ESRS 2 General Disclosures

E4-1 – Transition plan and consideration of biodiversity and ecosystems in strategy and business model

Managing the impact of our business operations on biodiversity and ecosystems along the value chain is a key focus of our work in the area of sustainability. For this, we follow holistic frameworks such as SBTN’s science-based targets for nature and the Accountability Framework to guide our approach: assess, reduce, and restore.

While we have transparency of the locations and business activities of our Tier 1, Tier 2 and part of our Tier 3 suppliers, information about the origin of raw materials (suppliers in Tier 4 and beyond) is not available in a systematic and verified manner. As deforestation is the biggest driver of terrestrial biodiversity loss globally¹, we focus on deforestation-free supply chains as a priority for the years to come.

At the same time, we understand that maintaining, preserving, and restoring biodiversity is a complex challenge that requires systemic change and strong collaboration among multiple actors, including suppliers, certifiers, innovators, and industry peers. As a signatory of the Fashion Pact and a member of several industry working groups, we are committed to setting specific targets and action plans to decrease our impact on biodiversity and advocate for the topic in different forums, including support for innovation, which adidas understands as an important enabler for systemic change.

Biodiversity is also addressed through water efficiency, water quality, and chemical management programs with Tier 1 and Tier 2 suppliers. SEE ESRS E2 POLLUTION and SEE ESRS E3 WATER AND MARINE RESOURCES.

Biodiversity assessment 2023/2024

adidas recognizes its dependencies on reliable and cost-effective access to ecosystem services, while at the same time also acknowledges its impacts on ecosystems and their provision of different ecosystem services. These indirect or direct impacts, being positive or negative, were considered in adidas’ dependencies and impact analysis conducted in 2023/2024, using ENCORE, a specialized tool for biodiversity and assessments related to natural capital. The analysis concluded that the biggest dependencies and impacts are related to structure and biotic integrity, followed by water and atmosphere. This is due to our business reliance on raw materials and on regulating and maintenance services related to water, but also pressures on the physical structure and composition of different ecosystems, such as climate, rainfall pattern, and soil regulation services. Species as natural capital turned out to play a significant role in our upstream value chain through their ecosystem services, such as solid waste remediation, biological control, and pollination services. For these ecosystem services, understanding the relevance of possible local impacts is paramount, and, for this reason, adidas conducted a more detailed biodiversity assessment, including the factor of proximity to sensitive biodiversity areas as key criteria.

Overall, the biodiversity dependencies and impacts analysis, as well as the biodiversity risk analysis and the biodiversity proximity impact assessment, all showed that biodiversity dependencies, impacts, and risks are more prevalent in the upstream value chain and will become more relevant for adidas from 2030 onwards (long-term time frame). Nevertheless, due to our operating model and our agility and flexibility in terms of design, material selection, and sourcing locations – all connected to our upstream value chain – we consider our business model sufficiently resilient in the short and medium term.

Scope and main assumptions

Our biodiversity dependencies and impacts analysis has taken into account the current adidas business model and value chain, covering main manufacturing processes used by our direct suppliers, e.g., Tier 1 manufacturing of footwear and apparel, and also activities related to our indirect suppliers, such as Tier 3 leather tanneries and spinning and weaving mills, which are located in our upstream value chain. Our own operations (offices and distribution centers) were also included in the analysis. The assessment was conducted by using the ENCORE tool, based on the type of economic activities carried out in our value chain (which were based on the International Standard Industrial Classification of All Economic Activities – ISIC – codes), especially considering adidas’ use of natural and synthetic materials for its products.

To enhance our analysis, we also considered biodiversity-related aspects in the climate risk assessment – mainly related to the effects of changes in the weather patterns and the associated risk of sourcing essential natural materials such as cotton, leather, and rubber in the future and the impacts of climate change on the availability of these materials. For this risk assessment, we did not take into consideration any future potential changes to our asset base, sourcing locations, and material portfolio. Also, to be conservative, we did not assume technology-driven yield improvements in the production of raw materials.

Lastly, understanding that biodiversity risks are usually experienced locally, we also conducted a biodiversity assessment considering the proximity of the locations of selected Tier 1 and Tier 2 suppliers (preliminary assessments) and our own operations in 2024 to biodiversity-sensitive areas by using the Integrated Biodiversity Assessment Tool (IBAT) from BirdLife International. The input variables were the location of the site (latitude/longitude), activities at the site (e.g., administrative office, distribution center), and a proximity buffer according to the economic activities conducted at each location. Moreover, two types of aggregated biodiversity-sensitive areas were used: Protected Areas (PAs) and Key Biodiversity Areas (KBAs), as defined by the IUCN (International Union for Conservation of Nature and Natural Resources) and BirdLife International, respectively².

Our biodiversity dependencies and impacts analysis as well as our climate and biodiversity risk analysis applied the same time horizons as defined in our enterprise risk management system: short-term (one year), medium-term (two to five years), long-term (over six years). The biodiversity proximity impact assessment considered a short-term time horizon (one year).

Stakeholders involved

Internal stakeholders from different departments (e.g., Enterprise Risk Management, Sustainable Sourcing, Workplace Governance, Sustainability) were formally involved when assessing the resilience of our business model with respect to climate and biodiversity risks. Moreover, our internal experts are in regular contact with external stakeholders in more informal settings (such as conferences, meetings, and working groups), and their views are therefore indirectly considered in our internal assessments. These external stakeholders include organizations such as the World Wildlife Fund (WWF), Canopy Planet, Textile Exchange, and the Leather Working Group (LWG), as well as other companies in the same value chain, peers, and local farmers (from Brazil, Australia, Indonesia, the US, and Turkey).

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

We do not expect any presented biodiversity-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.  SEE RISK AND OPPORTUNITY REPORT

Our biodiversity proximity impact assessment did not identify material biodiversity impacts and risks related to our own operations (covering owned and leased offices and distribution centers under our operational control). The proximity assessment identified nine sites (covering an area of 56.6ha) that are near biodiversity-sensitive areas. Due to their location, national context, nature of business activity, and environmental management practices already in place, the potential impact on biodiversity is deemed low. Moreover, adidas has no direct operations that affect threatened species, including flora and fauna listed in the European Red List of Threatened Species or the IUCN (International Union for Conservation of Nature and Natural Resources) Red List of Threatened Species. Due to the complexity of the activities conducted by our suppliers, the preliminary Tier 1 and Tier 2 suppliers’ biodiversity proximity impact assessment will be further analyzed at a later stage.

1 Source: UN

2 PAs can be national parks and equivalent reserves, recognizing they are valuable for economic and scientific reasons and as areas for the future preservation of fauna and flora and geologic structures in their natural state. KBAs are sites that contribute significantly to the global persistence of biodiversity (in terrestrial, freshwater, and marine ecosystems) and that meet one or more of eleven criteria, clustered into five categories: threatened biodiversity; geographically restricted biodiversity; ecological integrity; biological processes; and irreplaceability.