Annual Report 2024

de

Topics Filter

Results

This is a photograph of two individuals. They both seem to be engaged in a conversation or observing something together that isn't visible in the photo. Both people are dressed in sport outfits and are standing near what looks like a fence of a stadium.

ESRS 2 General Disclosures

SBM-2 – Interests and views of stakeholders

Is reported under ESRS 2 SBM-2

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 matters related to workers in the value chain are as follows:

SBM-3 – Workers in the value chain and material impacts, risks and opportunities (IROs)

Sub-topic

 

Material IRO

 

Classifi­cation

 

Time Horizon

 

Value Chain

 

Description

Secure employment

 

Negative Impact

 

Actual

 

n.a.

 

Up-stream

 

For suppliers with a high dependency on adidas orders, demand volatility and changes in business volume have a potential negative impact on job security (i.e., triggering layoffs) or reduced working hours and take-home pay.

Secure employment

 

Positive Impact

 

Actual

 

n.a.

 

Up-stream

 

adidas Workplace Standards limit short-term contracting in favor of permanent employment, increasing workers’ job security and their access to higher pay and benefits, as well as improving the protection of their legal rights. The manufacturing of footwear and apparel products creates a net benefit by generating employment for workers along the entire value chain.

Secure employment

 

Risk

 

n.a.

 

Short-term

 

Up-stream

 

Short-term risks may stem from non-compliance in our supply chain regarding secure employment, working time, adequate wages, social dialogue, freedom of association and collective bargaining, health and safety, measures against violence in the workplace, child labor, or forced labor. Such breaches of our Workplace Standards could lead to negative media and a loss of reputation.

Working time

 

Negative Impact

 

Actual

 

n.a.

 

Up-stream

 

There are negative impacts on workers if overtime exceeds legal norms or international standards, which would mean breaching adidas’ Workplace Standards.

Adequate wages

 

Negative Impact

 

Actual

 

n.a.

 

Up-stream

 

There are negative impacts on workers in instances where they do not receive at least their legal minimum wages and benefits. The risk of this impact occurring is greatest in countries with weak enforcement of wage and social security regulations, or a lack of effective minimum wage setting mechanisms.

Social dialogue

 

Negative Impact

 

Actual

 

n.a.

 

Up-stream

 

There are negative impacts on workers if there exist unlawful limits or prohibitions on their right to form or join trade unions, to engage in collective bargaining, or to exercise the right to strike, and/or experience trade union membership used as grounds for unjustified discrimination or retaliation.

Social dialogue

 

Positive Impact

 

Actual

 

n.a.

 

Up-stream

 

adidas generates positive impacts for workers by taking action to avoid restrictions on workers’ freedom of association and collective bargaining rights to which they are legally entitled under the laws of the countries in which they operate. adidas supports social dialogue between governments, employers and workers’ representatives, including trade unions.

Health and safety

 

Negative Impact

 

Actual

 

n.a.

 

Up-stream

 

Workplace accidents or work-related health hazards due to the nature of the work, such as use of machinery or handling chemicals, negatively impact workers. The most severe impacts are those that cause serious injury, illness, or death. Such impacts are more likely in countries where there is weak regulatory enforcement or inadequate monitoring of safety standards.

Gender equality and equal pay for work of equal value

 

Negative Impact

 

Actual

 

n.a.

 

Up-stream

 

Negative impacts on workers – particularly female – occur when they do not receive equal pay for work of equal value and/or face other forms of gender discrimination. Negative impacts also occur in cases where suppliers fail to comply with our Workplace Standards that state, e.g., ‘workers must not be discriminated against on the basis of their gender, marital status, or because they are pregnant or breastfeeding.'

Training and skills development

 

Positive Impact

 

Actual

 

n.a.

 

Up-stream

 

adidas provides training and skills development for workers in the supply chain that support positive outcomes such as long-term career progression, job security and stability, which in turn advances local livelihoods. In our supply chain, we have provided training programs to advance skills development as part of our supervisor training and women empowerment initiatives.

Measures against violence in the workplace

 

Negative Impact

 

Actual

 

n.a.

 

Up-stream

 

In cases where workers face physical, verbal, or mental abuse, which may include cruel, inhumane, or degrading treatment, and/or damage to life or limb, there are material negative impacts. Such impacts are a direct violation of our Workplace Standards.

Diversity

 

Negative Impact

 

Actual

 

n.a.

 

Up-stream

 

There are negative impacts on workers’ equal opportunities if any form of discrimination in employment occurs, based on protected characteristics like skin color, religion, beliefs, gender identification, or discrimination against vulnerable groups such as migrant workers or female workers.

Child labor

 

Negative Impact

 

Potential

 

Short-term

 

Up-stream

 

Instances of child labor – while rare – adversely impact children’s rights, their access to and outcomes of education, and the best interests of the child. This is a zero-tolerance issue that is prohibited in our own operations and those of our business partners, however, it remains a potential risk in the upstream supply chain, in particular at the raw material level.

Forced labor

 

Negative Impact

 

Potential

 

Short-term

 

Up-stream

 

Compelling a person to work involuntarily through force or intimidation of any kind, including all forms of slavery or practices akin to slavery, prison labor, indentured labor, or bonded labor, is a zero-tolerance issue and is strictly prohibited in our own operations and those of our business partners. However, it remains a potential risk in the upstream supply chain, in particular at the raw material level.

We do not expect any presented risks related to workers in the value chain 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.

Material positive and negative impacts

adidas has outsourced most of its production and is therefore heavily reliant on its upstream value chain workforce. In 2024, adidas worked with 388 individual Tier 1 facilities of manufacturing partners (suppliers) that adidas has a manufacturing agreement with, and their Tier 1 subcontractor facilities, in nearly 40 countries. Our global supply chain extends through various tiers, with many diverse types of business partners, including directly contracted suppliers as well as indirect relationships managed through intermediaries, licensees and agents.

The assessment and management of social impacts along our global value chain has been an integral part of our business decision-making for more than 25 years. It has informed and shaped our business model, such as our sourcing activities, our choice and retention of business partners, and our reputation as a responsible company. And it has evolved progressively from a voluntary approach, founded on worker rights protection, to one that is increasingly regulated by governments in the form of mandatory human rights due diligence.

adidas’ commitment to upholding human rights norms and safeguarding fundamental rights and freedoms of workers in our supply chain is a material consideration for the company. It has been included as a topic area in adidas’ materiality assessment, in our semiannual enterprise risk and opportunity management process, and through relevant target setting.

The types of value chain workers most likely to experience negative potential and actual impacts related to working conditions and labor rights are workers in adidas’ upstream supply chain. This encompasses those involved in raw material sourcing, including the harvesting of commodities, as well as in production and manufacturing of finished products. At the raw material sourcing and harvesting of commodities level of the value chain, these material impacts and risks are mostly widespread and/or systemic, based on the country where the operations are located and/or linked to specific commodity supply chains and their production processes. Material impacts and risks that occur in the production, manufacturing, and processing of adidas products (Tier 1, Tier 2, and Tier 3) are typically individual incidents.

adidas recognizes that certain groups in the upstream workforce – including migrant workers, indigenous peoples and female workers – are particularly exposed to potential adverse impacts. This includes discrimination and, in the case of women – who are the dominant gender in the supply chain, with almost 70% of workers making adidas products being female – gender-based violence. As we lack complete visibility of our supply chain beyond Tier 2, and compliance data is reduced at the far upstream (raw materials) supply chain, the prevalence of negative impacts may be greater.

Regarding potential impacts from forced or child labor, there are several raw materials in adidas’ upstream supply chain that are sourced from countries listed on the U.S. Department of Labor (USDOL) List of Goods Made with Forced or Child Labor. These commodities are cotton (India, Brazil, Pakistan, and Turkey), leather (cattle farming in Brazil and Paraguay – key leather hide sourcing countries), and natural rubber (Vietnam and Indonesia). The inclusion of these raw materials on the USDOL list means that we closely monitor these and take preventive and mitigating actions to avoid potential impacts of occurrence in our own supply chain.

Impacts on value chain workers that may arise from the adjustments to climate change must be considered as well. We support a just and equitable transition through working closely together with supply chain partners to ensure fair labor practices and decarbonization on all value chain levels. For more information on our supply chain decarbonization efforts see ESRS E1 CLIMATE CHANGE.

adidas has also identified material positive impacts on supply chain workers, primarily impacting Tier 1 and Tier 2 workers, which are:

  • adidas’ outsourced production creates stable employment opportunities for workers in developing economies. Our supply chain is dependent on our strategic suppliers. We value long-term relationships, which can result in job creation and stable employment helping sustain the livelihoods of workers in the supply chain.
  • adidas provides opportunities for training and skills development to support the long-term career progression and job security of workers in the supply chain. Alongside facility-led training, we also offered tailored training to advance skills development, including women empowerment initiatives.
  • adidas also has positive impacts on supply chain workers’ labor rights: adidas helps protect workers’ rights to freedom of association and collective bargaining. We support social dialogue between governments, employers, and workers, including trade unions and other forms of worker representation.

Material risks

As stated above, these material impacts and risks relate to workers in Tier 1 and particularly to Tier 2 and Tier 3 workers and also to migrant workers, female workers, and/or those working in countries with a high risk of labor rights violations.

The materiality assessment has also identified short-term impacts on business continuity, particularly where there are dependencies on workers in our supply chain. Where there are breaches of our Workplace Standards, these can result in negative publicity, which can affect our business reputation and potentially lead to regulatory inquiries. Potential material risks can occur regularly or be limited to an individual incident/event.

Examples include:

  • Poor worker-management relations may lead to strikes, work stoppages, or other forms of industrial action. Where we have dependencies on workers in our supply chain, for example in our strategic Tier 1 supplier base, this may result in adverse business impacts (disruption of production) and potential adverse impacts on workers in the supply chain, if their ability to exercise their freedom of association is restricted or if they face retaliation for engaging in industrial action or other trade union activity. As a responsible business, adidas respects the workers’ right to freedom of association and supports the exercise of this right in our supply chain, while managing operational impacts to our business.
  • Events such as factory closures can also adversely affect our reputation as an ethical and responsible business, if they are not effectively managed. Our guidelines on redundancy and layoffs clearly state our expectations of business partners in the event of retrenchment or layoffs, and we expect a clear severance plan to be provided by the business partner.
  • An overall increase in regulatory enforcement risks and potential legal claims due to emerging human rights due diligence regulations and increased attention by regulators on the issues of forced labor and child labor.

To address material risks, adidas conducts systematic monitoring of our supply chain for human rights and labor rights risks to workers. We do this by mapping supply chain risks, conducting regular social compliance audits, engaging directly with workers through feedback mechanisms such as worker surveys and grievance mechanisms, and by regular engagement with governments, civil society organizations, unions, and employer federations.

To better understand potential impacts and risks faced by workers in the supply chain, we conduct annual risk assessments of the high-risk countries where we source our products from and monitor the suppliers we work with for human rights, labor rights, and environmental compliance through our social and environmental audit program. Country and factory profiles determine which issues are prioritized and the frequency of monitoring and remediation activities.

We also use various grievance mechanisms that allow open communication and exchange: Workers and other parties can reach the Social and Environmental Affairs (hereafter referred to as SEA) team through a variety of channels, including mobile apps, dedicated hotlines, and our third-party complaint mechanism. We take information from workers and other parties regarding factory conditions seriously and ensure that communication channels are easily accessible to all.