Impact, Risk and Opportunity Management

E1-2 – Policies related to climate change mitigation and adaptation

E1-3 – Actions and resources in relation to climate change policies

Overall, our actions and measures that are guided by our climate change policies aim to improve our management of energy, reduce GHG emissions and mitigate our negative climate impacts. Stakeholders affected are mainly our upstream suppliers and internal business areas. If not indicated otherwise, as of now, all actions mentioned are intended to be ongoing without a set completion date.

Scope 1 and 2 GHG emissions related actions:

• Control: During 2024, we managed to increase our primary data coverage for our own retail sites by 2 percentage points compared to the previous year, to 43% globally. Data coverage for administrative offices and distribution centers is at 100%, while data for showrooms and smaller offices was mostly estimated.
• Optimization: We increased EE with direct investments in building equipment, primarily at our corporate sites (e.g., a chiller replacement at our Portland office and LED retrofits in various locations).
• On-site RE generation: At our own sites, we continuously increase the consumption of renewable electricity. In 2024, we implemented additional on-site solar projects at the DC Manchester and at our factory outlet in Herzogenaurach.
• RE procurement: We continue to increase the renewable energy coverage by procuring renewable electricity through power purchase agreements (PPAs) and virtual power purchase agreements (VPPAs). After securing a VPPA contract for many European countries in 2023, we also signed a VPPA contract for the USA and Canada in 2024. The European project will become operational in 2025, the project for North America in 2026.
• Environmental risk assessment: We carry out environmental risk and opportunity assessments for our facilities (by 2024, 325 facilities were covered by ISO50001 and 76 facilities covered by ISO14001) to identify improvement opportunities and also, at an early stage, any potential risk which could affect our ability to meet our GHG emissions reduction targets.

Scope 3 GHG emissions related actions:

• RE and EE: We collaborate with our key Tier 1 and Tier 2 suppliers to adopt energy-efficient equipment and processes. Our Environmental Good Practices Guidelines (EGPG) provide a comprehensive list of best practices for reducing energy use. We encourage suppliers to periodically conduct energy audits, identify energy reduction initiatives, and implement them. Our suppliers are also asked to scale up the use of electricity from RE sources and move toward our aspirational goal of maximizing RE usage, wherever possible, by 2030. During 2024, suppliers participating in our Environmental Program sourced 24% of their electricity from renewable sources through on-site electricity generation and/or procurement via PPAs, as well as high-quality Energy Attribute Certificates (EACs) where sourcing or scaling up of electricity from rooftop solar and/or RE PPA-Agreements was not possible/limited. 7% of the electricity used by our key suppliers is sourced from rooftop solar PV systems, with the majority of our suppliers having maximized the viable potential of rooftop solar PV electricity generation within existing policy constraints. In many of our sourcing countries, governments have initiated targeted policies to transition their national power grids toward renewable sources. The (slow but) steady progress on the path to greening the grids, will provide additional, external tailwind for our supplier base to increase the usage of RE. In 2024, adidas has worked with industry associations and NGOs to support governments in driving policies to accelerate energy transition. This includes engagement on policies related to power purchase agreements and rooftop solar projects.
• Coal phase-out: The manufacturing of our products is reliant on thermal energy that has traditionally been generated by coal-fueled boilers. Together with our direct Tier 1 and Tier 2 suppliers, we have a dedicated program to replace wherever possible coal-fueled boilers in their factories with lower-carbon fuel boilers, such as biomass and natural gas. By the end of 2024, more than half of the targeted suppliers in the program have upgraded their equipment and transitioned to lower-carbon fuels.
• Process improvement and innovation: Developing and scaling lower-impact solutions in material processing, manufacturing, and product assembly that can help adidas reduce its GHG emissions. The steps from material manufacturing, coloring, and finishing up to the final product assembly is an energy-intensive process. Innovation through developing, testing, and scaling new technologies with a lower carbon footprint is a critical enabler of our climate strategy.
• Material innovation: Scaling the use of low-carbon materials. The materials we use in our products are a key contributor to our carbon footprint. This impact is mainly attributable to the use of five materials: (animal) leather, recycled polyester, ethylene-vinyl acetate (EVA), cotton, and rubber. In 2024, we continued our efforts to evaluate low-carbon material alternatives, including recycled and bio-based options. As part of this commitment, we have made significant progress in transitioning from virgin polyester, with 99% of all polyester– our most widely used material –sourced from recycled polyester. SEE ESRS E5 – RESOURCE USE AND CIRCULAR ECONOMY
• Other levers:
  • Inbound transportation: Most of our transportation is by sea and truck, and only a very small proportion is by air freight (2% in 2024). To support our climate strategy, we encourage our logistics partners to increase their adoption of biofuels and alternative fuels to power vessels and trucks. We also focus on continuously improving our planning and go-to-market capabilities to minimize the use of air freight to deliver products.
  • Packaging: Although packaging accounts for only a small proportion of our GHG emissions, we focus on using more recycled and sustainably sourced materials, while optimizing box sizes and the number of shipments. In 2024, 85% of our primary carboard packaging was recycled, while 83% of our polybags are made of recycled plastic.

Industry collaboration-related actions:

• Suppliers’ SBTi targets: We recognize that achieving our targets relies on collaboration to support the development and industry-wide scaling of new solutions. We connected with various industry experts and engagement platforms such as World Resources Institute (WRI), CDP, World Wildlife Fund (WWF), and Indonesia Business Council for Sustainable Development (IBCSD) to provide assistance to our key suppliers to establish their SBTi targets. Through the program, our suppliers were trained on how to identify and quantify their Scope 1, 2, and 3 GHG emissions and to build roadmaps on how to reduce GHG emissions.
• adidas is part of several organizations aimed at driving the adoption of low carbon processes and renewable energy in sourcing countries and promoting innovation in the industry. We will continue establishing 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. For example, adidas is a member and part of the UNFCCC Fashion Industry Charter for Climate Action Steering Committee and also member of the Fashion Pact, which, among other objectives, aim at creating capacity at suppliers to adopt renewable energy and also appeal to governments in sourcing countries for the need to scale up their renewable energy portfolio and capacity. Moreover, adidas is part of the Fashion for Good organization, which, among other objectives, aims at identifying and scaling up innovation in materials and production processes for the fashion industry. On top, as a member of the World Federation of the Sporting Goods Industry (WFSGI) and by vice-chairing its ESG committee, adidas actively contributes to shaping the WFSGI roadmap for its chosen strategic priority of decarbonization, aiming to find ways to help the industry decarbonize jointly with other industry players.
• Circular business models: adidas works with different organizations to set up the needed infrastructure to scale up capabilities related to circular business models (e.g., take-back programs and re-commerce), to extend the life cycle of our products and make sure that the end-of-life GHG emissions are reduced. We will continue refining our approach to circularity by adopting a systemic approach to addressing circularity challenges within our value chain. Utilizing frameworks established by industry organizations and upcoming regulatory requirements, we will identify pertinent actions to be implemented across our entire value chain operations.
• Advocacy and ‘just transition’: Ensure that we contribute to a net-zero future, creating pathways that are inclusive, equitable, and just. This means empowering communities, protecting workers’ rights, and fostering sustainable opportunities (‘just transition’). In order to do so, we also work with external stakeholders as part of our “Move For The Planet initiative”: Together with athletes and sports organizations around the world, adidas tries to identify and fund areas impacted by extreme weather conditions.
• Move For The Planet: This is a yearly global initiative that focuses on sustainability education through sport and improving sports facilities. Its goal is to encourage adidas’ stakeholders to sign up for the Move For The Planet challenge and turn collective movement into collective impact for local communities. As a result of the 2024 activation, more than 1.2 million participants worldwide tracked almost 230 million minutes of movement on the adidas Running app. adidas pledged to donate € 1 to its partner organizations Common Goal and United Nations Climate Change for every ten minutes of movement logged – up to € 1.5 million. The funds support projects that provide education on sustainability through sport and help make sports facilities more resilient against extreme weather conditions, such as heat waves and flooding.

Data and transparency-related actions:

• Product footprint calculation: Data and transparency are key enablers to translate our climate strategy into tangible and measurable actions as they serve as catalysts for increasing awareness and inform decision-making. One of the most essential components of our business model is the design and development of our products. Decisions made along this process, such as material composition, have a significant effect on the environmental impact in general and our carbon footprint in particular. To guide the necessary interventions and choices in our product design and development to reduce impact, 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, including GHG emissions of our footwear and apparel products. Aligned with international standards, the calculation methodology adheres to ISO 14067:2018 and has undergone rigorous third-party verification. This tool is seamlessly integrated into our existing product creation systems, connecting and leveraging available life cycle assessment (LCA) data, ultimately speeding up the calculation process and enhancing accuracy. With this tool, we are also able to provide higher transparency about our products’ environmental impact to consumers and allow them to make more informed purchasing choices. In 2024, we continued to disclose the carbon footprint of selected articles.
• Data accuracy: We collaborate with our suppliers to gather primary data on fuel consumption, electricity use and its sources, water, waste, chemicals, and other inputs to track their progress on our sustainability and decarbonization initiatives. We drive better data accuracy by providing our suppliers with clear guidance and making them accountable for timely and accurate reporting. We also engage with third-party assessors to verify if these data are documented as per the defined standards.

In 2024, the carbon intensity per product declined 2.5% compared to 2023 and 5.3% compared to the climate strategy baseline year 2022. This improvement is largely attributable to the actions taken in cooperation with our suppliers and was achieved despite the relatively higher share of footwear sourced in 2024 versus 2023 and 2022. Footwear in general, and footwear with a high leather use in particular have a higher carbon intensity compared to apparel and hardware products. On an absolute basis, total GHG emissions decreased 1.4 million tons CO₂e (–20%) in 2024 compared to the baseline year 2022. The climate strategy actions we took over this two-year period contributed a considerable portion to this reduction, for example, the combination of coal phase-out and the higher share of renewable energy used in the production process at our Tier 1 and Tier 2 suppliers resulted in a decrease of Scope 3 GHG emissions of 0.6 million tons of CO₂e. Measures we took to align production planning and improve our inventory management also supported this positive development. Total GHG emissions (Scope 1, 2, and 3) increased 5.5% in 2024 versus 2023. Nonetheless, due to the strong progress made against the 2022 climate strategy target baseline (–20%), we are on track and remain confident to achieve our SBTi-approved ambition of a 42% reduction of Scope 3 GHG emissions against the baseline by 2030.