Workers in the Supply Chain
Workers in our suppliers’ factories play a central role in our sustainability program.
It was our concern for the well-being of workers in our factories that led us to establish our "Workplace Standards," the supply chain code of conduct, which covers workers’ health and safety and provisions to ensure environmentally sound factory operations. A number of topics related to the workers' well-being are of special interest to our stakeholders. These range from fair wages, child labor and freedom of association to health and safety.
Fair Compensation
The idea of a living wage is that workers – and their families – are able to afford a decent standard of living that is considered acceptable by society at its current level of economic development. A fair compensation approach goes further than this. It considers the fairness of the wage that a worker is paid by benchmarking whether wages meet all legal requirements, are paid in full and on time, reflect a worker’s performance and skills, follow price increases paid for the products they make, are linked to their employer’s profits and sales, are negotiated individually or collectively with the workers and are clearly and formally communicated to them, among other factors.
The workers employed in our supply chain should not have to face hardship in their daily lives. Our aspiration as a responsible business – and as set out in the core principles of our Workplace Standards – is that workers earn enough for themselves and their families’ basic needs and have income remaining to cover discretionary spending as well as savings. We seek business partners who progressively raise employee living standards through improved wage systems, benefits, welfare programs, and other services which enhance quality of life. Our ambition is to see progressive improvements across all fair compensation benchmarks and achieve gender wage parity for workers in each of our strategic Tier 1 suppliers by 2025.
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, by national laws and government policy, and a number of other variables. We recognize we cannot do this alone, and continuously seek to work and collaborate with other entities to make fair compensation a reality for workers in the supply chain.
As a member of the Fair Labor Association (FLA), we have aligned our fair compensation approach and strategy with FLA Benchmarks and their Fair Compensation Methodology. Additionally, we have joined the Anker Research Institute (ARI) as a Corporate Sponsor to learn from ARI’s technical expertise and the larger living wage community that ARI brings together. As part of our fair compensation strategy, we have also adopted ARI’s living wage definition, which includes living wage components such as food, water, housing, education, health care, transportation, and discretionary income to help deal with unexpected life events. These parameters inform ARI’s living wage estimates, which are incorporated into the available the Global Living Wage Coalition benchmarks, which we use to measure and track wage progress.
Our approach to the payment of fair compensation in our global supply chain is built around five levers that influence wage development: legal obligations, responsible sourcing and purchasing practices (RPP), productivity, government engagement, and industrial relations. For each lever, we have a program of work to support fair compensation and wage progression. To measure and track wages, we use the FLA Fair Compensation Assessment Tools and guidance to assess our suppliers. Finally, we will also build on our existing efforts with a focus on gender equality, pay equity, and responsible sourcing practices.
DATA COLLECTION
To measure and track wage progress over time, we will use the FLA’s Fair Compensation Data Collection Tool to collect wage data from a sample of our key global suppliers. Data will be collected and compared in three different years: 2020 (our baseline year), 2023 (our mid-point year), and 2025 (our final year). The results of these wage assessments will be used to help evaluate the links between wage progress and our five levers.
Due to the global pandemic, we extended the collection of our 2020 baseline wage data in phases through to 2023, the results of which are published below. For 2024, we will be collecting 2023 wage data from our selected suppliers; this data will be compared to our 2020 wage data and results will be disclosed in 2025.
BENCHMARKING RESULTS
The figures below illustrate the full results of our 2020 wage benchmarking of our selected strategic suppliers in the six countries below. The scope of our benchmarking includes workers’ net average wage and excludes consideration of any overtime income. Workers’ total take-home pay can be higher than the wage data presented below. It is important to note that the figures below are based on factory averages, therefore, some workers may earn higher wages, while others may earn lower wages; however, under no circumstances will a wage below the minimum wage ever be acceptable, and none were found in our wage assessments.
For these results, we compared the collected wage data against external benchmarks, such as the applicable legal minimum wage and the FLA Country Average, which represents the industry average. The FLA Country Average Benchmark is only available as a country-wide average, and not for each applicable minimum wage group and/or region in countries with multiple minimum wage requirements. To avoid inaccuracies, we will only apply this benchmark in countries where the minimum wage is calculated for the entire country and not by various regions or groups. For our living wage benchmark, we have selected the GLWC benchmark, whenever available. Finally, we are using the World Bank’s International Poverty Line as a constant benchmark in all applicable countries. In the future, we will be able to compare wage progression across our benchmarked countries by tracking and measuring the relationship between factory wages and the World Bank International Poverty Line. Our goal is to move wages away from this benchmark. All amounts below, except for the minimum wage and World Bank International Poverty Line benchmarks, are in their net format (excluding legal deductions).
Cambodia (ten factories/33,719 workers):
- There is only one applicable minimum wage requirement applicable for factories in Cambodia.
- All factories met the minimum wage.
- 90% of our factories are unionized; 10% have a Collective Bargaining Agreement (CBA) in place.
Country Net Wage Avg. (USD) | Country Net Wage Avg. vs. Applicable Minimum Wage (Gross) | Country Net Wage Avg. vs. FLA Country Avg (Net) | Country Net Wage Avg. vs. World Bank International Poverty Line (Gross) |
---|---|---|---|
$296 | Surpassed by 56% | Surpassed by 33% | Surpassed by 36% |
China (14 factories/31,851 workers):
- Factories in our data collection scope fall into 10 different minimum wage requirement groups.
- Across all minimum wage groups, factories’ net wages surpassed their applicable minimum wage requirement by between 13% and 159%.
- 79% of factories in China have a state-backed trade union and 43% have a CBA in place. The average net wage of all factories met the applicable minimum wage.
Minimum Wage Group | Group Net Wage Avg. (CNY) | Group Net Wage Avg. vs. Applicable Minimum Wage (Gross) | Group Net Wage Avg. vs. GLWC (Net) | Group Net Wage Avg. vs. World Bank International Poverty Line (Gross) |
---|---|---|---|---|
Group 1: Hunan Province Level 4 | 2,042 | Surpassed by 67% | N/A | Surpassed by 141% |
Group 2: Guangdong Province Level 4 | 2,153 | Surpassed by 53% | N/A | Surpassed by 154% |
Group 3: Jiangxi Province Level 3 | 1,854 | Surpassed by 26% | N/A | Surpassed by 119% |
Group 4: Jiangsu Province Level 3 | 4,196 | Surpassed by 159% | N/A | Surpassed by 395% |
Group 5: Guangdong Province Level 2 | 1,939 | Surpassed by 13% | N/A | Surpassed by 129% |
Group 6: Zhejiang Province Level 2 | 3,566 | Surpassed by 98% | N/A | Surpassed by 320% |
Group 7: Liaoning Province Level 1 | 2,677 | Surpassed by 48% | N/A | Surpassed by 216% |
Group 8: Zhejiang Province Level 1 | 3,398 | Surpassed by 69% | N/A | Surpassed by 301% |
Group 9: Jiangsu Province Level 1 | 4,694 | Surpassed by 132% | Surpassed by 34% | Surpassed by 454% |
Group 10: Guangdong Province Level 1 | 2,860 | Surpassed by 30% | Surpassed by 2% | Surpassed by 237% |
Indonesia (13 factories/103,763 Workers):
- Factories assessed in Indonesia fall into 10 different legal gross minimum wage groups, with widely varying minimum wage requirements.
- Across all minimum wage groups, wages paid surpassed the legal minimum wage by between 9% and 66%.
- 92% of factories are unionized and have a CBA in place.
Minimum Wage Group | Group Net Wage Avg. (IDR) | Group Net Wage Avg. vs. Applicable Minimum Wage (Gross) | Group Net Wage Avg. vs. World Bank International Poverty Line (Gross) |
---|---|---|---|
Group 1: District Minimum Wage: Kabupaten Brebes | 2,995,918 | Surpassed by 66% | Surpassed by 166% |
Group 2: City Minimum Wage: Kabupaten Boyolali | 2,122,912 | Surpassed by 9% | Surpassed by 89% |
Group 3: City Legal Minimum Wage: Kabupaten Jepara | 2,247,529 | Surpassed by 10% | Surpassed by 100% |
Group 4: City Legal Minimum Wage: Kota Semarang | 3,429,548 | Surpassed by 26% | Surpassed by 205% |
Group 5: City Minimum Wage: Kabupaten Sukabumi | 3,767,782 | Surpassed by 24% | Surpassed by 235% |
Group 6: City Minimum Wage: Kota Cimahi | 3,483,690 | Surpassed by 11% | Surpassed by 210% |
Group 7: District Minimum Wage: Kota Batam (UMK) | 4,749,660 | Surpassed by 15% | Surpassed by 322% |
Group 8: Sectorial Minimum Wage: Kabupaten Serang (Sector II: Textile, Leather, Apparel, Bag & Shoes) | 6,192,938 | Surpassed by 45% | Surpassed by 450% |
Group 9: Sectorial Minimum wage: Kota Tangerang (Sector IV: Leather, Footwear) | 4,987,489 | Surpassed by 15% | Surpassed by 343% |
Group 10: Sectorial Minimum Wage: Kabupaten Tangerang (Sector IIIA: Textile, Apparel) | 5,143,247 | Surpassed by 18% | Surpassed by 357% |
Pakistan (two factories/10,455 workers):
- The factories in our sample are located in the same province and must adhere to the same minimum wage requirement.
- Factories in Pakistan within scope are not currently unionized.
Group Net Wage Avg. (PKR) | Group Net Wage Avg. vs. Applicable Minimum Wage (Gross) | Group Net Wage Avg. vs. World Bank International Poverty Line (Gross) |
---|---|---|
24,877 | Surpasses by 42% | Surpassed by 203% |
Thailand (four factories/8,072 workers):
The minimum wage in Thailand is officially calculated as a daily wage. For reporting and tracking purposes, we have calculated a monthly wage based on the daily wage using the same formula as FLA: [the number of working days in the year multiplied by the daily rate] divided by 12 months in a year.
- Our applicable factories in Thailand are located within 3 different legal minimum wage groups.
- Across all minimum wage groups, wages paid surpassed the legal minimum wage by between 36% and 44%. Currently, none of the factories are unionized.
Minimum Wage Group | Group Net Wage Avg. (THB) | Group Net Wage Avg. vs. Applicable Minimum Wage (Gross) | Group Net Wage Avg. vs. World Bank International Poverty Line (Gross) |
---|---|---|---|
Group 1: Regional Minimum Wage Requirement – 315 THB/day (8216 THB/month):
| 11,817 | Surpassed by 44% | Surpassed by 388% |
Group 2: Regional Minimum Wage Requirement – 325 THB/day (8477 THB/month) | 11,561 | Surpassed by 36% | Surpassed by 377%
|
Group 3: Regional Minimum Wage – 331 THB/day (8634 THB/month) | 12,014 | Surpassed by 39% | Surpassed by 396% |
Vietnam (17 factories/113,776 workers):
- Our factories are located within three legal gross minimum wage zones.
- Factories surpass the minimum wage by between 72% and 78%, and the Global Living Wage Coalition benchmark by 18% where applicable (Zone 1 only).
- 100% of our factories have a state-backed union and a CBA in place.
Minimum Wage Group | Group Net Wage Avg. (VND) | Group Net Wage Avg. vs. Applicable Minimum Wage (Gross) | Group Net Wage Avg. vs. GLWC | Group Net Wage Avg. vs. World Bank International Poverty Line (Gross) |
---|---|---|---|---|
Zone 1: Urban Hanoi and Ho Chi Minh City | 7,882,193
| Surpassed by 78% | Surpassed by 18% | Surpassed by 282% |
Zone 2: Suburban Hanoi and Ho Chi Minh City | 6,743,658 | Surpassed by 72% | N/A | Surpassed by 227%
|
Zone 3: Provincial cities and districts of Bac Ninh, Bac Giang, Hai Duong and Vinh Phuc provinces | 5,966,927 | Surpassed by 74% | N/A | Surpassed by 189% |
APPLYING OUR LEVERS
Legal Obligations
Fair compensation cannot be achieved without first ensuring factories meet the legally required minimum wages and benefits. We demand that our suppliers, as employers, pay the legally required wages 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 with the expectations outlined in our Workplace Standards through internal and third-party audits, worker hotlines and grievance processes. Where we find evidence of non-compliance, we recommend remedial steps and actively engage with our suppliers to implement corrective action, drive improvement, and prevent recurrence. 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 established (whether by 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.
Below are examples of the activities we have performed to support our legal obligations lever:
- We worked on the remediation and/or advancement of country-specific issues such as:
- Karnataka, India – Minimum wage requirement: Our team worked with our licensees and other buyers at three supplier factories to ensure workers were paid back wages after the local labor court ruled in favor of a new minimum wage that factories had previously challenged in court.
- Mexico – Overtime (OT) pay: Together with other participants in the Americas Group intitiative, we supported the drafting and implementation of an OT memo brief requiring OT premiums to be based on full integrated wages, including incentives and benefits, rather than just hourly wages as per legal court precedent. We have verified factories are all in compliance with the memo brief and will continue to monitor factories against this court decision.
- Pakistan – Minimum wage implementation: We worked with suppliers to implement the new minimum wage quickly, given previous delays in its approval. Two-thirds of our factories implemented the new minimum wage before it was officially announced, allowing workers to receive their minimum wage as soon as possible.
Responsible Sourcing & Purchasing Practices (RPP):
At the end of 2017, we launched our Responsible Sourcing & Purchasing Practices Policy to ensure our sourcing and purchasing decisions do not impede or conflict with the fulfillment of the adidas Workplace Standards, including the payment of wages to workers. To complement this policy, we added 10 Buyer Commitments in 2020 to guide our responsible purchasing.
To better understand the potential impact of adidas’ purchasing practices, we have sought feedback from our manufacturing partners, both anonymously and openly, through our subscription to the Better Buying Institute, an independent organization that assesses and reports on the purchasing practices of participating brands, and through our own engagement with our suppliers. Based on this feedback, we have continued our efforts to improve our purchasing practices. Some of the RPP improvements related to fair compensation are:
- Enable greater transparency on demand forecasts to help suppliers plan ahead. In addition to providing refreshed market forecasts at the article/model level on a monthly basis, we also engage directly with suppliers to provide a qualitative outlook and visibility on the inventory situation and consequential demand trends beyond the forecasts. Furthermore, we also provide an annual capacity roadmap with at least two seasons of forward-looking capacity expectations. These detailed demand and capacity forecasts help suppliers to plan their financials much more effectively, which impacts their ability to pay their workers on time and in full.
- Adjusting delivery KPIs to remove one-size-fits-all approach. Lead time expectations are now driven by product complexity.
- Revised costing framework to better reflect inflation in overhead calculations.
- Provide greater visibility into existing financial support programs such as prepayment options and vendor financing programs.
- Adopt new ways of working from 2023 that give suppliers greater ownership and self-governance, along with clear expectations and transparent guidelines.
Furthermore, in partnership with Better Buying, we expanded our e-learning training on responsible purchasing practices to over 4,000 employees in Global Operations. In 2023, the training was also shared with the US Demand Planning team and adidas strategic licensee partners to further improve their understanding of effective responsible purchasing policies.
Productivity
The issue of calculating and paying fair compensation within global supply chains is complex and often linked to productivity and efficiency. We support productivity initiatives and technologies to reduce work hours and improve pay for performance. Additionally, as we look to the future, we believe that technology and automation will increase the demand for skilled workers, creating an opportunity for improvements in wages and benefits. However, automation may also reduce the overall demand for workers. As a result, we need to capitalize on the positive impact of technology and automation, while also being sensitive to the impact on employment that comes with new ways of working. In late 2022, we participated in a fair compensation pilot in Vietnam to assess and understand how purchasing and production practices, compensation systems, and opportunities for worker engagement can improve wages for workers. The project is scheduled to run through mid-2024, and we hope it will help us identify ways to link productivity gains to fair compensation.
Government Engagement
Governments play a key role and have a responsibility in protecting and promoting human rights, including upholding the ILO (International Labour Organization) labor conventions and fundamental principles and rights at work. Governments can also help normalize industrial relations and workers’ ability to organize and bargain collectively. If we want to see long-term and sector-wide improvement in wages and worker welfare, we need to engage with policymakers and national governments.
Below are some examples from the past calendar year of our government engagement efforts in support of fair minimum wage setting mechanisms and long-term social protection.
- Bangladesh: We were signatories of a multi-brand letter sent in October 2023 to the Bangladeshi Prime Minister calling on the government to ensure minimum wage negotiations include open dialogue and consultations with labor groups and trade unions, and that any proposed new minimum wage is sufficient to provide workers with discretionary income in addition to covering basic needs.
- Pakistan: In September 2023, together with FLA representatives, we met with the Punjab Secretary of Labor to raise our concerns about an ongoing delay in the implementation of the minimum wage, which was originally scheduled to take effect in July 2023. The new minimum wage was implemented shortly after.
- Myanmar – MADE in Myanmar: The EU-funded Multi-stakeholder Alliance for Decent Employment in the Myanmar apparel industry (MADE in Myanmar) was launched in December 2022. The initiative aims to raise higher wages for workers, with the ultimate goal that all workers are paid at least a living wage. To support this process, participating companies in MADE commit to sharing a self-assessment of the actions they are taking toward wage improvements, including wage surveys.
Industrial Relations
Strong and effective industrial relations foster dialogue, transparency, and problem-solving capabilities between employers and workers. They also provide a mechanism for workers to negotiate their working conditions through collective bargaining, which can lead not only to better wages and working conditions, but is also covered by two of the ILO’s fundamental rights at work conventions, the Freedom of Association and Protection of the Right to Organize Convention, 1948 (No. 87), and the Right to Organize and Collective Bargaining Convention, 1949 (No. 98). The path to improving the general welfare of workers is supported by the creation of wage-setting mechanisms that 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. Below are some examples of some recent efforts:
- El Salvador-FOA Guidance: As a participant of the Americas Group, in 2023 we helped launch ‘The Employer Guidance: Ensuring Respect for Freedom of Association in El Salvador,’ drafted by local experts, in consultation with local labor stakeholders. The aim of the guidance is to provide factories in El Salvador with clear guidance on the policies and practices that are to be adopted to ensure workers’ FOA rights are respected. The Guidance was issued in October 2023 and introduced to suppliers in an in-person training session in November 2023 hosted by the Americas Group. Since 2024, we have been working individually and collectively with other buyers to implement the Guidance in our supply chain.
- Mexico-CBA Authentication Reviews: i. We continue to engage with the Americas Group Mexico Committee to leverage collective action to advance freedom of association. ii. We have worked to verify that all applicable suppliers are in compliance with the 2019 Mexican Labor reform’s CBA Legitimization processes.
- Türkiye: In 2023, we partnered with a local industrial relations expert to provide training to workers at a key manufacturing partner. The aim of the training was to raise workers’ awareness of their FOA and CBA rights under Turkish law, as well as adidas' approach to protecting and upholding these fundamental rights.
- Vietnam FOA Training: In late 2022 and throughout 2023, over 20 strategic suppliers enrolled in a three-module training series sponsored by Better Work Vietnam. The training focused on: i. Trade unions rights and responsibilities and industrial relations management; ii. Grievance mechanisms; and, iii. Collective bargaining agreements.
Finally, we also seek to leverage freedom of association/social dialogue among our own suppliers. The case study below highlights industrial relations at our owned facilities in Scheinfeld, Germany:
Industrial relations at Scheinfeld: Fostering Collaboration for Fair Compensation
At the adidas-owned factory in Scheinfeld, Germany, robust industrial relations mechanisms are in place to ensure transparent and equitable processes, particularly regarding wages and benefits setting. In line with the German Co-Determination Act (Betriebsverfassungsgesetz – BetrVG), the factory engages in formalized communication and negotiation with the adidas Works Council, adhering to both legal requirements and voluntary agreements. The dialogue between factory management and the works council is structured around key principles such as information sharing, consultation, and participation. Through regular face-to-face meetings and ad hoc consultations, topics ranging from workplace changes to personnel planning are discussed. In particular, the Works Council has the right of initiative and veto to ensure a balanced decision-making process.
When it comes to compensation, Scheinfeld navigates a complex landscape of centrally negotiated collective agreements with industry bodies and individual company agreements. While exempt employees negotiate individually, non-exempt employees benefit from collective agreements, with the Works Council ensuring compliance and fairness. Moreover, the Works Council actively negotiates local agreements, such as adjustments to working hours and shift systems, demonstrating a commitment to tailoring compensation to local needs. With regular negotiations and agreements subject to review, Scheinfeld prioritizes ongoing dialogue and collaboration to uphold fair compensation practices.
OUR PROGRESS
2023 | We complete our 2020 benchmarking of strategic suppliers across six countries – a three-year effort. And we begin to publicly disclose our 2020 wage data collection.
2022 | We complete 2020 data collection across our three primary sourcing countries of Cambodia, Indonesia, and Vietnam. We join the FLA’s fair compensation pilot in Vietnam and continue to support the FLA in their improvement to the Fair Compensation Dashboard. We pilot freedom of association training in Vietnam to support our industrial relations/social dialogue lever. At the end of the year, we become a corporate sponsor of the Anker Research Institute.
2021 | We revise our Fair Compensation Plan by identifying two primary goals and five wage levers and incorporate Fair Compensation into our 2025 strategic priorities. We publish the adidas 10 Buyer Commitments as part of our Responsible Sourcing & Purchasing Policy on our website.
2020 | In response to covid-19, we commit to pay for all completed or in-process orders. We join the ILO Call to Action to help address the impact of covid-19 on the garment industry and workers. We integrate our 10 Buyer Commitments into our existing Responsible Sourcing & Purchasing Practices Policy.
2019 | Through our continued participation in the FLA’s Practitioners’ Working Group, we support the FLA’s efforts to improve its wage collection tools and online dashboard to facilitate the collection and analysis of wage data. We review and analyze the data collected and share the insights gained from our Better Buying report with our internal sourcing partners.
2018 | We publish our Responsible Sourcing & Purchasing Practices Policy. We participate in the Better Buying survey to gather supplier feedback. We complete wage data collection in two of our largest sourcing countries, Indonesia and Vietnam.
2017 | adidas joins the FLA’s Fair Compensation Practitioners’ Working Group with the aim to improve the FLA’s wage collection methodology and tool. We collect data in Cambodia, Honduras, and Ukraine to test the upgraded FLA Fair Compensation Wage Data Collection tool and begin conducting wage analysis in our supply chain.
2016| Our Workplace Standards are updated to include additional commitments related to human rights and to various code provisions, including wages and benefits. We conduct initial pilots of the FLA’s Fair Compensation Wage Collection tool in Brazil, Cambodia, China, Honduras, Indonesia, Mexico, Türkiye, and Vietnam.
2015 | We adopt our Fair Compensation Strategy based on the three pillars of the UN Guiding Principles and aligned with human rights concepts. We begin working in tandem with the newly adopted FLA Fair Compensation Strategy.
2013 | We share our work and experiences on fair wages at the European Conference on Living Wages in Berlin, Germany.
2012 | We extend the Fair Wage Network assessment to include a quantitative evaluation of the outcomes of assessments at four suppliers.
2011 | We engage with the Fair Wage Network to assess the fairness of wages paid by 26 suppliers in seven countries.
2010| We revise and update our Employment Guidelines to include language on fair compensation.
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 and the Fair Wage Network.
2007 | We issue a new set of Workplace Standards with updated wage provisions, highlighting the need for discretionary spending and savings.
2005 | We commission an econometric study for a cross section of footwear and apparel suppliers in China to examine wages, productivity, and incentive payments for workers.
2004 | adidas 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. We publish a guideline on worker cooperatives to support savings and loans for housing and the establishment of worker food cooperatives.
2003 | We commission a two-year study on fair wages in Indonesia that examines different living wage methodologies. Also in 2003, we appoint a leading economist to review the research output from the Indonesia Living Wage Study and advise on wage benchmarks for Indonesia.
2001 | We publish our Employment Standards to explain how wages and benefits (and a range of other labor rights) should be respected and delivered.
1998 | adidas publishes its Standards of Engagement, which include wage and benefit expectations for suppliers.
FAIR COMPENSATION GLOSSARY
Cash benefits: Cash payments made by the employer that are not linked to performance or productivity. Examples: housing allowance, transport allowance, any non-production-related bonus. Vacation, hardship/hazard and profit-sharing bonuses are also included. This may also include legally required benefits such as 13th month pay, national and holiday cash bonuses if received during the year.
Fair compensation: Compensation that ensures that workers earn enough to meet the basic needs of themselves and their families, and have income left over for discretionary spending and savings.
In-Kind benefits: Goods and services provided by the employer to the employee as part of the compensation package. These goods and services should be provided free of charge or at a reduced cost to the employee. Examples: housing (such as a house or apartment), utilities for housing (such as water or electricity), meals, food rations, goods provided at a discount, transportation, childcare, education for workers' children, and private health insurance if not required by law.
Living Wage (as defined by the Anker Research Institute): remuneration received for a standard work week by a worker in a particular place sufficient to afford a decent standard of living for the worker and her or his family. Elements of a decent standard of living include food, water, housing, education, health care, transport, clothing, and other essential needs, including provision for unexpected events.
Minimum Wage (as defined by the ILO): The minimum amount of remuneration that an employer is required to pay wage earners for the work performed during a given period, which cannot be reduced by collective agreement or an individual contract.
Net Wage Formula (as defined by the Fair Labor Association methodology): Net wage includes the basic contracted wage, in-kind and cash benefits, and deducts taxes and other deductions. Net wage does not include incentive or leave wages, unless otherwise specified, and never includes overtime wages.
Wage benchmarks: A wage or economic indicator used for comparison purposes. Examples of wage benchmarks include the minimum wage, a living wage benchmark, international poverty lines, etc. Throughout the strategy, we will compare factory net wages to various wage benchmarks to track and measure wage progress.
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 programs and initiatives to address topics such as child labor, migrant labor, forced labor, trafficking and women’s rights. These initiatives are summarized below.
Child Labor
Our Workplace Standards prohibit our suppliers from employing children under 15 years of age, or below the age for the completion of compulsory education if that is over 15. This is in line with international standards as set by the International Labour Organization (ILO), which defines child labor 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 the schooling of children.
Over the past 25 years, we have engaged with our suppliers to build their capacity to eliminate child labor in all our Tier 1 supplier facilities. We have developed specific guidelines for effectively managing the recruitment process and strengthening human resources systems at the factory level to prevent child labor, ensure the protection of juvenile workers, and respond to violations, if they occur.
- Policies and standards: Our policies on child labor have always been centered on a concern for the child and protecting their interests, as well as recognizing the importance of income to support households and schooling. Our requirements related to the prevention of child labor, as well as the employment of juvenile workers (those who are of a legal age to work, but under 18) is clearly outlined in our Employment Guidelines.
Our experience working with the United Nations and industry partners to eliminate the worst forms of child labor informs our due diligence and risk mitigation strategies as we continue to extend our efforts and to reach upstream suppliers, including raw materials sources.
Any finding of child labor will require a supplier to pay an ongoing wage to the family of the child laborer 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 does not involve excessive hours or hazardous work.
It is important to our brand that all production takes place in authorized locations, both for compliance and quality reasons. We do not permit homeworking or unauthorized subcontracting, both of which may increase the risk of child labor. - Preventing child labor in our supply chain: In support of these policies, we employ monitoring systems to ensure that we have knowledge and visibility of each stage of the production process and trace the movement of product components and materials up until the finished product is shipped to the customer.
All new suppliers must be screened for the presence of child labor and, if found, this issue must be addressed immediately. If a prospective supplier is unable or unwilling to establish a human resources management system with the relevant ID-checking and verification processes to minimize the risk of hiring child labor, or to address a specific instance or finding of child labor, they will not qualify as an approved supplier for adidas.
Should instances of child labor be identified, we have issued guidance to suppliers on immediate measures to be taken, such as: verifying the identify and age of the child, removing the child from the production area and providing accommodation, food and care until a solution is found, identifying opportunities to re-enroll the child in school, evaluating family circumstances, and other measures; and medium-term measures including: reviewing recruitment and personnel practices to identify gaps or failures, building a remediation network of local organizations, trade unions, government and other parties to provide support services, and implement a robust remediation program.
Our approach to children's rights
We are committed to respecting children’s rights. We do so through our efforts to eliminate child labor and provide decent work for young people in our global supply chain, and through our commitment to children’s rights and business principles.
- Commitment to respecting children’s rights: Our commitment to children’s rights is aligned with the principles of the UN Convention on the Rights of the Child (CRC) and the principle that: “In all actions concerning children…the best interests of the child shall be a primary consideration.” (Article 3, CRC). We also uphold the UNICEF Children’s Rights and Business Principles (CRBPs). The CRBPs identify a range of actions businesses should take to address the potential impacts that business can have on children in the workplace, marketplace, community, and environment. To support industry best practice in upholding the CRBPs, we have engaged closely with UNICEF in the past on advancing children’s rights in the apparel and footwear sector. We have helped UNICEF develop guidelines for our industry to more effectively address adverse impacts on children and working parents in the supply chain, and have participated in the development of a practical toolkit for businesses to integrate children’s rights into their sustainability strategies and responsible sourcing frameworks.
- Ensuring products and services are safe: Our product safety team ensures that all products likely to be used by children are designed and tested in line with relevant national and international standards. Moreover, product safety legislation that sets out specific requirements for defined children ages or size formats, is applied with a special level of care. We continue to lead our industry in safety-related chemical management and physical product requirements and seek to ensure that products and services for children or to which children may be exposed are safe and do not cause harm. Our product labelling and information for instance is clear, accurate and complete, including age restrictions and consumer guidance. This enables parents and children to make informed decisions. We also seek to prevent – and eliminate – the risk that products and associated services could be used to abuse, exploit, or otherwise harm children in any way. This includes developing social media and privacy policies to protect the rights of children who seek to interact with our business through e-commerce or online platforms.
- The right to play and child safeguarding in sport: As a global sporting goods company, we have long championed children’s right to play, including access to sports. To achieve this, we have both launched and participated in several initiatives.
We have worked with the Ministry of Education in China, providing training for around 50,000 Chinese sports teachers, who in turn are teaching football skills in more than 20,000 schools, reaching 20 million youngsters in total.
In partnership with UNESCO, adidas has also had a part to play in the FIFA Football for Schools program, which aims to make football more accessible to children by incorporating football activities into the physical education curriculum. This international sports program targets over 700 million school children.
As a sponsor of clubs, players, and sports bodies – such as FIFA – we have engaged with our partners on the question of child safeguarding, especially for young professionals. This has included outreach to the Centre for Sports and Human Rights in Geneva, which actively promotes the safeguarding of children around major sporting events such as the FIFA World Cup. adidas is a member of the Centre’s Advisory Council, along with UN agencies, governments, unions, and other civil society groups.
Forced Labor
adidas strictly prohibits the use of any form of forced labor or human trafficking across all of our company operations and in our global supply chain. We have a zero-tolerance approach to forced labor, human trafficking and slavery.
Click here to read more about our approach.
Migrant Labor
We are committed to eliminating the practice of migrant workers paying recruitment costs and fees to obtain or secure their employment. This commitment is reflected in our Policy on Responsible Recruitment and Fair Treatment of Migrant Workers and our Guidelines on Employment Standards. We have also signed the American Apparel Footwear Association and Fair Labor Association [AAFA/FLA] Commitment to Responsible Recruitment.
We have worked closely with the International Labour Organization (ILO), the International Organization for Migration (IOM) and various NGOs to protect the rights of migrant workers who are employed within our supply chain. This includes developing guidance and industry best practice to eliminate the exploitative recruitment practices of intermediaries and unscrupulous employment agencies or labor brokers, as well as ensuring freedom of movement, equal treatment, and proper employment contracts for migrant workers.
Our partnership with the International Organization for Migration (IOM) from 2017 to 2022 focused on promoting ethical recruitment practices, specialized training and due diligence measures for our business partners in receiving countries and for recruitment agencies in sending countries. As a result of this partnership, nearly 100 of our Tier 2 suppliers in Indonesia, Vietnam, Taiwan, and South Korea were trained on how to identify, mitigate, and address human rights and labor risks for migrant workers, and over 40 labor recruiters were trained on ethical recruitment principles and the adidas Workplace Standards. The partnership also informed the development of the IOM Migrant Worker Guidelines for Employers, which provide practical guidance to business enterprises on how to recruit and employ international migrant workers ethically and responsibly.
Human Rights Defenders (HRDs)
We are committed to respecting the rights of human rights defenders (HRDs). A human rights defender can be any person or group of persons working to promote human rights locally, regionally, or internationally through peaceful means. HRDs can be of any gender, of any age, from any part of the world, and with diverse backgrounds and different interests.
In the context of adidas’ own operations and the business activities that occur in our supply chain, we recognize trade union organizers, environmental interest groups, human rights campaigners, and labor rights advocates as HRDs. Over the past five years, we have intervened and sought the reinstatement and/or financial compensation for over a dozen trade union leaders and organizers, where we have found them to have been unfairly dismissed, discriminated against, or intimidated in breach of our Workplace Standards. These cases were identified through our own monitoring activities, investigations triggered by worker complaints, or grievances received from external advocacy groups or trade unions. Worker reinstatements have taken place in sourcing locations including Cambodia, El Salvador, Indonesia, and Turkey.
Throughout the history of our human rights and labor program, we have frequently taken action to address the treatment of HRDs, whose activities are linked to issues in our global supply chain. Examples of our efforts to support HRDs include:
- Cambodia, 2022: In May 2022, negotiations were underway between the Can Sports Shoes Co. Ltd. footwear factory in Cambodia and four trade unions that had threatened to strike. The unions were demanding better access to private food vendors and a faster transfer of union fee deductions from workers’ salaries when they switched trade union affiliation, which was a frequent occurrence given the ten plant-level unions operating at the factory. These negotiations were interrupted when two of the union leaders were arrested and held in police custody. The next day, the workers went ahead with their strike, gathering peacefully in front of the factory gates. At that time, it was reported that a third union leader had been arrested. Within 24 hours of the first arrest, all three union leaders were released by the police after signing a pledge to call off the strike. Initially, the local authorities claimed that the detentions were for inciting criminal activity. However, there was no evidence to support this claim and the union leaders were released without charge. adidas investigated the case and concluded that the root cause was interference by the local authorities who feared that the strike would disrupt upcoming elections. We promptly wrote to the Cambodian Ministry of Labor requesting an investigation and highlighting the local authority’s failure to uphold freedom of association as guaranteed under Cambodian law. By giving visibility to the case and calling for government intervention, we sought to prevent future interference with trade union activities in Kampong Chhnang province.
- Vietnam, 2016: This case involved the detention of two labor rights advocates who met with workers who had been laid off after a fire destroyed the main production building of Yupoong Vietnam, an accessories supplier. We learned of the detention and subsequent release of the two individuals, who are affiliated with Viet Labor, an overseas labor rights group. We assured Viet Labor that we would act in line with our policy of protecting individuals and advocates from any infringement of their rights (freedom of association, freedom of expression, etc.) during active disputes and investigations. We wrote directly to the Chairman of the Dong Nai People’s Committee, and called on the provincial government and the local police to exercise maximum restraint in dealing with protests and not to interfere where individuals are acting peacefully and within the law.
- Cambodia, 2015: In 2015, we were approached by a US labor rights organization, the Worker Rights Consortium (WRC), regarding our position on the legal action taken by the Garment Manufacturers Association in Cambodia (GMAC) against six independent trade union leaders in Cambodia for their alleged involvement in the destruction of property during the 2014 nationwide protests. We explained that we had been very clear in our communications with GMAC and our suppliers. And that we believed the criminal charges were without merit and that the case should be withdrawn. Throughout 2014, we met with the GMAC secretariat and individual GMAC board members on more than one occasion to deliver that message. And we repeated that message in subsequent face-to-face meetings in 2015.
- China, 2014: This case involved the detention of two labor advocates who had supported striking workers at the Yue Yuen industrial complex in Dongguan, in the People’s Republic of China. We engaged on a daily basis with civil society groups in southern China as we tracked the local government’s handling of the largest strike ever in the PRC, involving some 40,000 workers. Two advocates from the Shenzhen Chunfeng Labour Disputes Services Centre who had been advising the workers were arrested and detained by police. On the day the strike ended, one of the advocates was released, but the other remained in detention. The reasons for his arrest were not disclosed by the authorities, although it was rumored that he was being held for incitement and “causing trouble.” We petitioned the local mayor to release the advocate. Our action was timed with an online civil society campaign. Three weeks later, the individual was released without charge.
Women in the Supply Chain
Women make up half of adidas’ current global employee base and are the dominant gender in our supply chain; more than 80% of workers making our products are women.
Our approach to ensuring the equal treatment of women in our supply chain is closely aligned with the expectations laid out in the UN Convention on the Elimination of All Forms of Discrimination against Women (CEDAW). The underlying principles of CEDAW are reflected in the language of our Workplace Standards and our supporting Guidelines on Employment Standards, which our business partners must follow. These guidelines explicitly state that “workers must not be discriminated against on the basis of their gender, marital status, or because they are pregnant or breastfeeding.” Moreover, women are to be guaranteed “equality of opportunity and treatment in access to training, employment, promotion, organization and decision making, in addition to securing equal conditions of remuneration, benefits, social security and welfare services.”
We aim to bring a gender lens to our strategic suppliers’ operations ensuring that all workers have the same opportunities, rights, and obligations. To support this goal, we launched our Gender Strategy for Business Partners in 2022 to guide and help our strategic suppliers in this process. In addition, we introduced and shared guidelines alongside a self-assessment tool to help them develop and implement their own gender strategy. The tool is designed to help suppliers identify gender gaps in their operating practices and procedures and provide the building blocks they need to develop their own gender strategy. From 2023 onward, suppliers will monitor their progress against improvement plans aimed at closing potential identified gaps.
Since 2023, all strategic suppliers also conduct annual worker surveys on gender equality. More than 44,000 workers participated in these surveys, which are designed to evaluate worker experience and perception of gender equality in the workplace, obtain worker feedback on gender equality practices in factories, and provide strategic suppliers with a reference point for continuous improvement.
We have also implemented tailored programs and initiatives in collaboration with organizations aimed at securing the rights and ensuring the health and safety of female workers in our supply chain. Selected examples of such programs and initiatives are outlined below:
- Women’s Leadership Program (WLP): This program was launched as a pilot in Vietnam in 2016 and was expanded in 2017 to countries including Indonesia, China, Cambodia, the Philippines, Myanmar, and India. To date, over 4,300 female supervisors in our strategic supplier factories have joined the program and benefited from tailored training to support career development and job promotion. We closely track the progress of workers who complete this training initiative, and since 2016, approximately 170 female supervisors have been promoted to higher positions as a result of their participation in the program. In 2023, more than 1,500 supervisors were trained as part of the WLP.
- Americas Group (El Salvador and Honduras): Through its active participation in the multi-stakeholder initiative, the Americas Group (AG), adidas has been collaborating with other brands, the Maquila Solidarity Network, the Fair Labor Association (FLA), and local labor rights and feminist CSOs on finding sustainable remediation to macro-level issues heavily affecting women maquila workers. Much of the AG’s work in Central America derives from the Women’s Labor Rights Agenda for the Central American Maquiladora Industry, published in 2014 by the Central American Women’s Network in Support of Maquila Workers (REDCAM). As a priority, the AG has been focusing on supporting local efforts in identifying sustainable ways for employers to meet their legal obligations around child-care provision. In addition, in 2017, the AG began exploring possible ways to help improve how brands and factories prevent, identify, and remediate sexual harassment and other forms of gender-based violence in the workplace.
- Women’s Empowerment with Baidarie (Pakistan): Launched in 2017, this project aims to provide women with economic opportunities by strengthening their knowledge and skills. It has equipped home-based women workers impacted by the automation of the football stitching industry with locally marketable and demand–driven skills, creating opportunities for the induction of trained female workers into the formal sector and enabling women to set up their own profitable micro- and small-sized business enterprises. Click here to read more.
Indigenous People
Indigenous peoples are generally identified as Tribal or First Nations peoples whose social, cultural, and economic conditions distinguish them from other sections of their national community. Their relationship with the land and natural resources on which they depend is inextricably linked to their identities, cultures, livelihoods, and physical and spiritual well-being. As a result, indigenous peoples are often disproportionately affected by climate change, environmental degradation, loss of resources and displacement, and face high levels of poverty and poor access to education, and health.
adidas is committed to respecting the rights of indigenous peoples in line with the United Nations Declaration on the Rights of Indigenous Peoples and ILO Convention No. 169 (Indigenous and Tribal Peoples Convention). We require our manufacturing partners to obtain free, prior, and informed consent for any greenfield developments that may require land acquisition in proximity to tribal areas, or in locations where land rights have been disputed. We have modeled our approach and expectations on IFC Performance Standard No.7: Indigenous Peoples and related IFC guidance on land acquisition.
In the upstream end of the value chain, we require suppliers of raw materials such as cotton and rubber to conduct human rights and environmental due diligence and to follow standards that consider the rights of Indigenous peoples. For example, adidas is a founding member of Better Cotton. The Better Cotton Standard System outlines a High Conservation Value (HCV) approach to cotton farming. This means that before Better Cotton farmers can convert any land to cotton production, they must complete an HCV assessment. The assessment guides them in collecting field data, consulting with local stakeholders such as community leaders and Indigenous people, and analyzing any existing information to identify HCVs in their landscape. Once farmers have identified HCVs, Better Cotton helps them manage and protect them.
Indigenous peoples may also face exploitation or misappropriation of their cultural and economic rights. When marketing and designing products, adidas strives hard to respect indigenous artwork, designs, symbols, and other forms of cultural expression. We have conducted internal training to raise awareness of the importance of protecting such rights.
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 clearly emphasize that our supplier partners must recognize 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
A worker’s right to freely associate must be protected. No employee should be discriminated against because of their trade union affiliations. Our approach to effective workplace communication and ensuring freedom of association (FOA) in our global supply chain is built on three pillars and aligned with basic human rights concepts.
Respect | adidas recognizes 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. It is essential that employees exercise their right to freely communicate and engage with the management. adidas does not seek to promote, nor prevent, the lawful formation of workers’ organizations, 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 |
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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 recognize 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 recognize and respect the right of employees to join and organize 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 implementation FOA. 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.
For instance:
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 organizations 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 labor officials, trade unions and suppliers to run FOA awareness training sessions, to strengthen workers’ understanding of their associational rights to form and join organizations 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. We require them to establish a health and safety management system that adheres to the standards and procedures of the international standard OHSAS 18001.
We are committed to tracking and reporting health and safety incidents in our supply chain. In 2018, we started to track the incident and severity rates across our strategic suppliers globally, and plan to report this figure in the coming years. In addition, we have initiated a machine safety project at major footwear suppliers in Indonesia, one of our main sourcing countries. The aim of this is to precisely assess machine safety conditions and associated risks, as the majority of accidents in footwear factories are caused by machines. We have expanded the project scope in 2019 to cover additional suppliers and sourcing countries.
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 stakeholders to play a role in achieving effective and sustainable solutions.