Climate Change and Decarbonization
Managing the environmental impacts at our own sites and across the entire value chain is a key focus of our work. We are committed to decarbonization by reducing our absolute energy consumption and GHG emissions, and transitioning to clean energy.
The climate crisis presents the most pressing long-term challenge facing civilization. For that reason, adidas has set targets that will help us limit emissions aligned with the 1.5°C benchmark and contribute to a net-zero future. adidas has committed to:
- by 2025, achieving climate neutrality (CO2e) across its own operations (Scope 1 and 2)
- by 2030, reducing absolute greenhouse gas (GHG) emissions by 30% across the entire value chain (Scope 1, 2, 3)1, measured against a baseline of 2017,
- by 2050, achieving climate neutrality (CO2e) across the entire value chain.
Our emission reduction targets by 2030 have been approved by the ‘Science Based Targets initiative’ (‘SBTi’). Within the 2025 target, we commit to reducing absolute Scope 1 and 2 GHG emissions by 90% from a baseline of 2017. This target is consistent with the reduction pathways needed to prevent a rise in average temperatures of more than 1.5°C – the most ambitious goal of the Paris Agreement. Our GHG reduction target for value chain emissions (Scope 3) meets the SBTi’s criteria for ambitious value chain goals, meaning they are in line with current best practices.
Our ’Environmental Footprint Tool’ enables us to quantify, monitor, and be transparent about our carbon footprint not only across our own operations, but along our entire value chain. This covers all stages from extraction, production and processing of materials, product assembly, own operations, and logistics to the use phase and the disposal of our products at the end of their lifetime. Results for 2022 clearly show again that our environmental impacts are distributed unequally across the value chain, with the most significant impacts generated in the supply chain, particularly raw materials production and processing. We are moving ahead with our ambition to fully integrate the tool into our existing data-tracking systems to enable real-time simulations.
The following table shows the total annual GHG emissions across our value chain. The average Scope 1, 2, and 3 annual GHG emissions per product for 2022 decreased compared to the previous year. This reduction was majorly driven by our focus on innovation that enabled us to, for example, reduce emissions through low-carbon manufacturing and materials. In 2022, 96% of all polyester we used was recycled polyester, ensuring we are on the right path to achieving our target to only use recycled polyester. By continuing to focus on our decarbonization strategy which includes further material innovation, switching to cleaner energy sources at our supplier facilities, enabling low-carbon design for our products, and achieving climate neutrality (CO2e) across our own operations, we will ensure we stay on track to achieve our target of 15% emission reduction per product by 2025 (baseline 2017).
Despite reducing our GHG emission intensity, as shown in the table, due to an increase in the number of products we created and shipped, and due to the return of employees to the offices after the pandemic, we see a slight increase in the total absolute GHG emission compared to the previous year.
Measuring our product footprint
In order to create new and elevated consumer experiences, we are developing and implementing tools that bring more transparency to our product creation process, enabling our development and innovation teams to identify materials as well as create products and concepts with lower carbon footprints. At the same time, this helps us provide consumers with greater transparency for more informed purchase decisions. Following the launch of our most climate-friendly shoe in collaboration with Allbirds, we continued to scale our capabilities to calculate and communicate our product footprints visible to consumers. During 2022, we introduced the Adizero Lightstrike with a carbon footprint of 3.5 kg CO2e per pair, achieving a 42% reduction compared to the previous version, and the Supernova 2 with a footprint of 8.9 kg CO2e per pair, an 11% reduction.
Identifying ways we can make lower-impact products requires a detailed and thorough approach that includes not only optimizing our own operations but also the manufacturing of each of our products. And since most of our carbon emissions occur outside our direct control, we collaborate with our suppliers located across the globe, helping them improve their carbon footprint during production processes.
We continued to work with our suppliers to ensure they are continuously optimizing their environmental footprint in energy use and carbon emissions. Strategic suppliers producing most of our products and materials are enrolled in our environmental program, which means we partner closely with them and provide suitable training to achieve their targets and progressively improve their footprint.
adidas aims to have the supply network with the lowest carbon footprint in the industry. At the start of 2022, we reached a major milestone on our path to meeting that goal, when we shared a set of clear expectations, the adidas Decarbonization Manifesto, with our strategic Tier 1 and Tier 22 suppliers. This Manifesto clearly presents how we expect our suppliers to support our decarbonization efforts. Our expectations include:
- Environmental stewardship: Suppliers should set targets that get approved by the SBTi by 2024.
- Materials: 100% of new material offered to adidas must be of sustainable content and produced using low-carbon-intensive processes.
- Product: Suppliers should aim for an aggressive adoption of more sustainable and low-carbon materials spanning from creation to manufacturing.
- Transparency: Suppliers should build in-house capacity to provide full transparency and traceability, from raw material to finished product, and connect to the adidas sustainable material tracing tool that is used to trace the source of origin.
- Energy sources: Suppliers should adopt clean energy, including rooftop solar energy, energy sourced through renewable energy purchase power agreements (PPAs), and other renewable alternatives, and also achieve a phase-out of coal by or before 2025.
- Manufacturing processes: Suppliers should adopt low-carbon technologies from the adidas low-carbon technology portfolio.
Becoming the industry’s lowest-carbon-footprint supply network is a team sport. Meeting the conditions of our Manifesto will form the basis for continuing business operations with our suppliers beyond 2025. We have put measures in place to incentivize high-performing and committed supplier partners. These measures include:
- Product allocation priority,
- Opportunity for existing, high-performing supplier partners to gain market share,
- Entry opportunity for new, disruptive supplier partners,
- First-mover advantage and sustainability leadership position.
We encourage all our suppliers to enroll in the ‘UNFCCC Climate Action Training’ program. This, in addition to other upskilling initiatives conducted by our in-house team, helps suppliers develop their own decarbonization pathways, since they are best placed to understand their own circumstances and find the most appropriate measures for their future reduction in GHG emissions. Beyond that, we have driven various initiatives to help suppliers scale their use of renewable energy and increase their energy efficiency:
- Phasing out coal-fired boilers: With only one exception for administrative reasons, we have been successful in ensuring our suppliers refrained from installing new coal-fired boilers, heaters, or power generation systems from 2022 onwards, and remain committed to phasing out coal-fired boilers at all Tier 1 and Tier 2 direct supplier facilities by 2025. We asked these suppliers to conduct coal phase-out feasibility studies and provide us with a clear roadmap for replacing coal. During 2022, all relevant suppliers have confirmed their commitment to replace or modify their coal-fired boilers by 2025, and 18 boilers have already been converted to non-coal fuel or decommissioned this year.
- Increasing adoption of on-site renewable energy for electricity generation: Electricity is the other major source of emissions in our manufacturing process. We are therefore asking our suppliers to obtain their electricity from on-site and off-site renewable energy sources and have incorporated renewable energy (‘RE’) and decarbonization performance of our suppliers in our supplier assessment process. Rooftop solar projects are one of the major contributors to such on-site RE electricity. Total rooftop solar capacity across our key suppliers has doubled to 186 MWp in 2022, putting us ahead of our internal roadmap. We will continue to increase rooftop solar capacity over the next few years.
- Preparing suppliers to purchase electricity from off-site renewable energy sources: We are also encouraging our suppliers to source renewable energy through off-site options such as PPAs, green tariffs and Energy Attribute Certificates (‘EACs’) or Renewable Energy Certificates (‘RECs’). We provided supplier training workshops in multiple countries to upskill suppliers on how to source off-site RE and to communicate our expectations on scaling up RE. In 2022, our suppliers in China secured a total of 25,000 MWh of renewable energy through recently launched green power contracts.
- Advocating for policy to scale up renewable energy: Many of the key operating countries in our supply chain do not have the policies required to support PPAs or to maximize rooftop solar potential. We engaged with the governments of Vietnam, Indonesia, and Cambodia, as well as their respective electricity utilities, to communicate our concerns and recommendations with a view to facilitating PPAs and removing the barriers to rooftop solar. We also actively collaborated with other stakeholders such as Euro-Cham, Am-Cham, USAID, and fashion industry associations on their policy advocacy work across multiple countries during 2022.
- Continuing to increase energy efficiency: We use a supplier self-governance model for energy efficiency. Our efforts in recent years to improve our suppliers’ ability to measure, monitor, and conserve their energy use have enabled us to transfer full responsibility to our suppliers for their own efforts and achievements, while adidas continues to track and monitor their energy efficiency performance. In 2022, strategic suppliers enrolled in our environmental program successfully achieved an annual improvement in energy efficiency of almost 4% compared to the baseline of 2019, leading to an accumulated improvement of almost 12% over the last three years.
Own operations refer to administrative offices, distribution centers, and our own retail stores.
Our efforts are underpinned by the clear targets we have set. By 2025, we aim to achieve climate neutrality (CO2e) across own operations. To achieve this target, we will steadily increase our overall environmental performance data coverage and continue to implement eco-efficiency standards through a holistic integrated management system (IMS) at key sites. All of these efforts will support us on our way to achieving a 30% reduction in GHG emissions across our entire value chain by 2030, measured against the baseline of 2017.
We defined a clear roadmap to achieve our emission reduction targets for our own operations, including measures such as implementing on-site renewable energy production, improving energy use efficiency, and sourcing renewable energy through green tariffs in Europe. In 2022, we continued to invest in own operations and offered Green Funds to subsidize local energy efficiency and on-site renewable energy projects.
To drive the environmental performance of our own operations, we continue to improve the water efficiency at our highest-consuming sites, aiming for a 15% reduction in water consumption per square meter for our own operations, measured against 2019, while working to achieve a waste diversion rate of 95% at our own operations.
Our Integrated Management System (IMS) helps us reduce potential negative impacts and secure all relevant ISO management certifications for key locations, such as environmental management (ISO 14001), health and safety management (ISO 45001) and energy management (ISO 50001). We aim to further expand these certifications to more key sites through implementation of the standards as well as internal and external audits, as these support our efforts to achieve our energy, water, waste, and health and safety targets.
For interior design and construction of own operations facilities, we use ‘Green Building’ certifications – predominantly ‘LEED’ certification (‘Leadership in Energy and Environmental Design’). As Green Building certification is used for strategically relevant projects, a set of internal eco-efficiency standards has been continuously implemented for all projects which mirror the priorities of the LEED certification. The ultimate goal is to achieve energy reduction through investment in high energy-efficient equipment and energy monitoring.
Climate-related reporting and disclosure
We acknowledge the value of climate-related reporting and for many years have been reporting into well-established frameworks such as the Carbon Disclosure Project (CDP). Based on its international accreditation, we are aiming to include recommendations from the Task Force on Climate-related Financial Disclosures (TCFD) that enable companies to improve reporting of climate-related financial information, especially climate-related risks and opportunities. The TCFD is structured around four areas that represent core elements of how organizations operate: governance, strategy, risk management and metrics and targets.
