Mapping our supply chain risk is an effective way of ensuring that our suppliers produce in a socially and environmentally responsible way. We combine processes to systematically monitor and support improvements, with tools that enable us to react quickly to critical situations as they may arise. This helps us limit any negative effects on workers or the environment. Critical sources of information for risk-mapping exercises include the review of databases provided by governments as well as regular engagement with civil society organizations, unions, employer federations, and with workers directly. We regularly map and monitor the countries we source from and the suppliers we work with for labor, human rights, and environmental risks. Country and factory profiles determine the subject of issues to be prioritized and the frequency of monitoring and remediation activities. The tailored risk-mapping approaches and tools that are applied are as follows:

• Country-level risk assessment: Country profiles are developed based on in-depth due diligence processes. Countries are categorized as high or low risk. Suppliers located in high-risk countries are audited on a regular basis.
• Factory-level risk assessment: Regular audits, KPI assessments, factory risk-rating analysis. This information determines the frequency of re-audits and engagement with the factory.
• Crisis Protocol: Used by business entities and factories to report the details of high-risk issues. Based on the information we receive, we may decide to conduct site visits, audits, or other engagements with a business entity or factory on a case-by-case basis.
• Monthly Executive Reporting: Depending on the issue, this may also lead to additional action on a case-by-case basis.
• Grievance Mechanisms: Feedback from workers – collected through hotlines, digital platforms, and third-party channels – is a critical input into our risk mapping and escalation protocols. These mechanisms help us detect and respond to emerging risks in real time.

Measuring supplier social compliance (S-KPI): The strategy applied to suppliers we have a direct relationship with is based on a long-term vision of self-governance where they take ownership of their compliance program. To help them, we conduct factory audits to assess risks and help identify the root causes of non-compliance. Our Social Key Performance Indicator (S-KPI) rating tool measures accident rates, retention levels, worker satisfaction and the effectiveness of our worker empowerment initiatives. According to the results, suppliers are assessed with an S-rating score between 1 and 5 (with 5 being the best rating). Our target for 2025 is to have 90% of our strategic suppliers rated at 4S or better and 100% to achieve 3S or better. For more information about our company’s approach to monitoring our supply chain, see the SEA Audit Manual.

Measuring Licensee Performance (Licensee Report Cards): adidas licensees are obliged to adopt our in-house monitoring approach to ensure compliance in the indirect supply chains as well as commission audits by adidas approved external monitors who verify the outcomes of the compliance plans and activities. A licensee’s annual compliance performance is then measured by using a comprehensive report card. Of our key licensees, 100% achieved a licensee compliance rating of 3 S (on a rating scale of 1-5, with 5 being the best), and 50% a rating of 4S. This rating mechanism mirrors that of our S-KPI, which applies to manufacturing partners and reflects that these licensees have successfully demonstrated that they have embedded strong governance systems, supply chain management, and purchasing practices compliance requirements into their business practices.