities in other countries such as Indonesia, Vietnam and India.
Response: Integrating standards into day-to-day operations
The establishment of the 'Social and Environmental Affairs' (SEA) corporate function in 1997 was a landmark in the integration of sustainability principles into the global adidas Group organisation. SEA consists of 62 experts that are tasked with ensuring supply chain compliance with the Workplace Standards and with managing the wider corporate responsibility activities of the Group. The SEA Team members are located near our suppliers and collaborate closely with the Global Operations group, which is responsible for developing and sourcing products from suppliers.
For more see the Social and Environmental Affairs Team section.
To drive change the results of supply chain compliance performance must inform the Group's Operations team and other supply chain decision-makers. The Workplace Standards are an integral part of the manufacturing agreements the Group holds with its business partners as well as of the Global Operations factory rating system, and they ensure that customer demands are met - and competitive advantages achieved - in a responsible environment.
To track factory compliance performance within our core supply chain and to support supplier selection and retention by our Sourcing organisation, we use a Key Performance Indicator (KPI).
After a comprehensive period of field-testing and stakeholder consultations, we now fully apply this innovative approach to measuring how well our suppliers are complying with our Standards. This KPI assesses the effectiveness of suppliers' activities at delivering safe, fair and environmentally sound workplace conditions.
For more on this, see Managing our supply chain.
- Our business strategy and social and environmental programmes need to respond to multiple economic and societal developments in key sourcing countries.