Adidas Group

Additional comments

We have been using the Fair Factories Clearinghouse (FFC) as the adidas Group’s compliance database since 2006. In 2008, the FFC created a feature to enable its member companies to share factory audit reports, corrective action plans (CAP) and other related documents. We have shared our audit results in the FFC with all the other members since then.

The SEA team has been the leader in sharing the most number of monitoring documents in the FFC and in harmonising CAPs with other brands in shared factories. With the consent of the factory management, the CAPs of the two brands are harmonised into one CAP, which allows the factory to respond to just one CAP instead of two different ones. This saves valuable resources for the factory and for buyers, and creates consistency for everyone. It also reduces the number of audits in a factory as the brands can alternate audit responsibilities between each other and update the harmonised CAP.

In 2011, the SEA team asked the FFC to further improve and simplify its collaboration aspect and the FFC subsequently introduced new specifications to its members by end of 2011. In order to promote collaboration further, the FFC even introduced a new membership model with both “full membership" and “sharing only” membership. In this way companies do not have to be full members to collaborate and harmonise CAPs with other members.

The adidas Group strongly supports the FFC data sharing capabilities because we believe that if there are more companies using the FFC to share audits and to harmonise CAPs, the industry as a whole will benefit.

In 2011, we introduced the FFC to the “Brown Shoe Collaboration” companies. The “Brown Shoe Collaboration” consists of a range of brands within the business and casual footwear segment. Most of them were not FFC members so the FFC provided them with trial memberships for six months to allow them to edit the harmonised CAP in shared factories. We continue promoting the FFC as an industry-wide solution in our interactions with other brands, federations and initiatives including the World Federation of Sporting Goods Industry, Better Work, the Fair Labor Association, the Sustainable Apparel Coalition (SAC) and the Global Social Compliance Programme (GSCP).

Furthermore, the SEA team and the FFC have started working with ARTS (Association for Retail Technology Standards) to create an industry-wide solution to interface compliance data between different database platforms. Several other brands, multi-stakeholder initiatives and organisations such as Nike, FLA, GSCP, SEDEX and Better Work are also part of this project. The FFC plays a crucial role in this project and its recognition and visibility within the industry has increased in 2011.

Additional comments

We leveraged industry and sectoral initiatives such as the Fair Labor Association’s Sustainable Compliance Initiative (FLA-SCI), the Fair Factories Clearinghouse (FFC), and the Global Social Compliance Programme (GSCP) to continue calibrating our monitoring methodology, strategic compliance planning tool, and key performance indicators.

The FLA’s SCI methodology focuses monitoring on all of the stages of the employment life cycle, from recruitment through the termination of employment. The adidas Group actively participated in global testing of the SCI tool in the Americas, Asia Pacific and EMEA. We are also working closely with brands like Nike and Philips van Heusen to identify standards for a commonly used set of monitoring question sets derived from the SCI tool. This will further advance the jointly applied monitoring content and practices with up to 100 shared factories.

The SEA Human Resources Management Systems (HRMS) programme was evaluated and harmonised to seamlessly integrate with the SCI methodology. The Fair Wage Assessment project started in 25 factories (4 full assessments and 21 self-assessments in the Philippines, Thailand, and Latin America) and will collect and measure worker compensation practices against 12 wage benchmarks, and identify frameworks that sustainably improve wages. SCI, HRMS and Fair Wage Assessment continue to be thoroughly tested and will be completely integrated into the SEA team’s internal coverage and practice by 2013. See below for more on the Fair Wage Assessment exercise.

We use the Fair Factories Clearinghouse (FFC), a shared compliance monitoring platform that enables us to collaborate on activities in factories shared with other buyers, in other words, to more efficiently engage with factories. In 2011, we shared compliance data in the FFC for 913 of our factories. Additionally, we engaged in 18 collaboration activities directly with other brands, and through Better Work. In many of these cases, we developed harmonised remediation plans with other buyers and established consistent messages for factory management. This clearly set expectations for suppliers to fulfil the benchmarks of the partnership compliance model and move to adopt practices for a self-governing compliance model. We have 93 Self-Governance audits conducted by our 4C and 5C-rated suppliers, FLA participating suppliers, and selected licensees.

In 2012, we will start applying the “Equivalence Process” of the Global Social Compliance Programme. This helps companies and initiatives to benchmark their own systems, tools and processes against agreed best existing practices as described in the GSCP reference tools. A more detailed description can be found on the GSCP website at http://www.gscpnet.com/equivalence-process.html

Additional comments

The 2011 milestones were direct actions with the supply chain to achieve 2015 targets of 80% of our strategic Tier 1 suppliers reaching a 3C KPI rating and 25% of them to take direct responsibility for their own social compliance performance. The 2015 targets for collaboration and partnerships with multiple stakeholders (multi-stakeholder initiatives, brands, and local civil society) included work in 2011 to find resolutions in several factory reports – Ocean Sky, Style Avenue, PT Kizone. The Fair Wage project rolled out in five countries supports the 2015 target that strategic suppliers transparently report on sustainability performance.

Stakeholder partnerships and collaborations

In 2011, we worked closely with the Fair Labor Association and other brands to refine and finalise the Sustainable Compliance Initiative (SCI). The SCI is an innovative approach for assessing working conditions and developing corrective action that focuses on proper and effective human resource management systems. SEA staff participated in pilot testing of the tool with suppliers in China, India, El Salvador and Bulgaria. Team members attended training to assess the value of the systems and practices in the workplace, including identifying the item to be assessed, and then evaluating that item in a way that leads to sustainable recommendations and remedies.

The SEA staff participated in developmental working groups with the Fair Factories Clearinghouse’s new programme (ARTS) to seamlessly share compliance data, and the Sustainable Apparel Coalition’s Sustainability Index content for the environment and social compliance.

Notable collaborations with other brands included work on the FLA–SCI, and an increased number of corrective action planning with factories shared with another sports brand. Shared corrective action planning is rolled out in seven countries – Indonesia, Vietnam, Turkey, Egypt, Brazil, Honduras, and Mexico. Ongoing efforts in partnerships with eight other brands in the “Brown Shoe Collaboration” continued for the third year, with the development of common corrective action plans for multiple shared factories for a large scale shoe supplier in China. The collaboration also expanded coverage by looking at opportunities to set common standards and approaches for the safe use of chemicals.

Active engagements with local civil society, other buyers and regulatory authorities led to prompt and successful resolution in the Ocean Sky and Style Avenue factory cases in El Salvador.

Fair Wage pilot

The Fair Wage approach is based on assessing 12 complementary Fair Wage benchmarks to gain a complete overview of wage practices at the enterprise level and to identify remedial needs. Different Fair Wage tools capture the different aspects of the wage story in the enterprise and provide findings that are reliable and robust. These include an online questionnaire for managers, a table of statistics on wages, employment and company performance, quantitative interviews of workers and qualitative surveys of a few selected companies. In 2011, three suppliers in the Philippines and one supplier in Mexico started full Fair Wage assessments, and 21 suppliers in El Salvador, Brazil, Thailand and China worked on Fair Wage self-assessments. In Q3 2012, a consolidated Fair Wage Assessment report will be completed and given to the adidas Group and the four factories which completed full assessments.

The opportunities in the Fair Wage project will help individual suppliers, as well as the adidas Group, to identify the management practices required in Fair Wage dimensions. The assessments evaluate compliance with legal wage provisions, wage levels and wage adjustments, and set a series of wage policy recommendations. These recommendations encompass the quality of pay systems, their fairness and efficiency, as well as the strength of communication and social dialogue.