"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."
