Impact, Risk and Opportunity Management

E5-1 – Policies related to resource use and circular economy

adidas governs resource use and circular economy through policies, guidelines, and standard operating procedures (SOPs) throughout the entire value chain SEE TABLE E5-1. These policies anchor our strategy in the business and ensure we steer the organization toward a lower impact on the environment. Resource inflows are regulated by material-specific SOPs and by product creation guidelines. Our key priority is to reduce dependency on virgin fossil-based materials by increasing the share of recycled materials, as well as by using sustainably sourced renewable materials. Resource outflows and waste are also covered by several policies and guidelines implemented by our manufacturing partners (as the highest impacts occur upstream). However, guidance on circular product design and product end of life is still under development. This is due to a lack of technologies and infrastructure that can effectively sort, pre-process, and recycle different types of products at scale. Therefore, we are currently focusing our work in circularity on understanding the full ecosystem needed to enable a transition from a linear to a circular value chain SEE E5-2 ACTIONS, CIRCULAR ECONOMY SECTION.

Going forward, we will continue to adapt, widen, and substantiate our approach to circularity and resource use. Our approach is based on science, but will also be influenced by emerging industry standards and regulatory requirements that are becoming more concrete, particularly within the EU and in connection with its ‘EU Strategy for Sustainable and Circular Textiles.’ We expect these regulatory requirements to become clearer in the coming years, which will help eliminate some of the ambiguity within our industry as well as set a common baseline for every brand and market participant to adhere to.

E5-2 – Actions and resources related to resource use and circular economy

Our actions regarding resource use and circular economy are in line with our circularity strategy as well as corresponding to our material impacts, risks and opportunities mentioned in this standard. By focusing on traceability of materials, among other topics, we take the necessary step to gain transparency on related impacts and on where provision of remedy would be potentially needed. If not stated otherwise, as of now, all actions mentioned are intended to be ongoing, without a set completion date.

Resource use

• Creating more sustainable products enabled by improved IT infrastructure: To progress toward our ambition of 90% sustainable article share by 2025,¹ we have continued to evolve our foundational capabilities in 2024 to create more transparency and higher accuracy for material and product data. This has required investments into our IT infrastructure and now enables improved data quality.
• Transition to recycled polyester: Polyester is the most used material in our materials portfolio, therefore, transitioning to recycled polyester is a significant lever to lower our impact on resource use. In 2023, we had already reached 99% recycled polyester in our products, excluding trims, leaving us very close to our target of replacing all virgin polyester with recycled polyester where technically feasible SEE E5-3 – TARGETS RELATED TO RESOURCE USE AND CIRCULAR ECONOMY. Therefore, in 2024, we set ourselves a new, more ambitious target: to transition from using recycled plastic bottles to using recycled textile waste. We aim to achieve 10% of our polyester volume coming from textile waste by 2030. We are convinced that setting and communicating this target is also a signal to the industry and can enable our suppliers to scale up commercially viable offers for textile-to-textile recycled polyester.
• Sourcing of third-party certified cotton: Since the end of 2018, 100% of the cotton we use has come from sources, including organic, recycled, and other third-party certified cotton such as Better Cotton. Since 2024, we have also sourced cotton certified by the US Cotton Trust Protocol SEE ESRS E4 BIODIVERSITY AND ECOSYSTEMS. We are currently working on a Responsibly Sourced Cotton SOP that prescribes procurement expectations as well as practices for assessing cotton in terms of environmental and social impacts. This SOP is expected to be adopted in 2025.
• Increase recycled content in EVA and rubber and start sourcing certified natural rubber: EVA and rubber are key materials in most of our footwear. In 2024, we were able to slightly increase the recycled content in both materials. However, our in-house testing has shown that recycled content negatively impacts the performance of EVA and rubber, therefore its application is limited. We recognize the need for alternatives that can replace the current materials without compromising quality and are therefore continuously evaluating innovative solutions. Our goal is to adopt such alternatives as soon as they become commercially available. The rubber used in our footwear consists of a mixture of synthetic and natural rubber. For the natural rubber, we are working toward sourcing certified natural rubber that aligns with our environmental and social standards, in particular to avoid the risk of deforestation SEE ESRS E4 BIODIVERSITY AND ECOSYSTEMS. We are currently working on a Responsibly Sourced Natural Rubber SOP, which will prescribe procurement expectations as well as practices for assessing natural rubber in terms of environmental and social impacts. This SOP is expected to be adopted in 2025.
• Animal-derived materials account for 5.7% of total materials used in 2024. The largest share of animal-derived material at adidas is leather, mostly coming from cattle. 99% of our current leather volume is sourced from tanning facilities audited in accordance with the Leather Working Group (LWG). In 2023, adidas further committed to a deforestation- and conversion-free bovine leather supply chain no later than 2030 SEE 2024 ACTIVITIES IN ESRS E4 BIODIVERSITY AND ECOSYSTEMS. In 2024, we decided to stop purchasing kangaroo leather, which will be gradually replaced with other types of leather. All down used in our products is certified according to the Responsible Down Standard (RDS). Since the Fall/Winter ‘24 season, all wool used is certified by the Responsible Wool Standard (RWS). With both standards, we ensure that down and wool are sourced from suppliers who meet the required animal welfare and sustainability standards.
• Innovation: We continuously explore innovative solutions that can replace current materials and may lower pressures on land and ecosystems. Scouting and piloting is done in our own innovation team as well as through Fashion for Good, a multi-stakeholder platform for sustainable innovation of the fashion industry. In 2024, innovation focus was on enzymatic recycling of textile waste, biobased materials, and sustainable innovations for footwear-specific materials.

Circular economy

We define circularity as maintaining the value of products and materials at the highest level for as long as possible. This aligns with the UN Environmental Programme’s (UNEP) definition as laid out in their report ‘Sustainability and Circularity in the Textile Value Chain.’

• Quality and durability: As a sportswear company, the performance, fit for purpose and quality of our products are of utmost importance for our business success. While there are currently no industry average durability metrics and standards in place for apparel and footwear, we are constantly testing the quality and performance of our products. For product development and production phases, testing and quality teams across adidas ensure that products meet a defined set of physical, functional, and color fastness standards. We generally align our testing protocols with ISO test standards. When there is no suitable ISO standard available for a material type, product type or assessment we are doing, we use other internationally recognized test standards such as DIN, GB, ASTM, or SATRA. During product development, every material, component, and product type is tested in the laboratory to ensure that the materials we select and the finished products we create meet our quality expectations and those of our consumers. We also test products with athletes to determine quality, performance, and durability during the use phase of the product. During production, a framework defines for our partners how often testing should be completed to confirm consistent production quality, how to assess product quality during production, and our quality expectations for all final product types. We continually assess our suppliers’ compliance with our quality procedures through annual audits.
• Recyclability: As part of the Made To Be Remade (MTBR) initiative, adidas has developed end-of-life solutions for a dedicated range of products, with the objective that once returned, the product components can be remade into something new. The first product was a running shoe called Futurecraft.Loop, which was launched in 2019; we successfully expanded the concept into a comprehensive MTBR apparel and footwear collection across various categories through to our 2023 collections. Over the years, we have recognized that effective circular services necessitate close collaboration with partners across the value chain, including the collection, sorting, and recycling of waste materials. Building this circular environment as a stand-alone solution is not feasible. Therefore, we have focused our efforts and resources on supporting multi-stakeholder initiatives aiming to create such a circular ecosystem for the apparel and footwear industry.

Circular ecosystem

To drive systemic change toward a more circular industry, adidas is committed to fostering collaboration across our value chain and has engaged in multiple projects as well as made dedicated investments to this end. Examples include T-REX and the New Cotton Project, as well as Fashion for Good.

• T-REX is a publicly funded EU research project that brings together 13 major actors from across the entire value chain, with adidas acting as coordinator and leader. The aim of this multi-year project is to create a harmonized blueprint and guidelines as well as pursue business opportunities for closed-loop sorting and recycling of household textile waste in the EU. In 2024, adidas supported the progress of the project with completed collection and sorting activities and ongoing recycling. With these learnings, adidas kicked off the development of the circular design guidelines as a key deliverable of the project. In addition, adidas led the policy roundtable event on behalf of the project, bringing together industry and the EU Commission to provide valuable insights for upcoming regulations.
• The New Cotton Project focuses on scaling chemical recycling technology for cotton textile waste and includes stakeholders along the entire value chain. adidas was a contributing partner in the project and participated by designing and producing products using the feedstock generated as a result of the project.² The work was successfully completed in 2024 with adidas participating in the project review conducted by the EU Research and Innovation Office (Horizon Europe Program).
• Through our partnership with the Fashion For Good innovation platform, we are contributing to the development of frameworks and guidelines for garment lifecycle mapping and textile waste recycling. In 2024, three new projects were launched: assessing the renewable textile market in Europe,³ understanding the traceability challenges for textile recycled materials,⁴ and shifting the focus to assessing the circularity of footwear.⁵

Circular services

Circular services such as repair, rental or re-commerce can help extend the life of products once they are in the hands of consumers. Therefore, adidas has conducted several pilot projects over the last few years to gain insights into consumer response and business opportunity of circular services, including in-store sneaker cleaning, rental, and product take-back programs. In 2024, we focused on better understanding care and repair. Under the project name ‘Choose to Repair,’ we continued our pilot repair service offer in the Terrex store in Munich until May 2024 and tested an online repair service in the UK from July to October 2024 in partnership with the third-party service provider The Seam. From these experiences, we have learned that consumer expectations and behaviors vary widely and that circular services must be adapted to the local context in order to be successful. As a consequence, we aim to enhance our global guidance on circular services for our market organizations in the coming year.

Waste management

Our actions regarding waste management are aligned with our Waste Management Guidelines and our Waste Co-processing Partners Due Diligence Guideline. If not stated otherwise, as of now, all actions mentioned are intended to be ongoing, without a set completion date.

Our Waste Management Guidelines require our suppliers to segregate and treat all post-industrial waste according to the waste management hierarchy. This includes the prohibition of waste incineration at production sites. Suppliers included in our Environmental Program are required to record and track waste generated in adidas’ own digital platform to ensure that suppliers send waste for proper treatment, such as recycling, reuse, or waste-to-energy. We also support our suppliers through regular workshops for upskilling and strategy planning. The progress of waste diversion from landfill is monitored through regular audits and the performance by individual suppliers is monitored annually. SEE TARGETS SECTION

Our Waste Management Guideline adopts the following waste management hierarchy:

Furthermore, we have implemented a waste diversion program with co-processing partners in key sourcing regions that aims to use non-recyclable manufacturing waste to generate energy. In this program, we rely on our Waste Co-processing Partners Due Diligence Guideline. Through the co-processing solution, suppliers can achieve pollution reduction, reduced consumption of natural resources, and minimized landfill use, thereby contributing to a reduced carbon footprint.

Since 2021, we have successfully expanded our waste diversion program across our global upstream value chain, with the involvement of both Tier 1 and Tier 2 suppliers. We have provided guidance to our facilities to improve their waste segregation practices, resulting in improved recycling rates. For those materials that cannot be recycled, facilities are required to implement waste-to-energy solutions in partnership with a co-processing partner in accordance with our Waste Co-processing Partners Due Diligence Guideline. This strategy has resulted in significant achievement in landfill diversion achievements across our sourcing markets. Additionally, some of our Tier 2 suppliers are engaged in recycling activities to reclaim cutting scraps and post-industrial waste from the production process to be integrated into the materials and products.

Furthermore, we have engaged with industry organizations to drive improvements in waste management at supplier facilities. adidas joined GIZ FABRIC, other fashion brands, Closed Loop Fashion, Sevea and Reverse Resources in Cambodia to drive a collaboration project for ‘Advancing Post-Industrial Textile Waste Recycling in a Circular Supply Chain.’ The project aimed to optimize textile waste management and demonstrate circular business case feasibility, advance compliance among waste handlers and recyclers, strengthen the local structures and disseminate knowledge and learnings to foster up-scaling and public-private dialogue. adidas actively participated in the project and nominated our strategic suppliers to participate in the program. Through the project, all partners were able to enhance the collection, segregation and labelling of textile waste at 21 facilities. These actions were audited through on-site assessments. Training and corrective action plans were developed by consultants for the nominated facilities to implement actions beyond the project timelines. Overall, around 3,000 tons of cotton textile waste was collected from 17 of the 21 facilities and send to a local recycling company. The project was successfully completed in 2024.

While we rely on internal resources (mainly from the Sustainability team), no significant additional operating expenses or capital expenditure are needed in the foreseeable future for the implementation of the presented measures. Topic owners and teams implementing the measures track their effectiveness. SEE E5-3 – TARGETS RELATED TO RESOURCE USE AND CIRCULAR ECONOMY

Further actions to reduce negative impacts on resource use are described in detail in the relevant chapters. SEE ESRS E1 CLIMATE CHANGE SEE ESRS E2 POLLUTION SEE ESRS E3 WATER AND MARINE RESOURCES SEE ESRS E4 BIODIVERSITY AND ECOSYSTEMS

1 We define products as sustainable when they contain a pre-defined amount of sustainable materials, see ‘Sustainable Article Share’ in sections E5-2 and E5-3. We consider a material sustainable or sustainably sourced when it has a lower environmental and/or social impact than its conventional equivalent. We validate materials 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 is laid down in the Sustainable Ingredient and Concept Standard Definition SOP, see section E5-1 Policies.

2 adidas press release as of September 21, 2022: adidas by Stella McCartney Unveil Industry-First, with Viscose Sportswear Made in Collaboration with twelve Pioneering Partners SEE news.adidas.com

3 Source: Sorting for Circularity Europe Expands to Address Rewearable Textile Crisis – Fashion for Good.

4 Source: Fashion for Good and Textile Exchange Team Up to Trace Textile Waste – Fashion for Good.

5 Source: Pioneering the Future of Footwear: A New Initiative by Fashion for Good – Fashion for Good.