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Updated Statement in response to alleged poor working conditions found by China Labor Watch

December 10, 2007

Herzogenaurach, 10 December 2007 - On 6th December, 2007 adidas Group’s Head of Social & Environmental Affairs for Asia met with Mr. Li Qiang, the Executive Director of China Labour Watch (CLW). The issues identified in CLW’s 19th November 2007 report on the adidas Group supplier Fook Wah were discussed and SEA’s follow-up actions explained. As an outcome of the meeting it was agreed that the adidas Group will coordinate its remedial efforts with the compliance staff at Wal-Mart, who also source from Fook Wah. The SEA department also offered to provide Mr Li with the adidas Group’s China worker hotline number, so that future concerns or complaints can be addressed locally and immediately.

Statement in response to alleged poor working conditions found by China Labor Watch (November 23rd, 2007)

On 19th November 2007 the US-based non-governmental organisation China Labor Watch (CLW) issued a report that described working conditions in four textile factories in China. The report characterised the conditions in these four factories as being “poor” and expresses a hope that “by revealing the serious findings, corporations will commit to remediate workers’ conditions.” Reference was made to adidas, as being a brand that sources products from these factories.

adidas Group has production in only one of the factories named in the CLW report: Fuhua Textile Company. Fuhua, which is known to us as Fook Wah, is a major swimwear producer located in Shenzhen, in Southern China. adidas Group has had a long standing relationship with this supplier. As such, the factory has been regularly visited by the adidas Group Social & Environmental Affairs field monitors, with the most recent visit having taken place in September 21st, 2007. The factory has also been the subject of independent monitoring by the Fair Labor Association, with an audit having been conducted in May 2006.

Our own assessment of Fook Wah is that workplace conditions are generally compliant with our Workplace Standards – our code of conduct - and this is borne out by the general findings of the CLW report. We would therefore not describe the factory as having “poor” conditions. On the contrary, it is an above average performer, with a cooperative management team. Moreover Fook Wah offers comparatively high pay levels for an apparel supplier in Southern China, with controlled overtime.

We do accept however that there are several practices described by CLW which are not fully compliant, or could be improved, and we are working with the factory to address these areas. The first of these is the deferment of payment of social security for workers in their first year of employment. As is the common practice in China, the factory has agreed the coverage for pension contributions with the local government. These contributions are based on incremental, or staged, payments. We have asked the factory to speed up the roll-out of the pension scheme for workers. On a positive note we can state that the factory has in place and is fully compliant with other social insurances requirements, including work-related injury insurance, medical insurance and maternity insurance.

The second is the supervisory staff “lecturing” workers who make mistakes in production. We encourage the suppliers to adopt positive approaches to reinforce messages and reward workers for improved quality and productivity, rather than to admonish them for non-performance. Fook Wah is currently developing a reward scheme for workers and is also updating its grievance and disciplinary practices, for incorporation into its employee handbook. The handbook and supporting factory regulations will be approved by workers in 2008, in compliance with China’s new Contract Labour Law.

CLW states that no safety-related training is delivered by the factory. This is not accurate and our field staff have directly observed and reviewed the basic safety training provided by the factory. CLW also notes that the Government has posted labour-dispute information and safety management regulations on an external wall of the factory and shows a photograph of this message board being obscured by metal panels. This is not a deliberate act on the part of Fook Wah to restrict access to information to workers. What is shown is a gate that is folded back. The gate is positioned at the entranceway of an adjacent factory, which is independent of Fook Wah’s operations. Fook Wah will request the government to relocate the notice board.

The adidas Group’s Social & Environmental Affairs team will continue to work with Fook Wah, to ensure that our expectations and Standards are met.