Managing our suppliers
Our ability to influence change in social and environmental compliance strongly depends on the type of relationship the Group holds with its suppliers and the volume of orders placed there.
The adidas Group holds direct contractual relationships with its core suppliers who are centrally supervised by Global Operations. These suppliers produce the predominant share of the total sourcing volume of the Group, and can be characterised as our ‘direct supply chain’.
The other part of our product volume is sourced by agents or is made under licence. Agents place orders with their preferred suppliers. Licensees may either place orders directly with their suppliers or use agents as intermediaries. This portion of our sourcing volume is our ‘indirect supply chain’. See our case study on ‘Moving the boundaries’ for more on managing our indirect supply chain.
‘Partner for change’ – managing our direct supply chain
Our strategy is based on a long-term vision of self-governance in our supply chain where suppliers take ownership of their compliance programme. To achieve this, we need to act both as inspectors and advisors – assessing management commitment to compliance and the effectiveness of the programme, and providing help and support to suppliers to ensure success in the long term.
We promote effective human resources, health, safety and environmental management systems as an effective way to internalise continuous improvement, and we have now made implementing a health and safety management system mandatory for all our core suppliers. Strategy development and execution must be in the hands of qualified, committed and capable middle managers who are supported and empowered by senior management. The Lean manufacturing initiative and SEA activities strive to be collaborative and ensure that suppliers establish systems that support fair, healthy and safe work conditions and deliver improved efficiency and productivity.
How we work with suppliers
Over the past ten years, we have continually refined our methods, tools and techniques to promote compliance in our supply chain. The principal cornerstones of our management approach are described below.
Beginning with the foundation of our programme - our Workplace Standards - the following are the steps we go through to manage our supply chain and improve workplace and environmental conditions. [Click image to enlarge - opens new window]
Standards and guidelines – We have had a supplier code of conduct for ten years – the latest version is our Workplace Standards. Based on extensive experience of applying the Standards, we have produced guidelines for our suppliers, which help us to work together to find solutions to problems in the workplace.
Capacity building and outreach – We train our suppliers so they understand the importance of establishing and maintaining management systems and open lines of communication with those concerned about how they operate, such as government officials, local communities or the workers themselves.
We offer training on all key issues including labour, health and safety, and environment – either led by SEA or a qualified external service provider. This training can be customised for a single supplier, or be provided to a number of suppliers in large group sessions. Normally we follow up the training with consultation and progress review activities, to help the factory in achieving its training objectives. We also provide training with other brands that source from the same factory.
Monitoring and verification – We have a dedicated team of auditors which monitors a supplier’s performance against our Standards.
Effective compliance needs committed management that is responsive to feedback. We have refined our auditing approach to be able to close the compliance gap where suppliers are delivering practices in a superficial, opaque and ineffective way.
We also value independent monitoring by third parties because it helps us to improve how we work and adds credibility to our programme. So in 1999 we joined the Fair Labor Association (FLA) in the United States, which is a non-profit organisation dedicated to improving working conditions in factories around the world.
By working cooperatively with companies, NGOs and universities, the FLA developed a workplace code of conduct based on International Labour Organization standards, and appoints accredited inspectors to conduct unannounced factory visits and check if suppliers are meeting the standards.
Rating – We audit our suppliers against our Standards and rate them according to their performance. We use an innovative way to rate the supplier on its ability to deliver fair, healthy and environmentally sound workplace conditions in an effective manner.
Sourcing decision – Rating results are incorporated in the overall supplier rating that informs our decision of which suppliers to use.
- Footwear factory, Thailand
- Our strategy is based on a long-term vision of self-governance in our supply chain where suppliers take ownership of their compliance programme.