Sustainability as Strategic Focus Area

Being a sustainable business is about striking a balance between shareholder expectations and the needs and concerns of our employees, consumers, and communities, as well as the workers in our supply chain and the environment. We believe that acting as a responsible company will contribute to lasting economic success.

SUSTAINABILITY AS STRATEGIC FOCUS AREA

Our commitment to sustainability is embedded into how we have done business for over two decades. It is rooted in our purpose ‘Through sport, we have the power to change lives.’ In 2021, sustainability was defined as a strategic focus area of our strategy ‘Own the Game.’

Consequently, we have doubled down on our commitment to sustainability and defined a roadmap for 2025 and beyond that allows us to create a positive impact across relevant areas, always focusing on the most material topics – for us and our stakeholders. We will move to a comprehensive, consumer-facing sustainable article offering at scale, expand our circular services, and work toward achieving climate neutrality (CO₂e) across our entire value chain. We will empower our employees to become sustainability ambassadors, just as we invite consumers globally to engage and connect with us on the topic of sustainability. Lastly, we aim to uphold the highest social compliance standards in our supply chain.

We believe that moving toward achieving the targets we have defined for 2025 will set us up for future success. Yet we know that we cannot achieve these alone. We will leverage our long-term relationships with suppliers to ensure they can continue moving with us in alignment with our decarbonization efforts, and work closely with partners to scale innovative materials and recycling technologies. The table below provides an overview of the targets we have set for 2025, supporting our drive for positive environmental and social impact. See Strategy adidas-group.com/s/sustainability

MATERIAL TOPICS

We seek to ensure that we address the topics that are most salient to our business and our stakeholders, and the challenges ahead. To identify these topics, we openly engage with our stakeholders and consider their views and opinions in decisions that shape our day-to-day-operations. In addition, we regularly perform stakeholder consultations to confirm the selection of our material topics. We use insights gained from past assessments and from engagements we hold with multiple organizations throughout the year, review and categorize potential new topics and validate these through discussions with experts and stakeholders across the entire business. Ultimately, we want to better understand the importance a topic has for our business performance and stakeholders, but also gain more visibility about the impact we have on these topics. There were no material changes in 2021, compared to the list of topics in 2020. See Non-Financial Statement

We also make use of the United Nations Sustainable Development Goals (SDGs) as a framework to map their correlation with our own commitment to sustainable development and human rights. We have been able to link prioritized SDGs with both the environmental priorities related to, for example, the selection of materials, manufacturing, use, and disposal of our products, and the needs and concerns of people in the adidas value chain.

Correlation between un sustainable development goals and our sustainability roadmap

STAKEHOLDER DIALOGUE AND TRANSPARENCY

Engaging openly with stakeholders and establishing ways to increase transparency and disclosure has long been central to our approach. Our stakeholders are those people or organizations who affect or are affected by our operations, including our employees, consumers, suppliers and their workers, customers, investors, media, governments, and NGOs. The adidas ‘Stakeholder Relations Guideline’ specifies key principles for the development of stakeholder relations and details the different forms of stakeholder engagement.

adidas participates in a variety of industry associations, multi-stakeholder organizations, and non-profit initiatives. Through these memberships, we work closely with leading companies from different sectors to develop sustainable business approaches and to debate social and environmental topics on a global and local level. We use collaborations and partnerships to build leverage for systemic change in our industry, such as for efforts to mitigate the carbon footprint in our industry’s supply chain, strengthening chemical management practices, and raising standards in the cotton supply chain. In addition, we build awareness, capacity, and knowledge of laws and rights among factory management and workers by partnering with leading providers such as the International Labour Organization’s (‘ILO’) ‘Better Work’ program, as well as with the United Nations International Organization for Migration (‘IOM’) with the objective to ensure that the labor rights of foreign and migrant workers are upheld in the adidas supply chain.

Key memberships:

• Apparel and Footwear International RSL Management (‘AFIRM’) working group
• Better Cotton (‘BC’)
• Fair Factories Clearinghouse (‘FFC’)
• Fair Labor Association (‘FLA’)
• Fashion Pact
• German government-led Partnership for Sustainable Textiles (‘Textilbündnis’)
• Leather Working Group (‘LWG’)
• Textile Exchange
• The International Accord for Health and Safety in the Textile and Garment Industry
• United Nations Fashion Industry Charter for Climate Action (‘UNFCCC’)
• World Federation of the Sporting Goods Industry (‘WFSGI’)
• Zero Discharge of Hazardous Chemicals (‘ZDHC’) working group

We believe transparent communication with our stakeholders is critical. For that reason, we use global reporting standards such as the guidelines of the Global Reporting Initiative (‘GRI’) and the Sustainability Accountability Standards Board (‘SASB’) to inform our external non-financial reporting. We regularly disclose additional information to public-facing social and environmental benchmarks and reporting platforms, and publish important sustainability updates about our work throughout the year on our corporate channels, including our corporate website. A key element is the publication of our global supplier factory list which are updated twice a year. In addition, we disclose the names of the factories of suppliers that process materials for our primary suppliers and subcontractors, where the majority of wet processes are carried out.

We acknowledge the value of climate-related reporting and for many years have been reporting into well-established frameworks. Based on its international accreditation, we are aiming to stepwise include the ‘Task Force on Climate-related Financial Disclosures’ (‘TCFD’) recommendations that enable companies to improve reporting of climate-related financial information, especially climate-related risks and opportunities. The TCFD is structured around four thematic areas that represent core elements of how organizations operate: governance, strategy, risk management as well as metrics and targets.

We believe that with our long-standing commitment to and strategic focus on sustainability we are already covering elements of the four thematic areas in various sections of our Annual Report. adidas has chosen sustainability as a focus area in its company strategy ‘Own the Game’ and therefore a comprehensive roadmap with clear targets is in place. The Sustainability Sponsor Board ensures end-to-end management of this strategy. As part of our risk identification process, we monitor physical risks related to climate change as well as risks and opportunities resulting from the transition to a low-carbon economy. To further refine and develop the core reporting elements in line with the TCFD recommendations, a cross-functional project team was set up in 2021. This team will proceed with establishing solid governance processes around the TCFD and will particularly focus on establishing climate-related scenario analyses. Given the complex nature of the topic, further preparation will be needed to build more granularity and to ensure high quality for more extensive external reporting. SEE RISK AND OPPORTUNITY REPORT

GOVERNANCE STRUCTURE

A robust governance structure ensures timely and direct execution of programs that drive the achievement of our new set of targets for 2025 and beyond. The head of Sustainability is responsible for the development, coordination and execution of our sustainability strategy and reports to the member of the Executive Board responsible for Global Operations. This person also leads the ‘Sustainability Sponsor Board,’ which is composed of senior representatives from Global Brands, Global Operations, Digital, Sales, and other relevant functions across the company. The ‘Sustainability Sponsor Board’ ensures cross-functional alignment, transparent end-to-end management and execution of agreed-upon sustainability goals within their functions. This includes reviewing and signing-off on policies as required. We also maintain a separate compliance function which is operated as the Social and Environmental Affairs (‘SEA’) Team to evaluate supplier-facing social and environmental compliance performance and human rights impacts, reporting, through the General Counsel, to the CEO.

We have set up regular sustainability networking calls for all employees involved in sustainability projects and programs in the organization to ensure company-wide alignment on all levels. On top of this, adidas developed a company-wide sustainability training program available to all employees, educating them on how to think and act sustainably, enabling them to become sustainability ambassadors and encouraging everyone to make personal and professional commitments to contribute to a cleaner planet. Thousands of colleagues have gone through the training in 2021. We also initiated sustainability training for our retail colleagues, with the objective of informing, engaging, and inspiring our entire team and all consumers we interact with on a daily basis, around the globe. See Our People

EXTERNAL RECOGNITION

adidas continuously receives positive recognition from international institutions, rating agencies, NGOs, and socially responsible investment analysts for its holistic approach to managing sustainability. In 2021, adidas was again subject to comprehensive corporate environmental, social, and governance (‘ESG’) assessments, and took part in focused thematic disclosure benchmarks for environmental or social performance. As a result, adidas was represented in a number of high-profile sustainability indices, ratings, and disclosure benchmark evaluations.

Notably, following a thorough assessment by rating agency S&P in 2021, adidas was awarded with an overall ESG Evaluation Score of 85, placing us among the top ten in the entire S&P Global Rating Universe. In its comprehensive assessment, S&P emphasized our industry-leading approach to innovation, supply chain management, and consumer engagement. See Our Share