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Overview

Challenges and Responses

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Stakeholders

Supply Chain

Environment

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Challenges and responses

We aim to be the best sports company in the world and that means meeting the challenges we face head on and finding the appropriate responses to them. Our challenges are:

• Being a global business

• Being competitive

• Managing an external supply chain

• Building credibility and trust

• Managing change

• Being environmentally responsible

• Developing our people

• Supporting local communities

Being a global business

Our brands are visible all over the world but that visibility creates its own challenges. For example, our role as official partner to the 2008 Beijing Olympics means millions of people saw our brands in action. However, our presence in China – where we have many suppliers and retail outlets – means we are also in the spotlight when China’s economic growth is cited in discussions about the impacts of globalization on people and the environment.

Response
We accept that increased scrutiny of our business practices is in part a result of our own efforts to raise the profile and reach of our brands across the world.

Like any global business, the adidas Group must manage wide-ranging commercial and competitive pressure to deliver increased financial returns and growth. At the same time we are accountable for our employees and have a responsibility towards the workers in our suppliers’ factories and also for the environment.

We are committed to striking the balance between shareholder interests and the needs and concerns of employees and workers and the environment, or in short to becoming a sustainable company.

For more, see the Vision and governance section.

Being competitive

Being competitive requires we respond to consumer demands for a broad range of products. This in turn means we need a wide variety of suppliers. Ensuring consistent compliance with our social and environmental standards across this broader and more complex supply chain is a challenge.

Response
Our Workplace Standards are based on the International Labour Organization (ILO) and UN conventions relating to human rights and employment practices. The Workplace Standards are fundamental to our relationships with our suppliers and are a contractual obligation.

In 2007 we rolled out our policies to all adidas Group entities to ensure adherence to the principle ‘One Group – One set of standards’. These policies contain uniform and mandatory procedures related to disclosure of suppliers, approval of new suppliers, enforcement actions and termination practices.

For more, see the Supply chain section.

Managing an external supply chain

Most of our products are manufactured by suppliers under contract to the adidas Group. Outsourced production is not without its risks. We have less control over how our suppliers operate and the conditions at their factories than we do at company-owned sites.

Response
Within our core supply chain we act as both inspectors and advisors, assessing management commitment to our Workplace Standards but also training our suppliers on the key issues.

Our strategy is based on a long-term vision of self-governance for our suppliers and focuses on:

		Encouraging our business partners to establish a management systems approach to human resources and health, safety and the environment

		Training and advising our suppliers’ workers and managers

		Raising environmental awareness and promoting best environmental practice, and

		Expanding our engagement with local worker organisations and NGOs to better understand working conditions in places where our products are made.

For more, see the Supply chain section.

Building credibility and trust

The adidas Group has its own internal team for assessing how well our suppliers are complying with our supply chain code of conduct, the Workplace Standards. Some people question how impartial an internal team can be, and they call for us to publish the results of our assessments and to involve independent third parties in investigating and verifying supplier performance.

Response
We value transparency and stakeholder feedback. We report regularly on our compliance work, including the location of our suppliers globally. We also submit our programme to evaluation and public reporting by the Fair Labor Association, a non-profit organisation which assesses and verifies the compliance programmes of brands and publishes the results. Moreover, we continue to practise full disclosure to researchers, trade unions and other concerned NGOs, based on their specific requests. A practice we have followed for more than a decade.

We are also work collaboratively with our suppliers, labour activists, academics and others because we believe that working closely together demonstrates our commitment to meeting stakeholders’ concerns and creating lasting change in factory and environmental conditions.

For more, see the Stakeholders section.

Managing change

As a company we do not act in isolation: we have to react to economic and social developments in the countries where our products are made. For example, we have had to adapt our programme in the face of worker strikes in Vietnam, factory closures in Indonesia and new legislation in China.

Response
Integrating our standards into our day-to-day operations lies at the heart of our ability to respond to these developments. The ‘Social and Environmental Affairs’ (SEA) team was created in 1997 to ensure supply chain compliance with the Workplace Standards. To make this a part of normal business practice, SEA team members are located near our suppliers and work closely with the Global Operations group, which is responsible for developing and sourcing products from suppliers.

To drive change in supplier behaviour and practices, the results of supply chain compliance performance must inform the Global Operations group and other supply chain decision-makers. So the Workplace Standards are an integral part of the manufacturing agreements the Group holds with its business partners. And the Global Operations group refer to our suppliers’ performance against our Standards when deciding which suppliers to select and retain. In this way, we are driving change in the way our suppliers do business.

For more, see the Supply chain section.

Being environmentally responsible

Our products must be competitive in function and price but also safe. Manufacturing products must be done with the least environmental impact without compromising function and quality. And we have to be efficient in our use of resources but also fully support our global business. The challenge is to balance these various demands.

Response
Reducing pollution with so-called end-of-pipe solutions offers only limited environmental benefits, so we strive to design out environmental problems by:

		Complying with all legal local laws and regulations

		Applying best practices at our own sites and operations

		Ensuring product materials and components are non-toxic and safe

		Promoting environmental management systems and best practices in the supply chain, where major environmental impacts occur

		Integrating environmental aspects in the product design and development process, which led to the Spring 2008 launch of our ‘Grün’ range, which uses recycled materials and has been made with the least possible environmental impact.

For more, see the Environment section.

Developing our people

We operate all over the world, and have to mirror the global marketplace with a multinational workforce. Our challenge is to recruit, retain and develop this diverse group of employees so they achieve their full potential.

Response
The success of the Group is a direct result of the engagement of the people who work for us. We strive to be the best and most productive workplace in the industry by:

		Creating a working environment that stimulates team spirit and passion, engagement and achievement

		Instilling a performance culture, based upon strong leadership

		Fostering an understanding of social and environmental responsibility for the world in which we live – for the rights of all individuals, and for the laws and customs of the countries in which we operate

		Providing a secure working environment.

For more see the Employees section.

Supporting local communities

Our business has an impact on communities all round the world. We need to understand local needs and design programmes that are core to our business strategy and make a real difference to people’s lives.

Response
The adidas Group has adopted a largely decentralised and brand-oriented model for community involvement, recognising that people in our regional subsidiaries and Group entities best understand the needs and cultural sensitivities of their local communities. These initiatives derive from the brands’ individual identities and values. They may vary in form, but they are all aimed at supporting children and young adults, with sports as a common theme.

At Group level we continue to support our suppliers’ communities, as well as make contributions to organisations that promote sustainable development practices within the industry.

For more, see the Community section.