Adidas Group

During 2010, 1,451 factory visits (including 1,350 factory audits) involving management and worker interviews, document review, facility inspections and training sessions took place at different levels in our supply chain. The SEA team conducted 193 training sessions and workshops for suppliers, licensees, workers and adidas Group employees.

For 2010, the total number of training sessions conducted by SEA was lower than in the previous two years. The number of fundamental and performance training sessions was reduced, whereas sustainability training sessions increased slightly. Although the total number is lower, the number of participants has remained almost the same.

Reasons for this were:

1. There were less individual but more group (i.e. more than one supplier) training sessions undertaken that offer both higher efficiencies but also the added advantage of cross-learning and best practice sharing among suppliers.
2. Due to longer term and more mature business relationships, the need for more sophisticated and advanced trainings (sustainability training sessions) was achieved.

In 2010, the SEA team conducted 1,350 social compliance audits (including external monitoring audits). The total number of Initial Assessments - this first approval stage for new entry factories - and Performance Audits for our established suppliers was fewer than in 2009. In addition to these audits, suppliers' sites were the subject of multiple other visits by compliance staff to discuss specific remedial issues, to follow up project work or conduct training sessions.

Completing a high volume of Initial Assessments remained a challenge in 2010, particularly in Asia where new factories were proposed in more remote locations and a wide range of countries. There was a total of 447 Initial Assessments, of which 79.4% were in Asia, with China accounting for 33.8% of all assessments conducted. Overall 20.8% of candidate factories were rejected either out rightly, or for failure to remediate threshold issues in a timely manner. See also data on Termination and Rejections.

Audits conducted by external monitors were commissioned by adidas Group entities, including licensees with indirect sourcing models.

In total, there was audit coverage of 58% of all active suppliers. The audit coverage of all active suppliers in region Asia was 74%, with countries like China, India, Indonesia, Thailand and Vietnam showing more than 80% audit coverage.

The progress increase in audits from 181 in 2008 to 276 in 2010 reflects the increased participation of licensees in the SEA approved external monitoring system as well as an increased level of audit uploads to the FFC platform and subsequent audit maintenance.

The lower number of Initial Assessments and higher level of Performance Audits indicates a fewer number of new entries to the supply chain, and more in-depth compliance work being undertaken with existing suppliers.

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. The following table shows the average audit score by unit of measure for those active core suppliers that were rated against the six units of measure in the KPI to date. Each unit of measure is scored out of 100 percent.

In general, new factories that become part of our supply chain get low KPI scores which negatively affect the overall average KPI score. Relatively stable scores indicate that existing suppliers received higher KPI scores in 2010 compared to the previous years.

Since joining the FLA in 1999, more than 250 Independent External Monitoring (IEM) audits and verification visits have been conducted at adidas Group suppliers. The number of conventional independent monitoring visits conducted by FLA accredited monitors has gone down because more of the conventional IEM requirements of the FLA have been redirected to an engagement in value-added FLA projects focused on reducing and eliminating chronic non-compliance issues or improving monitoring methodologies.

In 2010, FLA activities included four independent external monitoring visits. Four factories participated in FLA 3.0 exercises and one factory received an external verification visit. Seven factories participated in FLA special projects in Asia, EMEA and Central America. These so-called re-directed audits are FLA participating company engagements in specific project work that addresses resolution of chronic compliance issues in the global workplace and the development of new auditing tools and methodologies, such as the Sustainable Compliance Initiative, which will standardise labour, health and safety monitoring across a number of participating brands. Re-directs are substituted for independent external monitoring visits to factories. This substitution option is only available to FLA-accredited programmes. The term derives from the 're-direction' of IEM fees to financially support specific project work by the FLA to address chronic compliance issues.