The Adidas Group

Brands: Adidas, Reebok, Taylormade, Rockport

The numbers

  • Annual Revenue: $19.24 billion[4]
  • Employees: 50,728[5]
  • Expected Revenue from the World Cup:  €2 billion

The Adidas group annual revenue is more than the GDP of several countries, where its supplier factories are located including:

  • Bosnia and Herzegovina:   $17.47 billion[6]
  • Cambodia:     $14.04 billion[7]
  • Honduras:     $18.43 billion[8]
  • Laos:               $9.418 billion[9]
  • Lesotho:         $2.448 billion[10]
  • Macedonia:   9.613 billion[11]
  • Mauritius:     $10.49 billion[12]
  • Moldova:       $7.253 billion[13]
  • Nicaragua:     $10.51 billion[14]

Production overview

Number of suppliers:  977 first-tier suppliers, 132 subcontracted suppliers

 Adidas has supplier factories all over the world, with their main production countries listed as: China, Vietnam, Japan, Indonesia, Brazil, Other.  Adidas publishes a full public list of the names and addresses of its supplier factories, which is available online. [15]

All in or nothing mock up

Corporate Social Responsibility

All hail the brand!  For most global companies their brand is their business so it is no surprise that companies like the Adidas group, invest millions every year in brand development.  For Adidas, it has paid off.  In 2013, Adidas was listed as one of the 100 best global brands[1].

In order to stay at the top, establishing consumer loyalty is critical. They need to be not just well known, but well regarded and they do this, in part, through Corporate Social Responsibility (CSR.)

94% of European-based CEOs believe that communication about CSR initiatives significantly impacts the firm’s reputation[2].

The Adidas group has successfully incorporated CSR into its business model, made clear on its website which devotes an entire section to “sustainability”.  Their proactive efforts project a positive brand image and help increase the company’s public legitimacy.  It builds a reservoir of social goodwill that Adidas can rely on to minimise the damage to their brand when bad things happen – and they do happen.

Adidas pledge “that acting as a responsible business in society is not only an ethical obligation, but will also contribute to lasting economic success”[3].

But does this reflect a genuine intention or is it the result of clever Mad Men marketing tactics to relieve the concerns of consumers and shareholders alike, in order to increase their bottom line? Does Adidas practice what they preach?

In a world dominated by buzzwords and hashtags, public relations firms and brand management professionals, we need to separate rhetoric from reality. Below are some key facts that should help you do that:

Adidas and a Living Wage

Does Adidas have a living wage benchmark?

No.

Adidas currently uses the legal minimum wage or prevailing industry wage as a benchmark to check if its factories are paying a fair wage.

What is the company position on a living wage?

“Our position is that wages should cover basic needs and expenditure and allow for reasonable savings. We do not determine what our suppliers pay their workers, but we acknowledge that we can influence fair wages, not least through the prices we pay for manufactured goods”[16].

“The Adidas Group has examined the question of fair wages 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”[17].

What about the immense and growing gap between the legal minimum wage and estimated minimum living wage in countries around the world?

The Adidas group believes “minimum wages must take into account inflationary pressures and the needs of the workers. Secondly, wherever new and higher minimum wages are set, we will require our suppliers to meet those wages and any other legally mandated allowances and benefits. [P]rices will be adjusted accordingly, within the normal cycle of price negotiations, to reflect our business partners operating overheads. The mandate for the setting of the minimum wage rests with the employers, unions and government of Cambodia.[18]

With regards to minimum wage-setting processes, the Adidas Group recognizes the need to consider that “business partners are also expected to deliver efficiencies and productivity levels that ensure their on-going competitiveness as suppliers”[19].

Is the Adidas Group committed to continue to source from countries if minimum wages increase?

No.

The Adidas Group acknowledges, “As wages increase, there are commercial pressures to seek cheaper sources of supply in countries with lower wage levels. However, we also consider the benefits of maintaining long-term relationships, so we avoid continually shifting our supply base”[20].

Does Adidas support raising the minimum wage in the countries it sources from?

To early to tell, but doesn’t appear to be.

The Adidas group’s position on this issue is not clear, and their communication is full of mixed messages.  On the one hand the company has communicated their tepid support towards efforts in Cambodia, where labour activists are fighting for a minimum wage increase, stating, “We, together with other brands, support the efforts by the Cambodian government and the Labor Advisory Committee to implement a robust minimum wage review mechanism based on international good practices, using objective criteria and data. We have called for the continued development of such a mechanism, which is supported by the ILO. It is our hope that this will reduce the incidence of wage disputes in the future.”[21]

On the other hand, Adidas CEO Herbert Hainer acknowledged in 2012 that the company was planning to grow production outside of China – a direct consequence from a significant increase to the minimum wage in China.[22]

Adidas and Workers’ Rights

How does Adidas approach workers’ rights and worker empowerment?

With decent rhetoric and disappointing action.

The Adidas group publically discloses their standards and policies.  Included in these are their Workplace Standards – rules related to health and safety, labour rights and environmental protection – which are applicable to both Adidas’ own sites and their supplier’s factories.  The Adidas group’s position on these is clear, stating, “We expect all our suppliers to live up to these Standards. They are a contractual obligation under the manufacturing agreements the adidas Group signs with its main business partners”[23].

To supplement the Workplace Standards, the Adidas Group has produced a number of supporting guidelines, which aim to “make the Workplace Standards understandable and practical, provide additional guidance for our suppliers, and help us work together to find effective solutions to workplace problems”[24].

Freedom of association, collective bargaining, and disciplinary practices are addressed in both the Workplace Standards and the Guidelines on Employment Standards.  In both, the Adidas group clearly articulates, “business partners must recognise and respect the right of employees to join and organise associations of their own choosing and to bargain collectively”[25].   More specifically the guidelines affirm, “The adidas group does not seek to promote, nor prevent, the lawful formation of workers’ organizations, in particular trade unions. However, the Employment Standards protect the right of employees to make their own choices in this regard, free of unlawful interference and ensures that employees have a voice in the workplace”[26].

Similarly, the Adidas group is exceedingly clear about the treatment of employees and the use of disciplinary practices stating, “Employees must be treated with respect and dignity. No employee may be subjected to any physical, sexual, psychological or verbal harassment or abuse, or to fines or penalties as a disciplinary measure. Business partners must publicise and enforce a non-retaliation policy that permits factory employees to express their concerns about workplace conditions directly to factory management or to us without fear of retribution or losing their jobs”[27].

So far, so good.  However, several incidents earlier this year illustrate how there seems to be some severe deficiencies with putting words into action.  Here’s just one example:

In April 2014, around 50,000 employees went on strike at one of the world’s largest shoe factories, Yue Yuen Industrial, located in southern China. The strike was the result of long-term exploitation and the workers demands were clear: “Strikers [said] that they are not being paid the full amount of social insurance and housing benefits owed to them. Additionally, they [said] their work contracts are fraudulent, preventing them from enrolling their children in local schools”[28].

Yue Yuen Industrial is a major supplier to Adidas and Nike.  Adidas’ response was equally unequivocal: Adidas moved some of its production away from the factory[29].  Adidas spokeswoman, Katja Schreiber, said in an e-mail, “In order to minimize the impact on our operations, we are currently reallocating some of the future orders originally allocated to Yue Yuen Dongguan to other suppliers”. The Herzogenaurach, Germany-based sportswear maker “has a highly flexible supply chain in place.”[30]  This response was not surprising or exceptional.   As Teresa Cheng, an organiser, described, “This is the typical behavior of Adidas.  Adidas systematically withdraws its orders and moves them to factories with more exploitative conditions, essentially punishing workers who dare to stand up to sweatshop abuse.”[31]

 Our Conclusion

What’s our conclusion about Adidas?

Put simply, Adidas is not doing nearly enough to ensure that the rights of workers in their supply chain are respected.  A living wage is a human right.  Full stop.  No company, Adidas included, can claim to be working ethically if the people who produce its clothes are paid less than a living wage.

The rules of fair play are grounded in the principles of equality, access, and diversity. Adidas’ marketing campaigns project these core values[32] and they commit to playing “by the rules that society expects of a responsible company”.

So, why then are Adidas garment workers – over 90 percent of who are women under the age of 35 – still struggling to survive on poverty wages?  Because, Adidas is all talk and no action, ultimately deferring responsibility for change to others. 

Adidas must recognise the contradictions between what they preach and what they practice. While claiming to support the principle that wages should cover “basic needs and expenditure and allow for reasonable savings”, Adidas will not ensure their purchasing practices are such that a living wage can be paid and is guaranteed in terms of business.  They also flout any responsibility for ensuring it, passing the buck onto employers and country governments.

On worker’s empowerment, Adidas undermines workers’ rights when they move production away from factories where workers are engaging in collective action, such as strikes.  Such action by Adidas compromises the effectiveness of workers’ organisations, like trade unions, by putting workers’ livelihoods at risk.

Adidas’ annual revenue outstrips the GDP of 14 of the countries it sources from. In that context your have to ask who really holds the power and the responsibility? There is no question about whether Adidas has the resources and capability to ensure that the company meets its social responsibilities.  It does and can.  Yet, Adidas still refuses to go all in for a living wage and workers’ rights.  With great power comes great responsibility.  Until Adidas accepts this fact, and acts accordingly, we have to presume that their rhetoric just disguises a wolf in sheep’s clothing.


[1]http://www.interbrand.com/en/best-global-brands/2013/adidas

[2] Hartman, L. 2007. The Communication of Corporate Social Responsibility: United States and EU Multinational Corporations. http://works.bepress.com/laurahartman/17/

[3] http://www.adidas-group.com/en/sustainability/managing-sustainability/general-approach/

[4]www.forbes.com/companies/adidas/

[5]www.forbes.com/companies/adidas/

[6] data.worldbank.org/country/bosnia-and-herzegovina

[7] data.worldbank.org/country/Cambodia

[8] data.worldbank.org/country/honduras

[9] data.worldbank.org/country/lao-pdr

[10] data.worldbank.org/country/Lesotho

[11] data.worldbank.org/country/macedonia-fyr

[12] data.worldbank.org/country/mauritius

[13] data.worldbank.org/country/moldova

[14] data.worldbank.org/country/nicaragua

[15] http://www.adidas-group.com/media/filer_public/2014/06/17/2014_may_global_factory_list_en.pdf

[16] http://www.adidas-group.com/en/sustainability/supply-chain/critical-issues/#/fair-wages/

[17] Tailored Wages

[18] Letter received from adidas representative on 25/6/2014

[19] Letter received from Adidas representative on 25/6/2014

[20] http://www.adidas-group.com/en/sustainability/supply-chain/critical-issues/#/fair-wages/

[21] Letter from Adidas representative on 25/6/2014

[22] http://www.wiwo.de/unternehmen/handel/adidas-chef-hainer-wir-peilen-eine-million-trikot-verkaeufe-an/6697824.html

[23] http://www.adidas-group.com/en/sustainability/supply-chain/standards-and-policies/#/employment/

[24] http://www.adidas-group.com/en/sustainability/supply-chain/standards-and-policies/#/employment/

[25] http://www.adidas-group.com/media/filer_public/2013/07/31/english_workplace_standards_en.pdf

[26] http://www.adidas-group.com/media/filer_public/2013/07/31/guidelines_on_employment_standards_english.pdf

[27] http://www.adidas-group.com/media/filer_public/2013/07/31/english_workplace_standards_en.pdf

[28] http://edition.cnn.com/2014/04/25/world/asia/adidas-chinese-factory-strike/

[29] http://www.bloomberg.com/news/2014-04-24/adidas-to-move-some-output-from-strike-disrupted-factory.html

[30] http://www.bloomberg.com/news/2014-04-24/adidas-to-move-some-output-from-strike-disrupted-factory.html

[31] http://edition.cnn.com/2014/04/25/world/asia/adidas-chinese-factory-strike/

[32] http://www.adidas-group.com/en/sustainability/managing-sustainability/general-approach/#/our-sustainability-statement/

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