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Updated response to the report "Play Fair at the Olympics"

Herzogenaurach, 4 March 2004 - A report was released by OXFAM and the Clean Clothes Campaign on March 4th, 2004. The report raises allegations regarding widespread violations of worker rights and social standards in factories supplying sportswear and athletic brands. The factories highlighted are in Indonesia, Turkey, Bulgaria, Thailand, Vietnam, Cambodia, and China. The report also criticizes the current sourcing practices of international sportswear brands, emphasizes the Right to Associate, and requests sportswear companies, suppliers, governments and the International Olympic Committee to participate in collaborative solutions that will improve working conditions industry wide.

adidas-Salomon representatives met with the authors of the report during the development stage and provided information about the 'Standards of Engagement' (SOE), our company's Code of Conduct, and how the SOE program is linked with the Group's sourcing practices.

The report acknowledges serious efforts undertaken by adidas-Salomon in promoting improved working conditions, efforts that include extensive supply chain monitoring, independent audits and verification, increased stakeholder interaction (including dialogue with workers), extended training and educational programs, analysis and review of internal processes, and transparency initiatives. Each year adidas-Salomon reports publicly on its social and environmental performance and the performance of its suppliers. Our annual Social and Environmental Report for 2003 will be published on March 10th, 2004.

The report developed by OXFAM and the CCC addresses and highlights a range of issues which we have been made aware of and have taken up when we developed and launched our global SOE compliance program.

The report specifically claims that in a number of cases non-compliant behaviour occurred in adidas-Salomon's supply chain factories. As is our normal practice whenever there are possible infringements of our standards, we have offered to conduct an in-depth investigation at each factory, to see whether these allegations are substantiated and to protect the interests and rights of the workers. We have contacted the authors of the report and have asked them to provide us with information that would facilitate such an investigation. The Clean Clothes Campaign (CCC), OXFAM-UK and the International Confederation of Free Trade Unions (ICFTU) have responded by stating that they are unable to share specific factory details, due to their concern that workers could lose their jobs, or that sportswear companies might decide to terminate the business relationship with those factories reported as non-compliant.

We feel our SOE programme has mechanisms that minimize possible retaliatory action against workers who report cases of non-compliance, and we do not have a history of random termination of commercial relationships with our suppliers. We therefore consider the concerns expressed by CCC, OXFAM and the ICFTU as unfounded. Despite the fact that we are unable to follow up on these allegations or address the concerns of the workers who are quoted in the report, we will continue to address non-compliance issues to factory management and support them in remediation. We remain committed to supporting sustainable compliance activities throughout our supply chain.

The report closes with "recommendations for change" addressed to sportswear companies, the industry as a whole, suppliers, governments, the Olympic movement and the public.

We would like to comment on those recommendations which were specifically addressed to individual companies as follows:

Recommendation:

"Sportswear companies should develop and implement credible labour-practice policies which ensure that their suppliers respect internationally recognized labour standards, including the right to a living wage based on a regular working week that does not exceed 48 hours; humane working hours with no forced overtime; a safe and healthy workplace free from harassment; and legal employment, with labour and social protection."

Comment:

adidas-Salomon has done so and continues to work towards more sustainable solutions and activities that result in a more consistently compliant supply chain. For further information on our Fair Wage study please refer to our website.

Recommendation:

"Sportswear companies should change their purchasing practices to ensure that they do not lead to the exploitation of workers. They should negotiate appropriate delivery times, as well as fair prices which allow factory managers to meet orders and meet labour standards.

Comment:

Our sourcing strategy aims to consolidate the supplier base and focus primary export production in a handful of key sourcing countries, notably China, India, Indonesia, Thailand, Turkey and Vietnam. Such consolidation will strengthen business relationships with our long-term strategic partners, as they will enjoy greater stability and certainty in order placement and will be better placed to plan future investment in equipment and facilities. We believe that this will also enhance our leverage and the level of SOE compliance.

Regarding the issue of excessive working hours we have investigated the root cause of this at a supplier's level and in our own operations. In particular, we have analyzed our own sourcing, development and production systems, customer needs (i.e. the retailer's expectations) and the performance of our material suppliers. As a result, recommended actions have been developed regarding a revised method for capacity planning, improved monitoring of raw material suppliers, and strict rules for last minute orders.

Recommendation:

"Sportswear companies should implement their codes of conduct on labour practices in ways that deliver sustainable improvements to working conditions. This requires communicating in clear terms to their suppliers - factory managers and their sub-contractors - that respect for the rights to join and form trade unions and to engage in collective bargaining are of paramount importance if working conditions are to be improved, and that undermining these rights is unacceptable. Further requirements are investment in appropriate inspection systems which place workers at the centre of the process; increased training for workers on their rights and related issues; and ensuring safe complaint mechanisms."

Comment:

We will not only clearly communicate the Standards of Engagement and the legal precedents to suppliers but we will continue to explore and promote effective worker-management communications, training that builds worker and management compliance awareness, and workplace practices that stimulate worker participation, as well as fair and safe complaint mechanisms.

Recommendation:

"Sportswear companies should commit themselves to be transparent about - and publicly accountable for - the impact of their business operations on workers."

Comment:

We remain committed to doing so, as illustrated by our annual public reporting of social and environmental affairs, and our participation in the Fair Labor Association's public transparency initiatives