Environmental Impacts Information

In 2023, decarbonization, circularity, biodiversity, and water management were confirmed as key environmental impact areas for us to continue to focus on in our strategy. During 2023, we continued to increase the number of articles we define as sustainable, aiming at 90% of our articles to be sustainable by 2025, and to work toward achieving climate neutrality (CO₂e) across our entire value chain. We also assessed selected key materials potentially contributing to biodiversity risks and committed to a deforestation-free leather supply chain latest by 2030. We further evolved our approach to circularity to support the creation of an ecosystem that is necessary to scale circular solutions in our industry. This included focused engagement in cross-industry projects aimed at unlocking circularity, such as ‘T-REX’ and ‘Sorting for Circularity.’ We also continued to address water efficiency and quality in our supply chain, with an advanced chemical management program and ambitious targets in place.

We empower our employees to become sustainability ambassadors, just as we invite consumers globally to engage and connect with us on the topic of sustainability. Our established running movement ‘Run for the Oceans’ has evolved into ‘Move for the Planet,’ an initiative aiming to raise consumer awareness for climate change by supporting selected grassroots sports organizations. adidas has partnered up with not-for-profit organization ‘Common Goal’ to help communities in need engage in climate action through sport. This includes initiatives such as renewing a community’s sports field using recycled materials and providing training on how to reduce plastic waste at sports facilities.

We believe that moving toward achieving the targets we have defined for 2025 and beyond will set us up for future success. Engaging closely with our suppliers remains critical to achieving our targets. We are therefore leveraging our long-term relationships with suppliers to ensure they can help us achieve our decarbonization targets and we are also working closely with partners to scale innovative materials, recycling technologies, and circular business practices across the value chain.

The table provides an overview of the targets we have set ourselves that will help us reduce our environmental impacts.

Decarbonization

The climate crisis presents the most pressing long-term challenge facing civilization. For that reason, adidas has set targets that will help us limit emissions aligned with the 1.5°C benchmark and contribute to a net-zero future. adidas has committed to:

• achieving climate neutrality (CO₂e) across its own operations (Scope 1 and 2) by 2025,
• reducing absolute greenhouse gas (GHG) emissions across the entire value chain (Scope 1, 2, 3)¹ by 30% by 2030, measured against a baseline of 2017, and
• achieving climate neutrality (CO₂e) across the entire value chain by 2050.

Our emission reduction targets by 2025 and 2030 have been approved by the ‘Science Based Targets initiative’ (‘SBTi’).² Within the 2025 target, we commit to reducing absolute Scope 1 and 2 GHG emissions by 90% ³ from a baseline of 2017. This target is consistent with the reduction pathways needed to prevent a rise in average temperatures of more than 1.5°C – the most ambitious goal of the Paris Agreement. Our GHG reduction target for value chain emissions (Scope 1, 2, 3) of 30% by 2030 (baseline 2017) meets the SBTi’s criteria for ambitious value chain goals, meaning they are in line with current best practices.

When it comes to decarbonization, we believe that data quality is critical. Therefore, in addition to developing a tool that enables us to quantify, monitor, and be transparent about our carbon footprint along our entire value chain, we have put considerable effort in gathering more primary data from our suppliers over the last few years. This has allowed us to gain more precise insights into carbon emissions, energy consumption, and the impact of our decarbonization initiatives.

As both the quality and availability of data improved significantly in 2023, we were able to update our methodology for measuring carbon footprint across our value chain. Consequently, we recalculated the 2022 data to ensure year-over-year comparability. This updated methodology continues to be fully aligned with international methodology standards, provided by e.g. the GHG Protocol and SBTi, and reduces the dependance on assumptions and generalizations typically presented by secondary data.

As in the previous year, the 2023 results show that our environmental impacts are distributed unequally across the value chain, with the most significant impacts generated in the supply chain, particularly in raw materials production and processing.

The following table shows the total annual GHG emissions across our value chain. The average Scope 1, 2, and 3 annual GHG emissions per product for 2023 decreased by 3% compared to the previous year. This reduction has been driven by the work done with our suppliers, such as continuing with the phase-out of coal in our manufacturing facilities and the increased use of renewable energy. Our innovation effort, that has also enabled us to use low-carbon manufacturing methods and materials, as well as decreased production volumes due to high inventory levels in the market translated into a 24% reduction in total absolute GHG emissions⁴ compared to the previous year.

During 2023, some of our suppliers purchased Energy Attribute Certificates (‘EACs’). The reduction of emissions resulting from these EACs were not factored into our footprint calculation, due to the current lack of consensus on concepts on the operationalization and accounting approach. Instead, we continued to collaborate with the industry to find more robust solutions that allow for Scope 3 interventions that further incentivize investments and overall long-term decarbonization of the industry.

Reducing land-related emissions (‘FLAG’)

adidas recognizes the importance of reducing land-related emissions. Therefore, in 2023, we started to quantify our emissions resulting from Forest, Land, and Agriculture (‘FLAG’) operations according to the SBTi FLAG Guidance. The results of our calculations (based on 2022 data) show that FLAG emissions represent only a minor proportion of adidas’ total GHG emissions, with the main impacts stemming from sourcing cow leather, cotton, and natural rubber. The result of 7% FLAG emissions⁵ falls below the SBTi threshold for required FLAG target setting, but adidas will continue to work on reducing those emissions. 

Measuring our product footprint

adidas recognizes the pivotal role of data and transparency as catalysts for increasing awareness and informed decision-making to mitigate the environmental impact of our products. This impact, largely resulting from decisions made during the design phase, underlines the importance of strategic interventions. In 2023, we achieved a critical milestone with the development of an in-house, state-of-the-art tool that allows us to measure the environmental footprint of any footwear or apparel product within our portfolio. Aligned with international standards, the methodology adheres to ISO 14067:2018 and has undergone rigorous third-party verification. This tool is seamlessly integrated into our existing creation systems, connecting and leveraging available life cycle assessment (LCA) data, ultimately speeding up the calculation process and enhancing accuracy.

This tool enables us to create higher transparency about product carbon footprints for consumers. In 2023, we managed to disclose the carbon footprint for selected articles and will continue to do so for an increasing number of articles in 2024.

Identifying ways we can make lower-impact products requires a detailed and thorough approach that includes not only optimizing our own operations but also the manufacturing of each of our products. As most of our carbon emissions occur outside our direct control, we collaborate with our suppliers located across the globe, helping them improve their carbon footprint during production processes.

Supply chain

Greenhouse gas emissions resulting from energy use during manufacturing of products at our supplier factories are one of the major contributors to the carbon footprint of our entire value chain. Consequently, working with our suppliers and helping them reduce their emissions is critical for achieving our decarbonization targets. As our supply chain is large and diverse, we benefit from setting and communicating clear ambitions and tangible goals for suppliers, while supporting them with expert know-how and training, and ultimately also measuring and rewarding them for progress made.

In 2022, we set clear expectations for developing a holistic approach to decarbonization in our ‘adidas Decarbonization Manifesto’ for our strategic suppliers at Tier 1 and Tier 2:

• Environmental stewardship: Suppliers should set targets that get approved by the SBTi by 2024.
• Materials: 100% of new material offered to adidas must be of sustainable content and produced using low-carbon-intensive processes.
• Product: Suppliers should aim for an aggressive adoption of more sustainable and low-carbon materials spanning from creation to manufacturing.
• Transparency: Suppliers should build in-house capacity to provide full transparency and traceability, from raw material to finished product, and connect to the adidas sustainable material tracing tool that is used to trace the source of origin.
• Energy sources: Suppliers should adopt clean energy, including rooftop solar energy, energy sourced through renewable energy purchase power agreements (PPAs), and other renewable alternatives, and also achieve a phase-out of coal by or before 2025.
• Manufacturing processes: Suppliers should adopt low-carbon technologies selected from the adidas low-carbon technology portfolio.

During 2023, we translated the high-level direction of our Manifesto into actionable goals and revised the framework we use to track performance of suppliers, helping us monitor how each supplier is contributing to our decarbonization efforts. These goals include increasing the use of renewable or low-carbon energy sources, improving energy efficiency, and demonstrating progress toward targets that are aligned with the SBTi. We incentivize suppliers for their performance, including product allocation priority, opportunity for existing, high-performing partners to gain market share, entry opportunity for new, disruptive supplier partners, as well as first-mover advantage and sustainability leadership position.

Key highlights of our suppliers’ progress during 2023 are as follows:

• Phasing out coal-fired boilers: Since 2022, we have prohibited our suppliers from installing new coal-fired boilers, heaters, or power generation systems, and remain committed to phasing out coal-fired boilers at all direct supplier facilities at Tier 1 and Tier 2 by 2025. By the end of 2023, more than 48 boilers have been modified or replaced (2022:18) to use 100% low-carbon fuel such as biomass or natural gas. Furthermore, six of our suppliers have now completely phased out the use of coal in their production.
• Increasing adoption of on-site renewable energy for electricity generation: We have been asking our suppliers to install on-site renewable energy sources, such as rooftop solar projects, for the last few years, and we are seeing steady progress. The total capacity of rooftop solar projects at our key suppliers increased by 44% compared to the previous year to 267 MWp in 2023.
• Preparing suppliers to purchase electricity from off-site renewable energy (RE) sources: After seeing first positive environmental effects from implemented PPAs and Green Tariffs at some supplier facilities in 2022, we expanded the coverage and scale of our renewable electricity target in 2023. We supported our suppliers by conducting upskilling sessions on PPAs, Green Tariffs, and Energy Attribute Certificates (‘EACs’) or Renewable Energy Certificates (‘RECs’) and connecting them with providers of these solutions. As a result, 35 supplier factories are now using more than 50% of their electricity from RE. Overall, our suppliers sourced more than 447,268 MWh from off-site renewable energy projects in 2023, reflecting an increase of 38% compared to the previous year.
• Driving industry collaboration to support suppliers achieving their SBTi targets: In 2023, we initiated a strategic partnership with the Indonesian Chamber of Commerce and Industry and saw 20 of our Indonesian suppliers successfully graduating from their technical training program, which is designed to help them achieve their SBTi-approved targets. We connected with various industry experts such as World Resources Institute (WRI), CDP, World Wildlife Fund (WWF), and Indonesia Business Council for Sustainable Development (IBCSD) to help them establish their SBTi targets. Through the program, our suppliers identified and quantified their Scope 1, 2, and 3 GHG emissions and built roadmaps on how to reduce emissions. 

Own operations

We are committed to reducing our GHG emissions in our own operations, i.e., our administrative offices, distribution centers, and own retail stores. In 2023, this equaled to a coverage of 3,491,966 m² of gross leased area.

We are following a clear roadmap across own operations to achieve our GHG emission-reduction targets, focusing on both steadily increasing environmental performance data coverage and continuing to implement eco-efficiency standards and processes through a holistic management system (‘Integrated Management System’ – ‘IMS’). We are working on measures such as improving energy efficiency, implementing on-site RE production, and sourcing renewable electricity. We continued to invest in our own operations and offered ‘Green Funds’ to subsidize local energy efficiency and on-site renewable energy projects. One such measure in 2023 was an on-site solar project combined with electrification of gas infrastructure used for heating at our distribution center in Caspe, Spain. For 2024, we plan several projects for implementation at our headquarter campus in Herzogenaurach, Germany, and at other own operation sites globally.

We further improved our coverage of energy data collection within our own operations. During 2023, we managed to increase our primary data coverage for our own retail sites by a further five percentage points compared to the previous year to 41% globally. Data coverage for administrative offices and distribution centers is at 100%, while data for showrooms and smaller offices was mostly estimated.

In 2023, our total energy consumption across own operations globally was 494,489 MWh (2022: 510,539 MWh), equivalent to total emissions of 164,236 tCO₂e (2022: 164,149 tCO₂e). While we continue our transition toward renewable electricity in Europe, in the past few years we decided to switch our focus from short-term initiatives, such as the purchasing of EACs for Europe and North America, to more impactful measures, e.g., securing long-term renewable electricity contracts such as PPAs. As a result, we saw no significant change in reported Scope 1 and 2 GHG emissions despite an overall decrease in energy consumption compared to 2022. In 2023, we signed a virtual PPA for Europe: For a period of ten years, adidas will be supplied with approximately 50,000 MWh of renewable electricity per year produced by a new solar project in Spain, starting in 2025. This will contribute to the long-term reduction of emissions from our European operations.

Our IMS helps us to secure all relevant ISO management systems certifications for key locations, such as environmental management (ISO 14001), health and safety management (ISO 45001), and energy management (ISO 50001). We aim to further expand these certifications to more key sites through implementation of the standards as well as internal and external audits, as they support our efforts to achieve our energy, water, waste, and health and safety targets. As of 2023, 70 sites (2022: 64) were certified for ISO 14001, 140 sites (2022: 112) for ISO 45001, and 324 sites (2022: 322) for ISO 50001 (applies to locations with more than 50 employees or space exceeding 4,500m²).

We continue to use certifications that require consideration of environmental aspects for interior design and construction of own retail stores – including ‘Leadership in Energy and Environmental Design’ (‘LEED’) and ‘Building Research Establishment Environmental Assessment Method’ (‘BREEAM’) certifications. While we aim to obtain these external certifications for strategically relevant projects, we also apply a set of internal eco-efficiency standards that mirror the priorities of the LEED certification for all other projects. In 2023, seven of our own retail stores across the globe received LEED certification, with our retail store in Cape Town, South Africa, being awarded the highest level of recognition, LEED Platinum, for its advanced energy metering, indoor water use reduction and enhanced indoor air quality strategies. 

Water efficiency

adidas has been running water reduction programs for years and has built a strong awareness of the importance of this topic among its Tier 1 suppliers. Since 2021, we have been using a self-governance model that requires suppliers to take responsibility for their reduction efforts, while adidas continues to track and monitor their consumption. We continued to expand and focus our water reduction efforts by including additional Tier 2 suppliers with high water use in our environmental program. In 2023, Tier 2 suppliers achieved a 33% reduction in water intensity (m³/total product output value in US $), compared to the 2017 baseline. By 2025, we aim to achieve an overall reduction in water intensity of 40% against the 2017 baseline. This will be accomplished with the aid of new technologies and through continued support for our suppliers.

At our own operations globally, we aim to strengthen water efficiency and wastewater projects in the coming years. By the end of 2023, our water intensity at administrative offices and distribution centers totaled 0.138 m³/m² (2022: 0.145m³/m²). In the year under review, we saw a decrease of the absolute volume of water withdrawal compared to 2022 due to reduced operations at some locations. Overall, we achieved an accumulative reduction of 28% (2022: 25%) compared to the 2019 baseline (0.193 m³/m²), and, with that, exceeded the target we set ourselves for 2025. 

Chemical management

We are dedicated to leading our supply chain to implement more sustainable chemical management practices using globally recognized guidelines throughout our production processes. We apply an end-to-end approach that includes using safe chemicals, eliminating potentially harmful substances, and ensuring proper discharge of treated wastewater that meets the highest standards.

As a founding member and signatory contributor, we maintained our strong collaboration with the Zero Discharge of Hazardous Chemicals (ZDHC) Foundation and supported them by actively participating in various task teams dedicated to the development of guidelines and trainings. In 2023, we were the only sportswear brand to achieve the highest of three possible performance levels ('Aspirational Level’) in the ZDHC ‘Brands to Zero’ program, demonstrating effective implementation of the ZDHC guidelines and tools within our supply chain, improving by one level compared to the previous year.

• Fostering sustainable input chemistry: In our efforts to further accelerate more sustainable chemistry, we introduced the ‘adiFormulator’ program in 2023 to enable direct engagement with 40 critical chemical formulators with the aim of accelerating the adoption of chemicals with the highest level of conformance with the Manufacturing of Restricted Substances Lists (‘MRSL’) (‘Level 3’ chemicals). Formulators successfully completed the transition to the revised ZDHC MRSL version and introduced approximately 1,000 new ‘Level 3’-certified formulations that are predominantly used in the footwear production and printing process in our supply chain. Through this program, in 2023, 67% of chemical formulation used by our suppliers achieved the highest level of conformance with ZDHC MRSL (‘Level 3’) (2025 target: 80%⁶). Going forward, we remain dedicated to further enhancing this program to drive exceptional performance in 2024.
  
  adidas is committed to being more than 99% PFAS-free. In 2023, an industry-wide supplier informed us that paint containing PFAS was incorrectly used for individual components of zippers in our PFAS-free apparel range. Upon learning this, we have taken appropriate steps to ensure that we will return to being 99% PFAS-free as of Fall/Winter 2024.
• Upgrading targets for cleaner wastewater discharge: Ensuring clean wastewater discharge is of paramount importance to us. We consistently surpassed our 2025 targets, with 84% of our supplier facilities meeting the ZDHC wastewater foundational level in 2023, resulting from our proactive approach to evaluating effluent treatment plants and implementing corrective measures. Following a continuous overperformance, we increased our target from initially 80% to now aiming for 90% of facilities that should meet this level by 2025. We have done so despite the fact that we anticipate revisions of the ZDHC wastewater guideline next year, for which we do not yet have full visibility of the new parameters to report on. We will continue to guide our suppliers through capacity building and best practice sharing to ensure a smooth transition to the application of the new guidelines.

Waste management

We make continuous efforts toward optimizing waste diversion across our supply chain with the aim of increasing the value of waste within the life cycle, e.g., through recycling or reuse. We have developed waste management guidelines to help our suppliers improve waste segregation in manufacturing, prioritizing recycling and reuse of non-hazardous waste. These guidelines specify that the non-recyclable waste materials should not be directly landfilled. We developed a waste diversion program to use non-recyclable manufacturing waste in energy production in collaboration with co-processing partners in our major sourcing countries. Co-processing is a proven and sustainable solution that can reduce pollution, reduce consumption of natural resources, reduce landfill space, and ultimately contribute to a smaller carbon footprint. To further optimize waste diversion, we have scaled up this solution across the globe, especially in sourcing countries with immature co-processing infrastructure. Globally, the suppliers enrolled in our environmental program collectively achieved a 96% landfill diversion in 2023.

At own operations, during 2023, we continued to focus on improving the quality of waste-related data from our administrative offices and distribution centers by upskilling team members on the data collection process of waste streams. This resulted in a higher data quality, but also a lower diversion rate. As of 2023, 98% (2022: 89%) of our own operations by square meters are monitoring and tracking waste. By the end of 2023, a total of 26,382 tons (2022: 32,246 tons) of waste was generated, and we achieved an accumulated diversion rate of 89% (2022: 88%) for administrative offices and distribution centers.

Transportation

We regularly track the environmental impact related to the transport of our goods. Compared to the previous year, performance remained relatively stable. While the use of air freight decreased to 1% in 2023 as part of our efforts to counterbalance covid-related supply chain challenges, the vast majority of our transportation continued to take place via sea freight and truck.

Materials

Our sustainable article offering has steadily increased over the last years. Our ambition is that 90% of our articles will be sustainable by 2025. We define articles as sustainable when they show environmental benefits versus conventional articles due to the materials used, meaning that they are – to a significant degree – made with environmentally preferred materials. The majority of the environmentally preferred materials currently used are recycled materials or more sustainable cotton.

To qualify as a sustainable article, environmentally preferred materials have to exceed a certain predefined percentage of the article weight. The applied criteria for environmentally preferred materials and the percentage of the article weight are defined based on standards reflecting the latest industry developments, competitor benchmarks, and expert opinions: For apparel, the environmentally preferred material content is required to be at least 70% of the article weight, for accessories and gear at least 50%, and for footwear at least 20%.⁷ This standard has been applied since 2022.

In 2023, almost eight out of ten of our articles were sustainable according to this definition, and consequently exceeded our planned annual milestone set for this year. This achievement was supported by progress across all categories. More than 90% of all apparel and accessories and gear articles were already sustainable. Our sustainable footwear offering nearly doubled compared to the previous year, despite the technical difficulty to develop sustainable solutions at scale. On top, we experienced challenges with regard to the availability of more sustainable, high-performing, and economically scalable materials in 2023.

Critical to this success was the progressive evolution of foundational capabilities to create more transparency and higher accuracy for material and product data. This required investments into our IT infrastructure and now enables automated measurement of sustainable components for each of our articles. Progress toward this target was successfully verified by a third party for the second consecutive year under the most reliable form of auditing (‘reasonable assurance’), increasing awareness across the entire company and supporting our system readiness for future requirements.

The most commonly used materials are listed in the following table.

• Recycled polyester: Polyester is the most widely used material in adidas products. In 2017, we set ourselves the ambitious target to replace all virgin polyester with recycled polyester in all products where a solution exists by the end of 2024. We set clear internal milestones for our product creation teams and have seen progress throughout the last several seasons. In 2023, 99% (2022: 96%) of all the polyester we used was recycled. This includes ‘Parley Ocean Plastic,’ which is plastic waste collected from remote islands, beaches, coastal communities, and shorelines, preventing it from polluting the oceans, as a replacement for virgin polyester. With that, we are on track to use only recycled polyester by the end of 2024. While recycled polyester has been in use for a long time, it is still not the standard in the textile industry, with only 15% of polyester produced worldwide being recycled polyester.

• More sustainable cotton: Since the end of 2018, 100% of the cotton we use has come from more sustainable sources, including organic, recycled, and other third-party certified cotton. During the 2022/23 cotton season, adidas participated in the ‘Organic Cotton Accelerator’s Farm Program’ and sourced organic cotton from smallholder farmers in India.
• Responsibly sourced leather: adidas has used leather for decades due to its unique properties such as durability and physical performance. As a member of the Leather Working Group (‘LWG’) since 2006, adidas has defined standards for our leather suppliers, including LWG certification, compliance with our Restricted Substances List ‘A-01,’ exclusion of hides from India and China, and exclusion of all exotic leathers and furs. Currently, more than 99% of our leather volume is audited in accordance with the LWG protocol, with most of our hides being sourced from tanneries with the highest possible rating (‘Gold’). LWG is currently working on enhancing this audit protocol to create an industry-first traceability standard for leather. In 2023, adidas committed to a deforestation and conversion-free (‘DCF’) leather supply chain latest by 2030.
• Innovative materials: In 2023, adidas launched products with a material using new technology (‘LanzaTech’) that turns greenhouse gases into feedstock for polyester. Waste gases are sourced from industrial emissions and fermented to ethanol, which is one of the elements needed to make polyester. These elements substitute the conventional building blocks made with fossil fuel feedstock. The 2023 Australian Open tennis collection and a total of around 380,000 pieces of apparel and footwear, were produced with material using this technology across several business units including running and training. In the fall, we successfully launched a small collection of Gazelle shoes with ‘Mylo,’ a material made on the basis of mycelium, through a collaboration drop with Sean Wotherspoon.

We are aware that textile products release microfibers during manufacturing processes and also during product use, due to washing or UV exposure. These microfibers can have a negative environmental impact on soil, air, and water. There still is, however, little research done to understand the root causes. We acknowledge that fiber fragmentation is a complex challenge for our industry, but it is one we are proactively addressing. adidas is a co-founder of ‘The Microfibre Consortium’ (‘TMC’), which has developed a test method for assessing microfiber release and, in the future, aims to advise the textile industry on mitigating the impact of fiber fragmentation. In 2023, TMC published position papers on microfibers in wastewater as well as a study on fiber fragmentation of recycled polyester in fabrics. Both contribute to better understanding the complexity of this topic and, as a result, will help define our approach going forward.

Circularity

adidas has been a pioneer in creating products with a circular end-of-life solution, known as ‘made to be remade’ (‘MTBR’). This journey began with the introduction of the Futurecraft.Loop shoe in 2019, a 100% mono-material performance running shoe that was made according to circular design principles. We successfully scaled this concept from a prototype back in 2019 to a fully commercial MTBR apparel and footwear collection across multiple categories through 2023. The program will expire in 2024. During the last few years, we learned that the implementation of circular services requires tight collaboration with partners along the entire value chain including collection, sorting, and recycling of waste.

In addition to circular products, adidas also carried out several pilots on circular services in previous years, such as sneaker cleaning in stores globally, rental, and take-back programs. In 2023, we focused on the topic of repair to extend the lifespan of our products. We maintained a repair service at our Terrex store in Munich and launched a rental program pilot in our new concept store in Berlin.

At adidas, we define circularity as maintaining the value of products and materials at their highest level for as long as possible, and as such align with the UN Environmental Programme’s definition as laid out in their report ‘Sustainability and Circularity in the Textile Value Chain.’ Establishing and expanding circularity on a global scale within our industry is a complex challenge that requires strong collaboration among multiple stakeholders. This includes direct and indirect value chain partners, ranging from collectors and sorters to pre-processing partners and recyclers, as well as suppliers and innovators.

In 2023, we evolved our approach to circularity acknowledging the need for systemic change. Using frameworks established by industry organizations, and anticipating upcoming regulatory requirements, we identified actions to be implemented across our entire value chain operations. We aim to support the creation of an ecosystem necessary to bring closed loops to scale in our industry and we will be sharing our knowledge and reviewing lessons learned from past circular service pilots and the MTBR product design criteria. In addition, we are expanding our engagement in EU-funded cross-industry circular research projects such as ‘Textile Recycling Excellence’ (‘T-REX’) and the ‘New Cotton Project,’ as well as partnering with ‘Fashion For Good’ in the ‘Sorting For Circularity’ project series, all aimed at unlocking end-to-end textile circularity.

• ‘Textile Recycling Excellence’ (‘T-REX’): This project brings together 13 major actors from across the entire value chain, under the coordination and leadership of adidas, to create a harmonized blueprint and business opportunities for closed-loop sorting and recycling of household textile waste in the EU. The key objective is to transform end-of-use textiles from waste into a desired feedstock and a commodity for new business models, thus proving the economic viability of a scalable circular economy for textiles in Europe.
• ‘New Cotton Project’: adidas has been a partner in this EU-funded project which is an industry and multi-stakeholder effort to scale the chemical recycling technology of Infinited Fiber Company with the ambition to expand circularity of cotton textile waste. The project will be completed in 2024 and has been impactful in scaling closed-loop textile sorting and recycling.
• Projects with ‘Fashion for Good’: In addition to EU-funded projects, we were actively involved in several projects with Fashion for Good in 2023. adidas is the lead sponsor of the ‘Sorting For Circularity’ project in the US, an initiative of Fashion for Good and the Circle Economy. Going beyond, through a series of projects, adidas has continuously collaborated with other organizations to develop a ‘Sorting for Circularity’ framework, a comprehensive guide to mapping the garment life cycle, capturing textile waste, and unlocking its recycling potential. We believe that this guide can be a valuable tool for the fashion industry to transition toward circularity.
• ‘FastFeetGrinded’: adidas also partnered with FastFeetGrinded to test shoe recycling processes with the aim of developing a scalable solution for the footwear industry. The pilot involves deconstructing shoes into macro components for repurposing and reuse.

We actively engage with circular economy experts and organizations to stay up to date on the latest developments and incorporate innovative approaches into our circularity initiatives. We have launched initiatives in various markets to educate consumers about circularity and encourage them to wear products longer. We published a series of blog articles to upskill consumers on proper cleaning of shoes in the US, and in Germany we partnered with one of our online retailers to create trainings for consumers on how to best care for their shoes. These activities demonstrate our commitment to circularity and driving change within the fashion industry aiming to move forward on the circular journey with our value chain partners.

Biodiversity

adidas is aware of the potential impacts and dependencies its business operations can have on ecosystem services and nature assets. In our industry, preserving and restoring biodiversity is a complex challenge that requires strong collaboration between multiple actors, including direct and indirect suppliers, certifiers, and innovators.

In 2023, we continued to assess and better understand where exactly our impacts lie and started to formulate our approach to managing biodiversity challenges in our value chain. Particular focus was given to the potential risk of deforestation because it represents the greatest lever for reducing the loss of biodiversity. In our value chain, a potential risk of deforestation is linked to the sourcing of nature-derived commodities used in our products and packaging, such as leather, natural rubber, and timber. Following scientifically validated frameworks from the Science Based Targets Network (‘SBTN’) and the Accountability Framework, we identified first concrete actions to be taken across our entire value chain, such as mapping our supply chain beyond our Tier 3 suppliers and setting time-bound commitments for deforestation-free supply chains.

In 2023, we prioritized leather and have already set a target. Roadmaps for natural rubber and timber-derived materials are under development.

• Leather: In 2023, we committed to source all bovine leather from DCF supply chains by 2030 or earlier. This commitment is based on the ‘Deforestation-Free Call to Action for Leather’ by Textile Exchange and the LWG, which aims to catalyze change within the entire bovine leather value chain through collective action. To achieve the 2030 target, we will follow a two-phase roadmap. The first phase encompasses mapping the leather supply chain beyond the tannery to the origin of the hide at the slaughterhouse. This additional transparency will allow a risk assessment and, in a second phase, lead to articulating more specific requirements that will be set for the earlier production stages to ensure that the leather we source is not linked to deforestation. Consequently, in 2023, we started a comprehensive mapping of our entire leather supply ecosystem down to the slaughterhouse and, where possible, to the farm level. This assessment has been carried out with the support of an external party and is currently under evaluation. This mapping will form the basis for our next steps.
  
  In addition, we have also been working with the WWF on their ‘Deforestation Toolkit,’ a project that brought together relevant actors in the leather supply chain, from the slaughterhouse owners to the buying companies. This toolkit will provide guidance to all actors on an aligned deforestation-free strategy and ensure robust commitments. Finally, as part of LWG in 2023, we also focused on traceability, with adidas sponsoring the first phase of the LWG ‘Traceability Roadmap.’ This roadmap has three pillars: traceability assessment, deforestation due diligence, and chain of custody. adidas experts actively participated in working groups with other brands and diverse stakeholders from the leather supply industry. In addition, adidas piloted a traceability blueprint using blockchain technology with the UN Economic Commission for Europe.
• Natural rubber: We also initiated a supply chain mapping exercise for natural rubber to identify the countries of origin of this feedstock. The gaps identified in this analysis will be addressed over the next years to ensure we have complete visibility of our supply chain and to enable us to work with our suppliers toward our goal of sourcing DCF natural rubber.
• Timber-related commodities and alternatives: In alignment with our DCF commitment, we have worked with Canopy Planet to structure our commitments on timber-related materials. This includes supporting the conservation of forests and ecosystems, further assessing our sourcing of man-made cellulosic fibers and paper packaging, and working toward eliminating sourcing from ancient and endangered forests. We continue to prioritize recycled or DCF-certified paper packaging. Through the ‘Fashion for Good’ innovator platform, we are collaborating with various innovators to explore alternatives to virgin materials, such as from agricultural waste. Our involvement in such innovation pilots supports the fashion industry in finding solutions to avoid increasing pressure on forest-derived materials.
• Animal-derived materials: We follow standards for sourcing animal-derived materials in an ethical and sustainable manner that respects animal welfare and species conservation. We do not source or process raw materials from endangered or threatened species as defined by the International Union for Conservation of Nature (‘IUCN’) in its Red List. All down used in our products is either virgin down certified by the Textile Exchange’s Responsible Down Standard (‘RDS’) or recycled down. Regarding the sourcing of wool, we are committed to increase the share of wool that is certified by Textile Exchange’s Responsible Wool Standard (‘RWS’) to 100% by the end of 2024.

In 2023, we also assessed potential biodiversity risks connected to other commodities in our supply chain, and our own as well as our strategic suppliers’ operations for potential impacts on protected areas, key biodiversity areas, and the International Union for Conservation of Nature (‘IUCN’) Red List of Threatened Species.

In 2023, we continued our work on biodiversity at our headquarters in Germany and completed a campus-wide inventory, created a master plan, and implemented initial measures to improve biodiversity on campus. Results will be used to develop new plans to reflect observations and implement science-based biodiversity actions. We also raised employee awareness of biodiversity, regenerative agriculture, and deforestation and conversion through several internal upskilling sessions, collaborative workshops, and employee activations around the globe.

Packaging

We are committed to using more sustainable packaging materials and reducing the impact of packaging by optimizing box sizes and number of shipments, although this only accounts for a small proportion of total emissions, around 1%.

Most of our paper-based packaging, such as shoe boxes and shipping boxes, is made with recycled content. Practically all plastic packaging (polybags) used to protect finished products during shipping is made from 100% recycled LDPE (low-density polyethylene). The only current exceptions are the DCs where e-commerce returns are repackaged, and no local vendor of recycled LDPE polybags is available yet (less than 1% of polybags). For many years already, all carrier bags handed out in adidas retail stores have been made with recycled paper.

Product safety

Product safety is an imperative. As a company we have to manage the risk of selling defective products that may result in injury to consumers. To mitigate this risk, we have company-wide product safety policies in place that ensure we consistently apply physical and chemical product safety and conformity standards. The creation of respective adidas standards and policies is a collaborative, cross-functional approach involving experts from both our Legal and Global Operations departments to ensure all aspects of a specific product are covered. This includes subsequent updates and training activities. Application and monitoring of compliance with our policies are ensured through Global Operations.

One of these policies is the Restricted Substances Policy (‘A-01’ Policy) we pioneered in 1998. It covers the strictest applicable local requirements and includes best practice standards as recommended by consumer organizations. The policy is updated and published internally and externally at least once a year based on findings in our ongoing dialogue with scientific organizations and is mandatory for all business partners. Both our own quality laboratories and external institutes are used to constantly monitor material samples for compliance with our requirements. Materials that do not meet our standards and specifications are rejected. As a result of our ongoing efforts, we did not record any product recalls in 2023.

Over the past few years, we have substantially contributed to the ‘Restricted Substances List’ of Apparel and Footwear International RSL Management (‘AFIRM’), which constitutes a harmonized restricted substances list across the industry. While the uptake of the list as an industry best practice matured further, and AFIRM membership continues to grow, various tools have been developed further in 2023, such as a harmonized test request form, the third-party lab evaluation questionnaire, and the offer of additional languages for the supplier online training videos. In addition, a PFAS phase-out guidance supported by an online webinar for suppliers has been published. All these tools will be issued to the public and made available to other companies from the textile and sporting goods industry and their suppliers. We also continued to participate in several major public stakeholder consultation processes initiated by the European Commission (e.g., European Chemicals Agency) and US state legislative initiatives to inform governmental entities on implications and opportunities of drafted legislation. To respond to the increasing legislation from US states, such as the recently enacted Federal US Environmental Protection Agency (EPA) law for PFAS, we have strengthened our status sharing for US retailers and our outreach to strategic suppliers, also enhancing our tracking functionality retroactively.

1 The target boundary includes biogenic emissions and removals from bioenergy feedstocks.

2 We will resubmit these targets to SBTi for approval during 2024.

3 In line with SBTi requirements, we allow ourselves, if needed, a reduction of a maximum of 10% of all emissions in the target year, to be achieved through offsetting.

4 Calculation excludes emissions resulting from ‘Use of sold products’ in alignment with the guidance provided by the ‘Science Based Targets initiative’.

5 The result of 7% FLAG emissions was not part of an assurance engagement by PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft.

6 Target was revised for clarity in 2023. Progress toward target as previously defined was that 69% of suppliers used at least 60% ‘Level 3’ chemicals.

7 This standard has been applied from 2022 onward. Percentage of sustainable articles (by count) offered at the points of sale (average of Fall/Winter season of the current financial year and Spring/Summer season of the following financial year). When calculating the article weight, trims are excluded for apparel, footwear, and accessories and gear. Only articles with verified environmentally preferred material contents are included. Licensed articles are excluded.