ESRS 2 General Disclosures

The climate crisis represents one of the biggest challenges the world faces. Mitigating global warming requires significant measures and strong collaboration within and across industries as well as global supply chains. The adidas climate strategy reflects this imperative. It lays out the actions and targets we are taking to reduce greenhouse gas (GHG) emissions in our business and across our value chain, aiming to reach net-zero¹ by 2050.

SBM-3 – Material impacts, risks and opportunities and their interaction with strategy and business model

The results of our double materiality analysis concerning material impacts, risks and opportunities for climate change matters are as follows:

We do not expect any of the presented climate-related risks to result in any additional major risks for the forecast for the 2025 fiscal year compared to the explanations given in the Risk and Opportunity Report.

Kicked-off in mid-2023 and finalized in mid-2024, our climate scenario and subsequent resilience analysis covered our entire value chain and all the physical and transition risks identified in the risk and opportunity identification process. We used a climate modelling tool to assess our exposure to those risks considering three GHG emission scenarios (low, intermediate, and high GHG emissions) and three different timeframes (2030, 2040, 2050) which are aligned with our climate strategy milestones and targets (2030 and 2050).

Using the input from the tool, we created a digital visual representation (’digital twin’) of the adidas’ business model and operational footprint: locations of key assets such as distribution centers, sourcing countries, and production regions of main materials, locations of strategic suppliers’ facilities, as well as transportation routes. Risks and opportunities were then quantified (to the extent possible) and aggregated to inform not only the resilience analysis, but also future strategic planning and decision-making.

Our main assumptions for the climate scenario analysis were as follows:

• The basis was our current asset base and value chain without factoring in any potential changes over the analyzed time horizons. Similarly, potential changes to our sourcing locations and/or materials portfolio were not taken into consideration, because the sporting goods industry is very dynamic and volatile with projections of trends over the analyzed time horizons not considered to be robust enough.
• Varying business growth rates were considered for the period until 2030 and from then onwards until 2050. In addition, the analysis factored in different growth assumptions between net sales on the one hand and production volumes on the other hand. For the GHG emission growth projection until 2030, production and sales forecast numbers were included until 2025, and a constant business growth rate for the subsequent years. The current product division mix and material mix are assumed to remain constant.
• We did not assume any production and/or process efficiency improvements for suppliers and other business partners. We also did not assume technology-driven yield improvements in the production of raw materials.
• We only considered the achievement of our climate strategy and planned outcomes of risk handling actions when assessing the potential financial impact of selected transition risks (e.g., increased shareholder scrutiny, increased exposure to carbon pricing and increased costs of low carbon materials and technologies). For all the other assessed risks we did not assume any expected future outcomes of actions currently in place.
• Depending on the analyzed risk and the associated tiering within the upstream supply chain, cost pass-through assumptions were considered on a case-by-case basis to quantify the potential impact on adidas.

The scenarios were as follows:

• Low-emission scenario (RCP2.6-SSP126): This future is in line with a 1.5°C pathway and characterized by a GHG emissions level which is stable until 2020, then declines and becomes negative by 2100. An early introduction of climate policies, which become more and more stringent over time would lead to a mitigation of both transition and physical risks. This scenario implies strong collective action, with transition risks more likely to occur in the short to medium term and a potential reduction of the severity of physical risks occurring in the long term.
• Intermediate-emission scenario (RCP4.5-SSP245): GHG emissions peak around 2040 followed by a decline. In this scenario, strong climate policies are not in place, yet the exhaustible character of non-renewable fuels is taken into account. If limited global action is taken, transition risks would decline in the short term. Inaction, however, would increase the severity and frequency of physical risks in the long term.
• High-emission scenario (RCP8.5-SSP585): This future projects a worst-case or business-as-usual scenario in which GHG emissions continue to rise throughout the 21st century. It assumes that no major efforts to reduce GHG emissions are taken, resulting in severe global warming.

It is important to note that the climate variables, values, and impacts of the scenarios will differ strongly from each other only in the long term (2070 – 2100), while they are relatively stable and similar until 2050. The climate scenario analysis showed that irrespective of the selected GHG emissions scenario, risks become more relevant from 2030 onwards.

The insights gained from the climate scenario analysis were then used to perform our resilience analysis. We assessed each material risk, its trend related to the different emission scenarios as well as our ability to manage such risks in the future, considering the nature of our business model, as well as the actions related to our specific strategies, such as the climate and biodiversity strategies. The scope and timeframe applied were the same as those used in our climate scenario analysis, as explained earlier. By considering all the mentioned aspects, we were able to assess our overall resilience towards climate change.

Based on the analysis of the results, we conclude that our business model is sufficiently resilient to climate change for the foreseeable future. The main aspects that drive our resilience are the nature of our business model, with its inherent agility and flexibility in terms of e.g., product design, material selection and sourcing locations, as well as the actions we take related to our climate strategy. Similarly, with our policy on capital management, we continuously intend to maintain a strong capital base and efficient access to capital markets. This is a fundamental requirement for sustaining the future development of our business and underscores our resilience and ability to adapt to potential impacts of climate change in the relevant timeframe.

The way forward for countries’ Nationally Determined Contributions (NDCs) and climate change mitigation and adaptation regulations remains unclear currently. This leads to uncertainty about the future implementation of policies in several countries to meet their respective GHG reduction targets and the related costs. In this context, we consider our climate-related scenario analysis to be an effective tool for providing guidance and direction on our exposure to climate-related risks. However, it cannot yet be used as a tool to estimate future costs and investments with high precision. Furthermore, macroeconomic effects can pose a significant challenge to the decarbonization pathway globally and are difficult to be incorporated climate-related scenario models accurately.

E1-1 – Transition plan for climate change mitigation

As a key player in an energy-intensive industry, we acknowledge our responsibility to contribute to climate change mitigation by implementing, optimizing and scaling existing solutions on the one hand and by supporting and collaborating on the development of long-term alternatives on the other hand.

The majority of adidas’ total GHG emissions originate from upstream activities such as raw material cultivation and extraction, processing and preparation, as well as product assembly, while GHG emissions stemming from our own operations account for around 3% of total GHG emissions.

adidas 2024 total GHG emissions along the value chain¹

In 2024, as part of our continuous efforts to respond to climate-related risks, we reviewed and updated our climate strategy. Led and orchestrated by the central Sustainability & ESG team, all relevant parts of our organization (primarily Sourcing, Product Operations, Supply Chain Management, Workplaces, and Finance) contributed to the refinement process. This cross-functional and collaborative effort was designed to ensure that the updated climate strategy is in alignment with other strategic, operational, and financial objectives. The strategy was endorsed by the adidas Executive Board.

The aim of the adidas climate strategy is to reduce our GHG emissions in line with a 1.5°C pathway – the most ambitious goal established by the Paris Agreement – and contribute to a net-zero future. Accordingly, with the approval from the Science Based Target Initiative (SBTi), we have refined our near- and long-term GHG emission reduction targets as follows:

• We aim to achieve net-zero GHG emissions (Scope 1, 2, and 3) for the entire value chain by 2050².
• We aim to reduce absolute GHG emissions across the supply chain (Scope 3)³ by 42% by 2030, measured against a baseline of 2022.
• We aim to reduce absolute GHG emissions across our own operations (Scope 1 and 2) by 70% by 2030, measured against a baseline of 2022.

According to the SBTi guidelines, re-baselining is necessary when significant changes occur that could impact the relevance and consistency of existing targets. The divestiture of the Reebok business, formally completed as of February 28, 2022, represents such a significant change. In addition, we have enhanced our GHG emissions accounting since 2022 as considerable effort has been put into gathering more primary data from our suppliers, remaining aligned with international methodology standards. We apply established methodologies to account for the GHG emissions, based on the GHG Protocol, and include all GHG categories material to adidas’ business. SEE E1-6 – GROSS SCOPES 1, 2, 3 AND TOTAL GHG EMISSIONS SEE EXPLANATORY NOTES TO OUR REPORTED GROSS SCOPES 1, 2, 3 AND TOTAL GHG EMISSIONS

All this led to a change in the baseline from 2017 to 2022. The change in our baseline also required a recalculation of our near-term target (2030). By changing the needed reduction from 30% vs. 2017 to 42% vs. 2022, we account for the changed baseline, while keeping the effort equal.

Due to the importance of our climate strategy, the Supervisory Board has decided that carbon intensity per product is a performance criterion for the LTIP of the Executive Board. In addition, as a reflection of the importance of our ESG roadmap, including our climate strategy, it was decided in 2024 that the central Sustainability & ESG team reports directly to our CEO. This team is responsible for the orchestration, progress tracking and continuous refinement of our climate strategy working with all relevant functions throughout the organization to embed the necessary action plans in their functional business areas and planning.

adidas climate strategy levers and targets 2030¹

Scope 1 and 2 GHG emissions: Decarbonization levers for our own operations:

• Control: Improve the quality of energy data to inform strategic energy decisions.
• Optimization: Increase energy efficiency with direct investments in building equipment, primarily at our corporate sites, e.g., HVAC (heating, ventilation, and air conditioning) improvements and insulation.
• Transition: Increase on-site renewable energy generation and the procurement of renewable energy, primarily through long-term contracts (e.g., virtual power purchase agreements – VPPAs).

Scope 3 GHG emissions: Decarbonization levers for our upstream value chain:

• Renewable energy (RE) and energy efficiency (EE): Collaborate with our key suppliers to reduce energy consumption by driving EE and maximize generation and/or use of RE.
• Coal phase-out: Replace use of coal in the boilers at our direct supplier facilities at Tier 1 and Tier 2 for thermal energy generation with low-carbon fuels such as biomass or natural gas.
• Process improvements and innovation: Develop and scale lower impact solutions in material processing, manufacturing, as well as product assembly that help us reduce GHG emissions (e.g. process electrification and low-temperature assembly).
• Material innovation: Scale the use of low-carbon materials (e.g. recycled, biobased and organic).
• Other decarbonization levers include:
  • Increasing the use of biofuels in inbound transportation
  • Using less, recycled and/or sustainably sourced[14] packaging materials
  • Reducing the share of air freight transportation

Due to the importance of taking action within the foreseeable time horizon, our presented climate strategy levers focus on reducing GHG emissions until 2030. These levers will also lay the foundation for long-term GHG reduction initiatives beyond 2030 and towards achieving our ambition to become net-zero by 2050. In this regard, we recognize the need for continuous innovation, cross-industry collaboration and policy support.

Financial considerations for our climate strategy

The implementation of our climate strategy will require continued investments, both within our own operations as well as related to our upstream value chain levers. For own operations measures, these investments are managed by adidas, while the upstream value chain measures are to a large extent to be funded directly by our suppliers. This can have an indirect impact on us through the cost of products, which is reflected in the cost of sales of adidas. Due to the evolving nature of the topic and to be able to better account for market developments (e.g., increasing access to RE in different regions, improvement of different countries’ energy mix), technological developments, as well as changes in our own and our suppliers’ asset portfolio, investments are decided on and implemented in due course and on an ongoing basis. An exact quantification of expected impacts on cost of sales, OpEx and CapEx until 2030 is to be defined. However, we consider the impact to be manageable due to the expected overall development of the company and its financial position over time, the available time to implement mitigation actions, and expected efficiency gains in our supply chain. The funding of the adidas climate strategy is intended to be largely driven by operational cash flow generation. In combination with our strong credit metrics, robust liquidity profile, and conservative financial policies, our ability to fund our climate strategy is determined to be sufficient.

Furthermore, in the context of the EU Taxonomy regulation, the core business activities of adidas are currently not covered (i.e., not eligible) by the Taxonomy Regulation. The Taxonomy-KPIs presented in this report are no meaningful indicators for the robustness and effectiveness of the adidas climate strategy. Similarly, driving the Taxonomy alignment of eligible activities would not make a material contribution to the achievement of our climate strategy targets. Therefore, we have no plans to prioritize resources to drive the alignment with the Taxonomy’s specific technical screening criteria. SEE EU TAXONOMY

In alignment with SBTi, GHG emissions from the ‘use of sold products’ are excluded from our climate strategy targets. There is no risk from any potential locked-in GHG emissions from our products toward the achievement of our targets, and no specific actions to manage locked-in GHG emissions from the use phase of our sold products are deemed necessary. In addition, any potential locked-in GHG emissions from key assets of our physical infrastructure related to property, plant, and equipment as well as right-of-use assets (leased assets) affect Scope 1 and 2 emissions within the own operations decarbonization lever. These GHG emissions account for less than 3% of the adidas corporate footprint and, hence, do not represent a material risk to the achievement of our climate strategy targets. Please refer to the following section on progress of our actions: SEE E1-3 – ACTIONS AND RESOURCES IN RELATION TO CLIMATE CHANGE POLICIES

1 Net-zero: As per SBTi, net-zero GHG emissions are achieved when human-caused GHG emissions are balanced by removing the same quantity of emissions from the atmosphere over a specified period (“net-zero” future). This is necessary at the global level to stabilize temperature increase at 1.5°C. In line with the SBTi criteria, we aim to achieve net-zero by cutting all our possible GHG emissions (by more than 90% against the baseline year 2022) through direct GHG emission reduction actions and neutralizing the residual GHG emissions through permanent carbon removal and storage.

2 In line with the SBTi criteria, we aim to achieve net-zero by cutting all our possible GHG emissions (by more than 90% against the baseline year 2022) through direct GHG emission reduction actions and neutralizing the residual GHG emissions through permanent carbon removal and storage.

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

4 We consider a material sustainable or sustainably sourced when it has a lower environmental and/or social impact than its conventional equivalent. Our materials are evaluated against a pre-defined set of impact criteria which is closely aligned with Textile Exchange’s Preferred Fiber and Materials Matrix. (PFMM). Our validation framework and the respective governance are laid down in the ‘Sustainable Ingredient and Concept Standard Definition SOP.’ SEE Section e5-1.