Focus 2007 – Moving the boundaries

Our approach to managing compliance in our indirect supply chain

With the acquisition of Reebok and the merger of both brands’ supply chains, the adidas Group supply chain has become more complex. While significant progress was made in consolidating the number of suppliers, and a major share of the Reebok brand supply chain has been brought under the direct management of Global Operations, some business entities of the adidas Group follow their own sourcing arrangements. Normally, these business units do not establish direct supplier relationships but source products through intermediaries such as agents.

Furthermore, new market opportunities for certain product categories are exploited through agreements with licensees who independently manage production.

This development prompted us to refine our existing compliance model and to pursue an approach that seeks to provide all of the following equally:

  • Continued support to our core suppliers and Global Operations in their efforts to achieve self-governance
  • The necessary supply chain oversight and transparency within the indirect supply chain
  • Effective risk management by prompting business entities and licensees to become accountable for their supply chains.

In 2007, we have taken the following steps to respond to the challenges we face in managing our indirect supply chain.

Launch of Group-wide policies and procedures

As mentioned, mandatory core policies and procedures were issued to all adidas Group entities and include:

  • adidas Group Workplace Standards – our Group-wide principles for fair, safe and healthy working conditions in our supply chain
  • Factory Approval Policy, which describes the procedures for getting SEA authorisation for all production and suppliers for the Group
  • Enforcement Guidelines, which describe the approach to enforcement of the Workplace Standards with our suppliers
  • Termination Guideline, which describes our approach to ethical termination of suppliers
  • Fair Factories Clearinghouse procedure, which describes the responsibilities for disclosing and maintaining data in the Group’s supply chain database.

External monitoring practices

Business entities are obliged to commission external audit firms to carry out initial assessments in their supplier factories. After an in-depth review of the quality of external monitoring services available in key sourcing countries, a list of preferred external auditing firms was developed. Business entities or licensees can choose external monitors from this list.

We developed detailed guidance so external monitors could conduct assessments in a consistent way. Where these assessments identify the need for remediation processes, these are then overseen by the SEA team.

Strategic compliance plans as report card

Since 2007 business entities and licensees have been required to submit strategic compliance plans to SEA on a regular basis. These plans outline their strategies, programmes and action steps to ensure compliance in their supply chains. The compliance plans help us track and evaluate the commitment and effectiveness of our business entities’ management in ensuring sound compliance practices.

In 2007, strategic compliance plans were developed with twenty business entities.