Impact, Risk and Opportunity Management

E2-1 – Policies related to pollution

Due to the lack of a holistic methodology in the textile industry on how to measure the release of microplastics and how to assess the impact generated by such release, it is still difficult to define the extent of the impact on the environment and human health. Nevertheless, adidas is committed to the topic and is contributing to the creation of a scientifically sound and comprehensive methodology, together with other industry players, i.e., via research conducted by The Microfibre Consortium. With more clarity on the causes of microfiber release, adidas will be able to define policies, actions and targets to avoid and/or minimize its release, both focusing on the release at the production phase, and providing the needed orientation for consumers.

adidas Environmental Guidelines and Standards

adidas understands the importance of reducing the environmental impacts caused by our upstream manufacturing activities. Our policies and guidelines lay out business practices that apply to our suppliers (Tier 1 and Tier 2 suppliers), with whom we closely partner and provide training for continuous improvement. adidas strongly focuses on reducing adverse environmental impacts by supporting responsible water, waste and chemical management in production processes, for example by avoiding the intentional use of restricted substances in our production processes, and by providing support for the implementation of governance processes and/or environmental management systems at supplier facilities.

We set clear expectations for our suppliers regarding the management of pollution-related impacts. Firstly, our Tier 1 and Tier 2 suppliers, as well as their partners, should, at a minimum, adhere to respective local regulations and legal requirements. adidas always aims to adopt the industry standard if it is stricter than local regulations. Secondly, our suppliers must follow the adidas Environmental Guidelines, which have been developed to minimize and mitigate environmental impacts. The Environmental Guidelines draw on good industry practices and provide guidance on preventing pollution, as well as establishing environmental (ISO 14001) and chemical management systems, including handling substances of (high) concern. To ensure compliance with our guidelines and policies, our suppliers (Tier 1 and Tier 2 suppliers) are required to conduct audits and assessments (managed by third-party verifiers) on a yearly basis.

Any facilities that fail to meet our expectations must immediately follow the mitigation process defined in the adidas Workplace Standards and the Remediation Guide and take action to address any adverse impact. We also set topic-specific targets for our suppliers ( SEE SECTION ‘METRICS AND TARGETS’), which require them to make progressive improvements in their environmental performance within a specific timeframe, based on the nature of the opportunities identified. In addition, we encourage our suppliers to develop pollution prevention strategies. Our regional teams track and monitor our suppliers’ environmental performance through monthly reporting into the adidas data-collection platform. All these measures aim at minimizing the environmental impacts on the communities where suppliers are based.

adidas is highly committed to chemical management and is working to eliminate restricted substances from its global supply chain. As a founding member of the Zero Discharge of Hazardous Chemicals (ZDHC) Foundation, since 2011, we actively support the development of industry standards and wider policy requirements. Part of our engagement includes promoting standardized measurement across the apparel and footwear industry (by developing and implementing a commonly accepted testing methodology and related acceptable thresholds), as well as setting strict industry requirements that go beyond legal mandates.

For our chemical management approach, since 2015 adidas has adopted the ZDHC MRSL (Manufacturing Restricted Substances List) industry standard, which outlines the chemical substances prohibited from any intentional use in the processing of textile materials, leather, rubber, foam, adhesives and trims used in the textile, apparel, and footwear industries. adidas additionally uses its own comprehensive restricted substance policy – Policy for the control and monitoring of hazardous substances – to avoid and control the use of any restricted substances in its products and to ensure consumer safety, going beyond the legal requirements. To monitor wastewater effluent (output chemical management), we apply the ZDHC Wastewater Guidelines, which is a unified approach on wastewater parameters and limits. The guidelines ensure a high standard of wastewater quality that minimizes environmental harm when discharged from suppliers’ facilities. We collaborate with the ZDHC Foundation to drive industry engagement to improve the water quality standards beyond legal requirements. Furthermore, adidas has been a member of the Leather Working Group (LWG) since 2006. The LWG certification for tanneries also focuses on effluent treatment (water treatment), aiming to reduce water pollution derived from tanning processes.

Our suppliers should also take precautionary measures to avoid pollution incidents involving chemicals leaks or emissions, which can lead to risks of contamination. To this end, suppliers are expected to have environmental, health and safety (EHS) management system in place, as well as continual risk management and remediation measures. These expectations are laid out in our Environmental Guidelines, Health and Safety Guidelines and the ZDHC Chemical Management System Technical Guide.

E2-2 – Actions and resources related to pollution

The actions we take to address adverse environmental impacts, as outlined in our Environmental Guidelines, are designed to prevent and minimize pollution, avoid the depletion of natural resources and further minimize the impacts of our suppliers in the upstream value chain. Moreover, the actions are designed to support policy implementation and target achievement for the material topics of water pollution and the use of substances of concern as detailed below and are planned to be ongoing.

In the reporting year, adidas carried out the following actions related to pollution preventions:

• We conducted an annual environmental compliance check with 80% of Tier 1 and Tier 2 facilities (based on sourcing value). No critical findings were identified in the 2024 annual assessments regarding air, water or soil pollution.
• ZDHC Wastewater Initiative (since 2017): In line with the ZDHC Wastewater Guidelines and the ‘right to know’ principle, we expect our Tier 2 suppliers (80% of Tier 2 suppliers performing wet processes – based on sourcing values) to test their wastewater twice a year and to disclose the results on the Institute of Public & Environmental Affairs (IPE) DETOX platform or the ZDHC Gateway platform. In the event of a non-compliance case, the supplier is required to address the issue and perform a follow-up audit to confirm the new wastewater quality results.
• To increase environmental transparency and accountability in our supply chain, since 2015 we have required the majority of our suppliers’ facilities located in China to report their water pollution data on an annual basis to the IPE Pollutant Release and Transfer Register (PRTR) platform. The disclosure drives supplier differentiation and showcases each supplier’s individual commitment to their sustainability practices and goals.
• We have partnered with service providers, e.g., ZDHC-approved laboratories and third-party consultants, to guide suppliers in advancing their wastewater treatment capabilities. In this initiative, suppliers will receive on-site evaluations and consultation aimed at enhancing their treatment capabilities and operational practices. This support is designed to improve the quality of their wastewater, enabling it to be recycled or safely discharged surpassing legal requirements. The findings are also shared at our regional supplier summit to foster knowledge exchange among industry peers. The initiative covers 80% of Tier 1 and Tier 2 suppliers with wet processing facilities – based on sourcing values.
• We have implemented an effluent treatment plant evaluation initiative to enhance the operation of on-site effluent plants, which contributes to adidas’ goal of 90% of suppliers achieving the ZDHC Wastewater Foundational Level for their wastewater quality by 2025 SEE SECTION ‘METRICS AND TARGETS’. This initiative aims at facilitating suppliers’ continuous improvement in wastewater quality monitoring and control and ensures environmental standards are met. In 2024, we have achieved 85.5% of suppliers with wastewater quality at or above the ZDHC Wastewater Foundational Level.

Actions related to the prevention and minimization of the use of substances of concern:

• We take a precautionary approach and continuously monitor the chemical formulation used in our production to avoid any restricted substances from being intentionally used. We adhere to the latest version of the ZDHC MRSL as our restricted substances list. Each year, our suppliers (80% of Tier 1 and Tier 2 suppliers with chemical usage facilities – based on sourcing values) undergo an on-site assessment focusing in particular on their chemical usage, compliance status and improvement progress.
• Our suppliers (Tier 1 and Tier 2 suppliers) report their chemical inventory and consumption on a monthly basis through a third party online chemical inventory platform (BV Ecube). We monitor our chemical profiles monthly to avoid any intentional use of restricted substances and to ensure overall compliance, environmental protection, and worker safety. Additionally, annual ZDHC MRSL targets are established at the facility level to promote the adoption of better chemicals, with their usage performance also reviewed monthly.
• We actively collaborate with organizations such as the ZDHC group, the Apparel and Footwear International Restricted Substances Management Working Group (AFIRM), the International Chemical Secretariat (ChemSec) Business Group, Better Cotton and the Leather Working Group (LWG), recognizing the importance of collective efforts to drive responsible chemical management practices in the apparel and footwear industry. Our industry engagement has been externally recognized by the ZDHC group. In 2024, we received the Champion Level in the ZDHC ‘Brands to Zero’ program. This is the second consecutive year that adidas has achieved the highest level in the ‘Brands to Zero’ program, demonstrating our effort on driving chemical management in our supplier base and our achievement in avoiding any restricted substances used in our manufacturing process.
• We continuously work with Better Cotton and other organizations that shape the environmental requirements for our raw materials to reduce the risk of using restricted substances and hazardous pesticides in their production processes. More information can be found in ESRS E4 BIODIVERSITY AND ECOSYSTEMS and ESRS E5 RESOURCE USE AND CIRCULAR ECONOMY.

For information on our approach to address actual or potential negative impact on affected communities with regard to water and sanitation, please refer to ESRS S3 AFFECTED COMMUNITIES.

Unless explicitly described otherwise, all checks, tests, and verifications of the measures described were carried out by an independent third party. The coordination and monitoring of actions is performed by our Sustainable Sourcing team, which operates within our key sourcing countries.

The majority of actions are reported and monitored on a monthly basis, with the exception of wastewater testing and annual verification checks. All the measures described are designed to be ongoing, in line with achieving adidas’ targets.

While we rely on internal resources (mainly from the Sustainable Sourcing team), no significant additional operating expenses or capital expenditure are needed for now or the foreseeable future for the implementation of the presented measures. The costs for the aforementioned activities (third-party evaluations and audits, as well as tests) are covered by the suppliers. These additional costs are subsequently passed on to us through contractually agreed pricing, and we ultimately incur higher cost of sales.