Responses from adidas

Proposal A1:

Require suppliers to issue 'Right to Organize' guarantees to workers.

Adidas endorses the right to organize in their own code and audits against that. They don’t, however, require suppliers to issue or communicate their own Right to Organize Guarantee to their workers. With 45% of their suppliers located in China and Vietnam, where freedom of association is restricted, they question the applicability of this provision.

Full response

"The adidas Group’s Workplace Standards are derived from ILO conventions. As such, FOA and the right to form and join a trade union of a worker’s own choosing is a right that we seek to promote and protect. It is also a key performance measure for our suppliers and is communicated to workers in open letters in their own language. Moreover, a positive climate of non-interference is encouraged through the encouragement and implementation of effective systems of worker-management communication.

"At the enterprise level FOA and other trade union rights are being closely monitored by our Social & Environmental Affairs (SEA) team. Where we see breaches of this right by our business partners, we do take direct action. However, before doing so, we first look to the relevant government authorities to take the necessary steps to enforce their own labour laws, and for workers and unions to find redress through mediation and labour arbitration processes.

"We would be interested to learn how the ‘Right to Organise Guarantee’, which was been referenced in the Clearing the Hurdles report, has been applied in practice by other brands. For example, has it been communicated to workers in the Peoples Republic of China and in Vietnam, where a single government-backed union is mandated by law? Some 45% of our suppliers are located in these two countries."

Proposal A4: Provide an accessible complaints process for workers.

All approved suppliers are required to post open letters from the adidas Group to workers providing a hotline number to the adidas Social & Environmental Accountability (SEA) team. Following the receipt of a worker complaint, SEA investigates the issues reported by interviewing workers and management, and by reviewing pertinent documents. The SEA team then identifies the subsequent training, consultation and monitoring required.

Full response

"Since the establishment of our programme a decade ago we have provided workers with the contact numbers of our field monitors and a confidential channel to lodge complaints about factory non-compliances, including infringement of FOA rights.

"All approved suppliers are required to post open letters from the adidas Group to workers providing a hotline number to the Social & Environmental team. In some cases these hotlines are manned by independent NGOs, as is the case in China. In other countries, such as Bangladesh we are partnered with local NGOs to independently report on worker concerns.

"Following the receipt of a worker complaint, SEA investigates the issues reported by interviewing workers and management, and by reviewing pertinent documents. The SEA team then identifies the subsequent training, consultation and monitoring required. Depending on the findings, we involve liaison office staff, quality staff, other brands, NGOs, and local Government in the resolution of problems within the work place."

Proposal A9: Require suppliers to sign union access agreements.

Adidas expects its suppliers to be neutral in respect to union organizing and says it “would take enforcement action if a local trade union provides us with evidence that a right of access has been denied.” However, it will not require that suppliers sign access agreements.

Full response

"At a minimum, we expect our suppliers to recognize and respect FOA rights, to be neutral regarding organizing, and to forego campaigns against union formation. We would not mandate that suppliers sign access agreements, but we would take enforcement action if a local trade union provides us with evidence that a right of access has been denied."

Proposal B2: Eliminate third-party employment schemes.

Although adidas’ Workplace Standards do not explicitly prohibit the use of recruitment agents, the company deems its suppliers “directly responsible for all recruitments terms, employment terms and conditions…” Suppliers are therefore not “allowed to use employment agencies which manage the entire employment relationship.”

Full response

"In recent years there has been a growing trend in some countries for suppliers to outsource the entire employment relationship. The Workplace Standards does not prohibit the use of recruitment agents. However, the factory will still be deemed directly responsible for all recruitments terms, employment terms and conditions, and to ensure that our Employment Guidelines are adhered to throughout the recruitment process. In short, suppliers may use recruitment agents, but are not allowed to use employment agencies which manage the entire employment relationship. A supplementary guidance note was developed on this standard in 2006, which will be incorporated into the second edition of the adidas Group Employment Guidelines, due for release in 2009."

Proposal B3: Eliminate short-term contracting.

According to adidas “contract workers must receive at least the minimum wage or the prevailing industry wage, whichever is higher, and all legally mandated benefits.” The use of contract workers must also be clearly defined and cannot be a means for suppliers to continuously engage workers in multiple short-term contracts. The company does not commit to requiring automatic open-ended contracts for workers after 2 fixed term contracts or two years’ employment.

Full response

"Based on the findings from our own monitoring, and in response to feedback from the NGO community, union organizations, and workers themselves, in 2006 a supplementary guidance note was developed dealing with contract, temporary and/or casual labour. The standards and practices set out in the guidance note, make it clear that we expect suppliers to comply with local laws and our Employment Guidelines when recruiting workers and signing employment contracts, and that the use of short-term labour should be limited and only used under certain conditions. (Note: this guidance note will also be incorporated into the second edition of the adidas Group Employment Guidelines.)
The two underlying principles governing this standard are:

"(1) suppliers must not hire workers on a contract basis as a means for depriving such workers of the correct wage and benefits, or other rights and privileges provided to permanent workers; and

"(2) suppliers must not hire contract workers on a continuous basis, multiple short-term contracts, or as regular practice, to support normal business needs.

"The guidance note referred to directly above states that suppliers may hire contract workers where contract (ie short-term) employment is allowed by law; in cases of unusual or extraordinary circumstances which may result in great financial loss to the supplier if delivery of goods cannot be met on time; or in the event of an unexpected or unusually large volume of orders placed at the factory and the permanent workforce is not sufficient.

"If factories use contract workers during peak periods, then the peak season must be clearly defined and this information provided to adidas, ie suppliers should consult with SEA before hiring any contract workers. Additionally, the factory should define the job functions or tasks that contract workers are hired to perform, and maintain information on the use of contract workers in relation to production needs.

"The same guidance notes specifically states: 'Contract workers must receive at least the minimum wage or the prevailing industry wage, whichever is higher, and all legally mandated benefits such as social security, other forms of insurance, annual leave and holiday pay.' It also states: 'Factory rules and regulations apply to contract workers the same as to permanent workers.'

"The guidance that we have developed on this point does not specify at which point a supplier would be required to automatically hire a worker who has been engaged on a short-term or contract basis. This is mainly because different countries and jurisdictions have adopted their own requirements to protect contact workers.

"Nonetheless, the standards set out in the guidance note referred to above, are aimed specifically and preventing suppliers from continuously engaging workers on multiple short-term contracts.

"Additional requirements set out in the guidance note are:

"• Any local laws governing contract workers must be observed. Where local law is silent on specific aspects of contract employment, at a minimum, contract workers must be provided an employment agreement, setting out the employment terms and conditions.

"• Personnel files and all relevant information in relation to contract workers must be maintained and accessible at the factory at all times. If a contract worker is hired on more than one occasion, ie under separate contracts, the worker should retain the same ID number where possible and all information on that worker must be kept in one file.

"• Contract workers must be given priority when the factory is seeking ‘new’ permanent employees

"• For any contract worker who becomes a permanent employee, seniority and other benefits such as social security entitlements, must be dated from the first date of entry to the factory as a contract worker, and not from the first day of permanent employment, ie all work-related benefits accumulate. "

Proposal B6: Establish long-term relationships with factories.

Adidas strives “to engage in long term and stable relationships with manufacturing partners,” but makes no commitment on targets.

Full response

"Over the past 7 years the adidas Group has implemented a sourcing strategy that seeks to balance security with flexibility and growth. To this end, we strive to engage in long term and stable relationships with manufacturing partners."

Proposal C1: Adopt Responsible Transitions policies.

Adidas has already adopted formal policies and procedures in respect to closures which are posted on its website. The company is willing to benchmark these procedures to MFA Forum guidelines.

Full response

"In 2006 SEA reviewed and updated our Workplace Standards and supporting policies, including our standard operating procedures for managing factory terminations. This procedure is posted on our Corporate website. We would be happy to review our termination procedures and benchmark these against the guidance offered in the MFA Forum’s Guidelines for Managing Responsible Transitions. Any revisions or updates to our existing procedures following such a review would be re-posted, i.e. made public, on our website."

Proposal C3: Report publicly on length of factory relationships.

Adidas says only that it “could consider” publishing average length of relationships with core suppliers but not its indirect supply chain (managed by licensees and agents). The company has no plans to track the location of factories by length of relationship.

Full response

"We could consider publishing the average length of our relationships with our main suppliers, that is, those suppliers through whom we directly source our product. However, as some of these relationships extend upward of 20 years and other relationships are comparatively recent, especially among specialty suppliers, we are not clear as to the value of creating such an ‘average’.

"Within our indirect supply chain - which is managed through intermediaries such as licensee and agents - we recognize that seasonality and the turnover in suppliers is much greater, with smaller order volumes. As a consequence, the average engagement may be shorter, but we do not track this specific data. We currently have no plans to generate data to map the location of factories by length of service."

Proposal C4: Report publicly on how suppliers are chosen and/or eliminated.

adidas reports publicly on these issues in its Annual Sustainability Reports, and has committed to publishing its Standard Operating Procedure for the approval of new suppliers, its Guideline for enforcing workplace standards and its Standard Operating Procedure (SOP) for factory terminations on its website.

Full response

"We have published our Workplace Standards and associated policies and guidelines. These are accessible on the adidas Group website, under Sustainability. Our recently revised Standard Operating Procedure (SOP) for the approval of new suppliers is soon to be posted on this site, together with our Enforcement Guideline and our SOP for factory terminations.

"We have described the linkages between our sourcing decisions and the compliance performance of our suppliers previously, in our annual Sustainability Reports. These are also to be found on our corporate website.

"The following provides amplification.

"Sourcing and Supplier Selection: To meet our fiduciary and governance obligations as a business we follow well developed and mature risk management processes. These processes inform and influence our sourcing strategies at a country level. Hence, in order to mitigate geo-political, trade and other business risks, we have established a balanced portfolio of suppliers across multiple sourcing countries. We recognize that some of these sourcing countries do not have independent trade unions, but they have a highly evolved and well established infrastructure for the export of manufactured goods that meet our sourcing needs.

"Our process of supplier selection is driven by our Sourcing organization nominating factories that pass technical performance criteria (in particular quality standards). These nominated suppliers are then screened for social compliance. Those that meet our minimum thresholds under our Workplace Standards are approved. Those that fail are rejected, or rejected subject to a second visit to permit remedial actions. We are not involved in comparative exercises, choosing one supplier over another where the selection could then be determined based on the unionized status of the supplier, or any other single factor.

"As for retention of suppliers, the reasons for termination of business relationships may be manifold – driven by concerns over technical performance, quality, available capacity, on-time-delivery, financial stability and investment levels, a failure to agree prices, etc. Occasionally, factories are also terminated due to repetitive non-compliances or zero tolerance issues under the Workplace Standards. This however is normally the last resort following extensive engagement and a ‘three strikes’ warning letter system, which calls for remedial action on the part of the supplier.

"Order Allocation and Management of Suppliers: Decisions taken on order placements – if we take, for example, our footwear sourcing division - are based on a range of factors, among them the overall market conditions and consumer demand, seasonal fluctuations, supplier performance, product/category mix and the balancing of orders between suppliers to maintain committed fill rates. In evaluating the ongoing performance of a supplier, our Sourcing colleagues refer to the factory Footwear KPI data.

"The Footwear KPI data measures a range of parameters including quality, on-time delivery, innovation (R&D) and management commitment. In addition to these factors, the Footwear KPIs contain labour and social compliance parameters, including worker turnover levels, average working hours (cf. targeted levels) and a composite SEA indicator.

"The SEA indicator considers six units of measure:

"1. Measuring management commitment to the effective delivery of the agreed strategic compliance plan;

"2. Measuring supplier management systems for HR and HSE includes an evaluation of certifications for environment and health and safety, development of HR and HSE systems, retention of qualified professionals for those management systems, and internal audit assessments of labour and HSE;

"3. Measuring worker management communications and industrial relations focuses on the factory’s ability to resolve disputes, respect forms of worker representation, develop effective grievance procedures and promote sustainable worker-management communications;

"4. Measuring the delivery and effectiveness of internal training for factory staff focuses on the process for training needs assessment, the scheduling and execution of training programmes, and the capital investment for training. Trainers are evaluated for skill, knowledge and experience and the factory training records are also reviewed;

"5. Measuring transparency in communication and reporting focuses on proactive factory reporting of self-assessment audits and action plan progress. It also scores factories on whether workers are coached, verification of document authenticity, and communication of the Workplace Standards to the workforce and subcontractors; and

"6. Measurements for compliance auditing focus on the factory management’s responses to non-compliance.

"Please note that the adidas Group has no plans to make public the full workings of our internal sourcing and order placement tools, our supplier rankings, or the individual scores or KPIs contained therein."

Proposal D1:

Make a commitment to paying a living wage.

The adidas Code of Conduct recognizes that “Wages are essential for meeting the basic needs of employees and reasonable savings and expenditure,” the company will not commit to incorporating a living wage in its Code.

Full response

"In 2001 the Wages & Benefits standard in our code was revised and updated, to read as follows: 'Wages are essential for meeting the basic needs of employees and reasonable savings and expenditure. We seek business partners who progressively raise employee living standards through improved wage systems, benefits, welfare programmes and other services, which enhance quality of life.'

"The adidas Group has examined the question of fair wages in the past and has concluded that the best way to improve the general welfare of workers is to work with our business partners at the enterprise level, to promote wage-setting mechanisms which are transparent and have been developed with the direct input of workers. Ideally, this occurs through negotiation or collective bargaining, or through alternative legal means, such as a workers council or welfare committee. We believe basic pay should be benchmarked at a level higher than the local minimum wage or the industry wage, and should acknowledge and rewards workers for productivity gains. A suppliers’ wage-setting should also take into account data the general cost of living and needs of their workforce. The wage setting mechanisms must also be supported by improvements in the factories human resources management system and they must meet, in full, all legally mandated benefits.

"However there remains a significant gap between broad objectives and ideals derived from our research on Fair Wages and the delivery of improved wage-setting mechanisms and increased pay and benefits at the factory level. Across the supply chain we find that:

"a) the majority of our suppliers pay minimum wage + OT + some allowances and bonuses based on seniority, special skills, hazardous work or night shift work, and productivity;

"b) some of our long-term, dedicated FW and apparel suppliers pay a basic wage above the local minimum to workers with experience and seniority OR in some countries suppliers and employer associations have been pressured (in the case of Vietnam, for example, by industrial action) to pay a basic salary above the minimum in recognition that the local minimum wage is simply too low compared to the workers cost of living;

"c) we fully support the establishment of wage setting mechanisms that are based on negotiation with the workforce, collective bargaining and other forms of direct worker input, as well as the provision of increased benefits to workers which improve worker welfare and living standards; and

"d) in order to realize c) above, in addition to our ongoing monitoring programme, we have engaged service providers and NGOs to project manage a number of initiatives in different countries, including a Human Resource Management Systems ( HRMS) Training programme, establishment of Worker Cooperative Organizations, Industrial Relations & Negotiation Training for factory management, Election of Worker Committees, and FOA Awareness Raising."

Proposal D3: Ensure prices are sufficient to pay a living wage.

“adidas Group will not participate in research which requires the disclosure of confidential price data.”

Full response

“adidas Group will not participate in research which requires the disclosure of confidential price data.”

Proposal D6: Take steps to improve workers’ wages.

adidas Group is concerned that collaboration with other buyers that attempts “to promote or foster certain wage conditions within a factory (other than a requirement to meet overtime premiums and minimum wages as established by local law or through the application of a CBA)” may run into anti-trust issues. The company has made no commitment to addressing this proposal.

Full response

"adidas Group is open to general collaboration with other buyers regarding workplace conditions and the fulfillment of labour rights and local legal compliance. However, where the purpose of such collaboration is to promote or foster certain wage conditions within a factory (other than a requirement to meet overtime premiums and minimum wages as established by local law or through the application of a CBA) then we are concerned that anti-trust considerations apply.

"Please see our earlier comments on living wage in response to recommendation D1."

Response Key

The brand claims to implementing all components of this proposal or has agreed to implement them within Play Fair's proposed timeframe.

The brand is currently implementing or has agreed to implement some of the essential components of the proposal but has refused to implement, has overlooked, or has raised issues with one or more important components; or, the brand agrees to implement the proposal but not within Play Fair’s proposed timeframe.

The brand has refused to implement the essential components of the proposal.

The brand has misunderstood or failed to comment on the proposal; or the brand is considering the proposal, but has yet to make a decision.