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Critical Issues

A number of topics are of special interest to our stakeholders. These range from fair wages, child labour and freedom of association to health and safety and chemical management.

VULNERABLE GROUPS

Although everyone’s human rights and fundamental freedoms must be respected and upheld, particular attention must be given to vulnerable groups, minorities, or those whose circumstances open them up to exploitation or the abuse of their rights. It is for this reason that we have developed specific programmes and initiatives to address topics such as child labour, migrant labour, trafficking and forced labour, and women’s rights. These initiatives are summarised below.

CHILD LABOUR

According to the International Labour Organization, child labour is often defined as “work that deprives children of their childhood, their potential and their dignity, and that is harmful to physical and mental development”. This includes work that interferes with children’s schooling. Our Workplace Standards state that our suppliers must not employ children less than 15 or less than the age for completing compulsory education, if that is higher than 15.

Our policies on child labour have always been centred on a concern for the child and protecting their interests, as well as recognising the importance of income to support households and schooling. Although cases of child labour are now a rare occurrence in our main supply chain, we do have very developed approaches to dealing with cases of child and juvenile labour, should they arise. Any finding of child labour would require a supplier to pay an ongoing wage to the family of the child labourer and for the child to return to school until they are of a legal age to work. They must then be offered re-employment by the supplier, in a role that would not involve excessive hours or hazardous work. In the past, we have often partnered with local NGOs to manage and track such activities, or support in the identification of school options.

The adidas Group Social and Environmental Affairs programme was formed as a result of concerns over the presence of child labour in global supply chains. It was a core area of our work in the late 1990s. The founding director of our programme was a former Director of Save the Children and our policies and practices led the industry. With the growing football stitching industry in Sialkot, Pakistan, we recognised at an early stage the need to address the underlying issues of poverty, employment and access to schooling for children through a combination of educational and social development programmes. For the past 15 years, we have now sponsored education programmes in Sialkot, to improve access to schooling for children from the rural locations where home-stitching was once prevalent. One such programme started as an industry-wide initiative supported by the ILO and UNICEF, establishing an independent child labour monitoring body which is now self-governing. Read more about our involvement in Pakistan.

We are also aware of and concerned by the fact that the sourcing of cotton in certain areas can include child labour. Therefore, we joined an alliance of international investors, brands and non-governmental organisations to fight against government-backed child labour in Uzbekistan during the cotton-picking season. Read more about the pledge we signed calling for the Uzbek government to end forced child labour.

Our requirements in managing child labour, as well as the employment of juvenile labour (those who are of a legal age to work, but under 18) are presented in our Employment Guidelines, which are shared with every supplier and apply equally to all subcontracting relationships.

FORCED LABOUR

The ILO Forced Labour Convention No. 29 defines “Forced Labour” as “work or service exacted from a person under threat of any penalty, which includes penal sanctions and the loss of rights and privileges, where the person has not offered himself/herself voluntarily”.

In accordance with our Workplace Standards, business partners must not use forced labour, whether in the form of prison labour, indentured labour, bonded labour or otherwise. No employee may be compelled to work through force or intimidation of any form, or as a means of political coercion or as punishment for holding or expressing political views.

In a world where modern-day slavery continues to impact tens of millions of people, we have developed a policy to address forced labour and concerns over human trafficking. The adidas Group strictly prohibits the use of any form of forced labour or the trafficking in persons across all of our company operations and in our global supply chain.

MIGRANT LABOUR

We have worked closely with the ILO and non-government organisations to safeguard the rights of migrant workers who have found employment within our supply chain. This has included the development of guidance and industry best practice to eliminate the exploitative actions of middle men and unscrupulous employment agencies, as well as ensuring freedom of movement, equal treatment and proper employment contracts for migrant workers. Details of our policies and guidance can be found in our Guidelines on Employment Standards.

WOMEN IN THE SUPPLY CHAIN

About 80% of the workers employed by our manufacturing partners are women. It is vitally important to us as a company that women workers enjoy equal treatment, including pay, benefits and career advancement and that they are free from discrimination or harassment. In many cases, women employees are of reproductive age, or may have already started a family. Pregnant women and nursing mothers require special consideration and we have developed specific guidance on securing the rights and ensuring the occupational safety of these workers.

We understand that there is a direct link between the health and welfare of women and turnover and productivity levels in our suppliers’ factories. For this reason, we have partnered with external non-governmental organisations to promote women’s reproductive health, that is both pre- and post-natal care. See for example our 10-year programme with Marie Stopes International in Vietnam.

HUMAN RIGHTS DEFENDERS (HRD)

A human rights defender can be any person or group of persons working to promote human rights locally, regionally or internationally. Defenders can be of any gender, any age, from any part of the world and with different backgrounds and different interests. Typically, trade union organisers, environmental interest groups, human rights campaigners and labour rights advocates would be considered to be HRDs.

The threats faced by human rights defenders come in many forms – physical, psychological, economic and social – and involve the interaction of many factors (poor governance, the absence of the rule of law, intolerance, tensions over development issues, etc.) and can be triggered by different actors, both private and state.

The adidas Group has a long-standing policy of non-interference with the activities of human rights defenders, including those who actively campaign on issues that may be linked to our business operations. We expect our business partners to follow the same policy; they should not impinge on the lawful actions of a human rights defender, or on their freedom of expression, freedom of association or right to peaceful assembly.

FAIR COMPENSATION

The idea of a living wage is that workers and their families are able to afford a basic, but decent, standard of living that is considered acceptable by society at its current level of economic development. [1]

Fair compensation goes deeper. It considers the fairness of the wage that a worker is paid  by benchmarking whether wages: are paid regularly and on time, include the legal minimum, allow decent living standards, reflect a worker’s performance and skills, reward overtime, follow price increases paid for the products they are making, are linked to their employer’s profits and sales, reflect changes in work technology, are negotiated individually or collectively with workers, are clearly and formally communicated to workers.

Wages, Benefits AND COMPENSATION

As a responsible business we do not want the workers employed in our supply chain to face hardship in their daily lives. Our aspiration, as set out in the core principles of our Workplace Standards, is that workers earn enough for their basic needs and also have income remaining to cover their discretionary spending as well as savings. We seek business partners who progressively raise employee living standards through improved wage systems, benefits, welfare programmes and other services which enhance quality of life.

The question of calculating and paying fair compensation within global supply chains is complex. Wages are determined by the general economic conditions and cost of living in a country, national laws, the size and availability of its workforce, a worker’s skill level, the nature of the industry or sector and the competitiveness of the employer. We do not determine what factories pay their workers but we oblige employers to pay compensation that is legally required or has been freely negotiated through a collective bargaining process. As a buyer, we influence a factory’s ability to pay its workforce their wages in two ways:

  • in the prices we pay for products;
  • by sourcing and buying those products responsibly.

OUR APPROACH TO FAIR COMPENSATION

Our approach to payment of fair compensation in global supply chains is built on three pillars and aligned with basic human rights concepts.

RESPECT

Do not infringe on the rights of workers, their employers and governments to set fair compensation.

 

As a company we are committed to responsible sourcing practices. Our business decisions and actions do not act as an impediment to wage increases, or to the workers receiving fair compensation. We believe it is the duty and accountability of governments to set minimum wages at a level that reflects the welfare and development needs of society and in accordance with human rights norms and ILO conventions. The legal minimum wage must take into account a country’s general economic conditions, inflationary pressures and the needs of the workers and their families. For years, we have engaged and we will continue to engage with governments who fail in their duty to uphold this basic expectation, and we will call for them to fulfil their international human rights obligation to steadily move wages towards a living wage. [2]

REMEDY

Conduct due diligence and act when business partners are not compliant with the law or our Workplace Standards.

 

For our business partners, our starting point is full legal compliance. We insist on adherence to our Workplace Standards. We demand that our suppliers, as employers, pay the legally required wage and benefits, on time and in full, and we monitor our suppliers to ensure this. We expect there to be equality in pay for men and women. We verify the compliance status of our suppliers through internal and third party audits, worker hotlines and grievance processes. If we find evidence of non-compliance, we recommend remedial steps and actively engage with our suppliers to implement corrective action, drive improvement and prevent further non-conformance. However, where a supplier fails to meet our expectations or take the necessary remedial or preventive steps they will be subject to enforcement action; up to and including termination of the business relationship. Wherever new and higher wages are set (whether through collective agreement or government minimum wage adjustment), we require our suppliers to meet those wages and any other legally mandated allowances and benefits. Our purchase price is adjusted accordingly, within the normal cycle of price negotiations, to reflect our business partners’ costs of doing business. In parallel with this, our business partners are expected to deliver efficiencies and productivity levels that ensure their ongoing competitiveness as suppliers and engage with their workforce to that end.

PROMOTE

Facilitate ways and actions that influence wage progression and fair compensation.

 

The path to improve the general welfare of workers is to promote wage-setting mechanisms which are transparent and have been developed with the direct input of workers. Ideally, this occurs through negotiation or collective bargaining with established and freely elected trade unions, or through alternative legal means, such as workers’ councils or welfare committees. We actively encourage our suppliers to consider and assess the impact living costs have on their employees’ wellbeing, worker turnover and retention levels. A worker’s total remuneration must include the legal minimum wage and mandatory benefits, reward overtime, be paid regularly and on time, and be clearly and formally communicated to workers. But to be truly fair, compensation must also include incentives and rewards, reflect a worker’s performance and skill, follow price increases paid for the products workers are making, be fixed to their employer’s profits and sales, reflect changes in work technology and allow decent living standards.

THE WAY FORWARD

Within each pillar we have a programme of work activities which supports fair compensation and wage progression when workers achieve proficiency, performance and competencies in their jobs. In the last two years, we have deployed wage assessment tools and guidance to two dozen suppliers to progressively pay fair wages. The assessments provided suppliers with measurements of the strengths and weaknesses of the wage-setting system and highlighted the important linkages between pay and skills, pay and company performance and the need for effective social dialogue in the workplace. In the next years, we will align with FLA activities to promote supply chain fair compensation. This includes specific focus on supporting wage influencers such as collective bargaining, responsible sourcing practices, productivity and efficiency improvements and validating the data gathered in interviews with workers and managers. The general programme of activities is described below.

RESPECT
  • Ensure prices that are negotiated and paid recognise the full payment of legally mandated minimum wages and benefits.
  • Ensure the prices paid account for wages negotiated through collective bargaining.
  • Advocate with governments to ensure that minimum wage setting takes into account workers’ living costs.
  • Strive for stable, long-term sourcing relationships with suppliers.
  • Support productivity initiatives and technologies to reduce work hours and improve pay for performance.
REMEDY
  • Regularly audit our supply chain for full payment of compensation.
  • Take enforcement actions when suppliers fail to pay the government-mandated wages and benefits.
  • Take enforcement action when suppliers fail to uphold legally mandated compensation and conditions.
  • Take enforcement when there are breaches of freedom of association and negative impacts on collective bargaining.
PROMOTE
  • Encourage suppliers to improve social dialogue, including participation in collective bargaining.
  • Partner with non-government organisations and specialised institutions which can provide technical insights about wage influencers.
  • Benchmark and measure wage influencers such as productivity and efficiency, performance pay, reduced work hours and collective bargaining with fair wage assessments.

TIMELINE FOR RESEARCH & GUIDANCE ON FAIR COMPENSATION

1998

The adidas Group issues its Standards of Engagement which includes wages and benefit expectations for suppliers

2001

We publish our Employment Standards to explain how wages and benefits (and a range of other labour rights) should be respected and delivered

2003

We commission a two-year study on fair wages in Indonesia, which examines different living wage methodologies

2003

We appoint a leading economist to review the research outputs from the Indonesia Living Wage Study and advise on wage benchmarks for Indonesia

2004

The adidas Group hosts the first-ever MNC-led fair wage workshop bringing together government, manufacturers and trade unions to discuss living wage concepts, wage growth and the impact of wages on employment

2004

We publish a Guideline on Worker Cooperatives to support savings and loans for housing and the establishment of worker food cooperatives

2005

We commission an econometrics study for a cross section of footwear and apparel suppliers in China, which examines wage, productivity and incentive payments for workers

2007

We issue a new set of Workplace Standards which updates the wage provisions and highlights the need for discretionary expenditure and savings

2009

We provide access to selected factories in Asia, as part of the initial research into fair wage concepts conducted by Professor Daniel Vaughan-Whitehead [3] and the Fair Wage Network.

2010

We revise and update our Employment Guidelines, incorporating fair compensation language into our guidance

2011

We engage with the Fair Wage Network to assess the fairness of wages paid by 26 suppliers in seven countries

2012

We extend the Fair Wage Network assessment to a quantitative evaluation of the outcomes from assessments in four suppliers

2013

We share our work and experiences on fair wages at the European Conference on Living Wages, hosted in Berlin, Germany

[1] ILO, 2011, ‘Estimating a living wage: A methodological review’, Conditions of Work and Employment Series No. 29 [2] According to the ILO Committee of Experts (1992), the ultimate objective [of ILO Minimum Wage Conventions] is to ensure to workers a minimum wage that will provide a satisfactory standard of living to them and their families [3] Daniel Vaughan-Whitehead is a Senior Economist with the International Labour Office, Geneva, Switzerland, and a Professor, Sciences Po, Paris, France

Freedom of Association and Industrial Relations

As a responsible business we believe that worker-management communication is vital for the success of any business enterprise. Workers must have access to effective communication channels with their employers and managers, both as a means of exercising their social and economic rights and to help them resolve workplace issues and disputes.

One important channel for worker-management dialogue is through trade union representation. Our Workplace Standards are clear that our supplier partners must recognise and respect the right of their employees to join associations of their own choosing and to bargain collectively. Our business partners must also develop and fully implement mechanisms for resolving industrial disputes, including employee grievances, and ensure effective communication with employees and their representatives.

Our approach to effective workplace communication and ensuring Freedom of Association

A worker’s right to freely associate must be protected and no employee should be discriminated against because of their trade union affiliations. Our approach to effective workplace communication and ensuring Freedom of Association in our global supply chain is built on three pillars and aligned with basic human rights concepts. 

RESPECT

We respect rights, ensuring that our own activities do no harm: The adidas Group recognises and respects the rights of all workers to freely associate, choose their representation in the workplace, and collectively bargain.

 

Effective communication in the workplace is the cornerstone of our social compliance efforts. Therefore, it is essential that employees exercise their right to freely communicate and engage with the management. The adidas Group does not seek to promote, nor prevent, the lawful formation of workers’ organisations, in particular trade unions. Through our engagement with our business partners, we strive to protect the right of employees to make their own choices in this regard, free of unlawful interference, and ensure that employees have a voice in the workplace.

REMEDY

We seek to secure worker rights by monitoring and remediating issues we find and by preventing issues occurring whenever we see opportunities to do so: Our suppliers must recognise and respect the rights of workers to freely associate, choose their representatives in the workplace, and collectively bargain. If we find evidence of non-compliance, we recommend remedial steps and actively engage with our suppliers to help drive improvement and prevent further non-conformance.

 

For our business partners, our starting point is full legal compliance. We insist that our suppliers recognise and respect the right of employees to join and organise associations of their own choosing, to bargain collectively and, when necessary, to participate in lawful strike action. Where the national laws restrict freedom of association, suppliers should take steps to create an open and effective means of communication for employees to discuss issues and express concerns in a positive environment.

 

Through internal and third party audits, worker hotlines and grievance processes, we verify the compliance status of our suppliers. The direct feedback of workers and their elected representatives is a key indicator for us, when checking the implementations of Freedom of Association. If we find evidence of non-compliance, we recommend remedial steps and actively engage with our suppliers to help drive improvement and prevent further non-conformance. However, where a supplier fails to meet our expectations or take the necessary remedial or preventive steps they will be subject to enforcement action, up to and including termination of the business relationship.

PROMOTE

We seek to build leverage and influence. We encourage our suppliers to act in accordance with their own obligations as business enterprises in upholding the UN Guiding Principles: We guide and encourage our business partners to find ways and actions that build good industrial relations, primarily through the facilitation of worker representation systems, the management of employee grievances, and by ensuring effective communication with employees and their representatives.

 

We believe that effective communication between employers and employees is an integral part of good industrial relations and the key to a fair and compliant workplace. We actively encourage our suppliers to establish mechanisms for resolving industrial disputes and employee grievances in a positive environment. These mechanisms should enable open and effective communication with employees and their representatives.

 

For instance:

  • Worker representation system: suppliers should create an environment which permits their employees to choose their own representatives, by common consent or election, and meet with them on a regular basis to help resolve workplace issues and disputes, and where unions have been formed to collectively bargain.
  • Suggestion and grievance systems: suppliers are required to have grievance systems in place where workers can freely and (should they decide to) anonymously post or share any complaints or suggestions they may have. All grievances and suggestions received must be properly considered and responded to in a timely manner.
  • Worker hotline: the adidas Group SEA team requires all authorised suppliers to post a corporate hotline poster in which we encourage employees to raise any concerns or complaints they may have either to the internal communication channels provided by the employer or directly to the SEA team via a corporate email address, postal address or by telephone.

Where we see evidence of governments failing in their duty to properly investigate and protect the Freedom of Association of workers in our supply chain, we will petition them and call for effective remedies. At times we have taken steps to expand the space for the exercise of representative rights.

For example, in Indonesia we were a leading party in a multi-stakeholder process with local trade unions, non-government organisations and suppliers to develop an FOA Protocol – a basic framework for the exercise of trade union rights in the workplace. Elsewhere, we have worked with labour officials, trade unions and suppliers to run FOA awareness training sessions, to strengthen workers’ understanding of their associational rights to form and join organisations of their own choosing and their right of access to trade union representation.

Health and Safety

Workers in factories face risks from fire, accidents and toxic substances. Our Workplace Standards are explicit about the need to protect workers from these risks and ensure they have a right to adequate lighting, heat and ventilation as well as access to suitable sanitary facilities.

Taking a structured approach is the best way our suppliers can ensure workers’ health and safety. So we require them to establish a health and safety management system that adheres to the standards and procedures of the international standard OHSAS 18001.

Through our own monitoring we are aware that breaches of good health and safety practices have historically been responsible for approximately half of all cases of non-compliance with our Workplace Standards. We therefore remain diligent in supporting suppliers to establish health and safety management systems by producing guidelines and training modules that help to meet the requirements of our Workplace Standards. We also support an academy to increase the pool of qualified environment, health and safety managers in southern China.

Managing Chemicals

Chemicals are widely used in global textile and apparel supply chains: from the cotton fields, to the mills and dye houses that make the fabric and the garment production. It is our goal to work with our suppliers and the chemical industry to eliminate and to reduce the discharge of hazardous chemicals in our sphere of influence as far as possible. But the management of chemicals in multi-tiered supply chains is a complex challenge, requiring many actors to play a role in achieving effective and sustainable solutions.

More information can be found in the Chemical Footprint section.