Impact, Risk and Opportunity Management

S3-1 – Policies related to affected communities

While adidas does not have a specific policy regarding community economic, social, and cultural rights, such as access to clean water and sanitation, we are aware of today’s global environmental challenges and their impact on people and communities. This is reflected in our Human Rights Policy and Human Rights Defenders Policy as well as in our Environmental Guidelines. These inform the implementation of measures in our own operations and those of our business partners to minimize impacts on affected communities, including those arising from climate change, biodiversity, water, use of hazardous chemicals and waste.

Similarly, our policies related to affected communities are not stand-alone policies but are rather incorporated into a broader set of documents, including our Human Rights Policy, Workplace Standards, and Environmental Guidelines. Our Human Rights Policy and Workplace Standards are fully aligned with the UN Guiding Principles on Business and Human Rights (UNGPs), International Labor Organization (ILO) Declaration on Fundamental Principles and Rights at Work, and the Organisation for Economic Co-operation and Development (OECD) Guidelines for Multinational Enterprises with regard to inclusion of internationally recognized human rights and labor rights as outlined in these international instruments. Further, our approach is aligned with UN and ILO guidance on vulnerable groups, including Indigenous Peoples.

Our stance on HRDs is included in our Human Rights Policy: We acknowledge human rights advocates and are committed to offering remedy for any adverse impacts caused by our business activities. Moreover, adidas commits to not interfere with the work of human rights defenders and to take protective action when freedoms are threatened in connection with adidas business activities, using our leverage with relevant authorities when appropriate.

The processes for monitoring compliance with the UNGPs, OECD Multinational Enterprises (MNE) Guidelines, and ILO Declaration on Fundamental Principles and Rights at Work are outlined in detail in S2 WORKERS IN THE VALUE CHAIN. For affected communities, our main monitoring mechanism is the third-party complaints procedure (see below for a detailed description).

adidas’ Human Rights Policy commitments embrace all internationally recognized human rights from the standards included in the policy table above. Where there is potential for adverse impacts on vulnerable individuals or groups, we will also consider other international standards and principles that elaborate on the rights of such individuals or groups, including Indigenous Peoples, women, national, ethnic, religious, and linguistic minorities, children, disabled people, migrant workers and their families, and HRDs. These include, for example, the Convention on the Elimination of All Forms of Discrimination against Women and the Convention on the Rights of the Child.

Respecting the rights of Indigenous Peoples

Although no official policy exists, adidas has published a clear position on addressing and preventing impacts on Indigenous Peoples – generally identified as tribal or first nations peoples whose social, cultural, and economic conditions distinguish them from other sections of their national community. Their relationship with the land and natural resources on which they depend is inextricably linked to their identity, culture, livelihoods, and physical and spiritual well-being. As a result, Indigenous Peoples are often disproportionately affected by climate change, environmental degradation, loss of resources and displacement, and face high levels of poverty and poor access to education, and health.

adidas is committed to respecting the rights of Indigenous Peoples in line with the United Nations Declaration on the Rights of Indigenous Peoples and ILO Convention No. 169 (Indigenous and Tribal Peoples Convention). In the upstream value chain, while we have no direct interaction with Indigenous Peoples or affected communities’ lands and territories, we require suppliers of raw materials – such as cotton and natural rubber – to conduct human rights and environmental due diligence, to follow standards, and where appropriate to secure certifications that take into account the rights of Indigenous Peoples. We furthermore require our manufacturing partners to obtain free, prior and informed consent (FPIC) for any greenfield developments that may require land acquisition in proximity to tribal areas, or in locations where land rights have been disputed. We have based our approach and expectations on the International Finance Corporation’s (IFC) Performance Standard No. 7: Indigenous Peoples and related IFC guidance on land acquisition.

Indigenous Peoples may also face exploitation or misappropriation of their cultural and economic rights. When marketing and designing products, adidas strives hard to respect the cultural property of Indigenous Peoples, including: Indigenous artwork, designs, symbols and other forms of their cultural, religious or spiritual expression. We have conducted internal training to raise awareness of the importance of protecting such rights.

Our stakeholder engagement/How we engage with stakeholders

We seek dialogue and exchange with stakeholders who act as the legitimate representatives and/or credible proxies of the affected communities we may have an impact on through our supply chain activities, recognizing their role in informing our due diligence processes and developing effective remedies. We communicate regularly and transparently about our efforts to ensure respect for human rights, including reporting on our human rights efforts in line with applicable non-financial reporting standards, and participate in specialist forums to share lessons learned and develop best practices for our industry.

In the first instance, the key party managing relationships with their local community and handling any complaints is the respective supplier. We engage with affected communities and their legitimate representatives and/or credible proxies upon receiving information, including third-party complaints, about the actual and potential material impacts stemming from our business activities that may affect them. To understand their needs, we have a diverse range of engagements through forums, discussions and other forms of direct communication, some continuous engagements that build upon organizational relationships established over decades, and some others that are targeted based on current issues or trends requiring critical feedback. We maintain an open dialogue with local and international NGOs, labor rights advocacy groups, human rights advocacy groups, trade unions, investors, analysts, and national and international government agencies. We communicate with communities on an ad hoc, as-needed basis, which includes both direct engagement as well as participation in specialist forums to share lessons learned and develop best practices for our industry.

The function primarily responsible for ensuring that engagement with affected communities takes place and for incorporating affected community needs into our overall approach is the Social & Environmental Affairs (SEA) department, which reports to the CEO through the General Counsel.

adidas implements robust due diligence measures to avoid causing or contributing to adverse human rights impacts through our own activities, and to address and remediate such impacts when they occur. We also seek to prevent or mitigate adverse human rights impacts that are directly linked to our operations, products, or services through our business relationships, even if adidas has not directly contributed to those impacts. We exercise our leverage and, where necessary, increase it to address negative human rights impacts arising from our business relationships.

Measures to provide and/or enable remedy for human rights impacts

Our Human Rights Policy emphasizes the importance of due diligence processes to enhance our influence to address adverse human rights impacts. We are committed to providing for, or cooperating in, the remediation of adverse human rights impacts which we have caused or contributed to, and we will seek to cooperate in the mitigation and remediation of adverse impacts where we are linked to these through our business relationships.

To complement our due diligence processes, our third-party complaints mechanism provides adequate access to remedy for affected parties. Our third-party complaints procedure for Human Rights & Environmental Impacts, established in 2014, is a channel for reporting any potential or actual human rights or environmental harm linked to adidas’ operations, products or services, and is open to any individual or organization directly affected by an issue, or any organization representing directly affected individuals or communities. As part of the mechanism, at the end of each year we communicate how many third-party complaints we have received related to labor or human rights violations and the status of those complaints (i.e., under investigation, successfully resolved, etc.) by publishing them on our corporate website. During the reporting period, we did not register any cases that involve affected communities in our own operations or in our upstream supply chain. The majority of the complaints were received from trade unions and labor and human rights advocacy groups, related to workers in our supply chain.

Separately, through a supplier self-reporting mechanism (community complaints reporting mechanism), we also track incidents that may potentially affect community water and sanitation. This is described further in S3-3.

S3-2 – Processes for engaging with affected communities about impacts

Our approach to engagement with stakeholders – including with affected communities and their legitimate representatives and/or credible proxies, is described above (S3-1).

adidas uses its stakeholder engagement, as stated above, to gain insights into the perspectives of affected communities. This especially includes vulnerable groups, minorities, or those whose circumstances open them up to exploitation or the abuse of their rights and who may be particularly affected by adverse impacts. It is for this reason that we have developed specific programs and initiatives to address topics such as child labor, migrant labor, forced labor, trafficking and women’s rights. We take a holistic approach to upholding women’s rights, ensuring gender equality and protecting against all forms of gender-based discrimination, both internally and through our business relationships. We aim to bring a gender lens to our strategic suppliers’ operations to ensure that all workers enjoy the same opportunities, rights, and obligations.

Our approach to minimizing impacts on Indigenous Peoples, including our requirements for raw materials suppliers and manufacturing partners, is described in the section above (S3-1). adidas is also a founding member of Better Cotton. The Better Cotton Standard System outlines a High Conservation Value (HCV) approach to cotton farming. This means that before Better Cotton farmers can convert any land to cotton production, they must complete an HCV assessment. The assessment guides them to collect field data, consult with local stakeholders such as community leaders and Indigenous Peoples, and analyze any existing information to identify HCVs in their landscape. Once farmers have identified HCVs, Better Cotton helps them manage and protect them.

Evaluating our stakeholder engagement

Given the scale of the global supply chain, adidas only has targeted engagement with local communities where incidents trigger the need for investigation, direct engagement and dialogue with local stakeholders. As such, there is currently no specific process to formally evaluate the effectiveness of adidas’ engagement with affected communities. Our primary focus is on addressing any identified adverse impacts on affected communities that may be raised through our third-party complaints mechanism and/or stakeholder engagement with credible proxies and/or legitimate representatives of affected communities. For the former, processes are in place to validate the resolution of the case with the affected party, which is a means to evaluate the effectiveness of the corrective/remedial action. Our incident handling procedure lays out guidance to factories on how to manage issues related to adverse impacts on affected communities regarding water/sanitation, and to track the management of such cases as they arise.

S3-3 – Processes to remediate negative impacts and channels for affected communities to raise concerns

adidas’ range of grievance channels includes the third-party complaints mechanism described above, which is the main channel for affected communities to raise concerns. We have also implemented a community complaints reporting mechanism, which is a component of our Major Incident Report Protocol. This allows suppliers to report to the SEA team if they receive local community complaints linked to their manufacturing operations, as described further below.

We are committed to providing for or cooperating in the remediation of adverse human rights impacts on affected communities that can be potentially caused in the areas of water and sanitation and human rights defenders:

• Water and sanitation: Any complaint received either directly from local communities or through other sources (local government, media reports, NGOs, etc.) regarding impacts on communities allegedly caused by or related to factory operations should be reported by the supplier to the SEA team through the community complaints reporting mechanism. The process requires a supplier factory to briefly explain any complaints, including, but not limited to, the following information:
  • Who the complainant is,
  • When and how the factory received the complaint,
  • Details of the complaint,
  • Follow-up action e.g., the factory’s investigation plan.
• The factory should provide updates during the process and again once the follow-up action is complete:
  • Update on the outcome of the investigation, action(s) taken and any supporting documents.
  • Any communication to the local community and the complainant about the actions taken to settle the complaints as well as any measures established to prevent reoccurring incidents.
• Human rights defenders (HRDs): We will provide for or cooperate in the remediation of adverse impacts related to HRDs by taking one or more of the following actions, where relevant:
  • We take direct action where there is clear evidence that one of our business partners has violated the rights of HRDs. In each case, our efforts and choice of action will be informed by the situation as it presents itself and the extent of leverage we can bring to change the identified behavior.
  • We seek constructive engagement – whether alone or in cooperation with other actors – with governments where we believe that the rights and freedoms of human rights defenders with whom we engage have been impinged by the activities of the state or its agents.
• In cases where negative impacts on HRDs are identified through our third-party complaints mechanism, we will follow the steps outlined in the mechanism to follow up and take remedial action.

These grievance channels and the complaints procedure are an integral part of adidas’ Human Rights and Environmental Due Diligence (HREDD) system. As such, adidas evaluates the effectiveness of the processes annually and/or as needed. We use the feedback from complainants and other affected stakeholders to drive continuous improvement. The number of complaints received and their status (e.g., ongoing, closed) are published on our website, as is a summary and analysis of the cases handled each year.

The extent to which affected communities are aware of and trust these structures or processes is dependent in large part upon our engagement with stakeholders, such as the credible proxies or legitimate representatives of such affected communities. adidas does not currently have a structured approach to assessing this. We do have a non-retaliation policy to protect complainants, which is included in the third-party complaints procedure described above.

S3-4 – Taking action on material impacts on affected communities, and approaches to managing material risks and pursuing material opportunities related to affected communities, and effectiveness of those actions

Water and sanitation-related actions

Our actions to respond to a particular actual or potential negative impact on affected communities with regard to water and sanitation are informed by the outcomes of investigations into cases reported by our suppliers through the community complaints reporting mechanism outlined below. The guiding principle in taking any action to respond to negative impacts on affected communities is to secure complainant satisfaction with the outcomes of actions taken and to achieve sustainable remediation through preventive actions to avoid reoccurring incidents.

• In 2023, we revised the supplier Major Incident Report Protocol by adding a new community complaints reporting mechanism, a channel through which suppliers should report any complaints received from local communities. This applies to all Tier 1 suppliers, Tier 1 subcontractors and strategic Tier 2 suppliers under adidas’ environmental and social compliance program coverage. The mechanism is intended to provide visibility if any concerns related to negative impacts on community access to clean water and sanitation are raised with suppliers, as well as how the supplier handles, follows up and closes the issue if verified. Case handling is managed by the supplier who has the relationship with the respective local community.
• We also track compliance with basic environmental requirements for supplier facilities with legal standards for air emissions, wastewater effluent discharges, waste disposal and water extraction to prevent negative impacts on local communities and the environment. All actions are ongoing.

Resources used for these actions: The SEA team is responsible for the monitoring and managing the community complaints mechanism and works closely with suppliers on the handling and remediation of individual cases. SEA also engages with the Sourcing Sustainability function to manage the coordination of environmental compliance program implementation and delivery of annual environmental assessments at the supplier level. In certain cases where additional expertise is required, SEA will commission independent third-party investigations to evaluate environmental impacts and propose mitigation measures or other remedial actions.

HRD-related actions

Our actions and efforts to respond to adverse impacts related to HRDs are informed by the specific case or situation as it presents itself and the extent of leverage we can bring to change the identified behavior. To identify what actions are needed and appropriate, we directly communicate and engage with affected parties, such as local labor organizations, local NGOs, governments and authorities as necessary to resolve the issue, always aligning with international human rights standards and local labor regulations. We do so with the goal to find effective and lasting remedies tailored to the case-specific situation.

We regularly track and monitor potential impacts on HRDs to ensure they do not occur in our operations or supply chain. One way to track whether such impacts materialize is through our third-party complaints mechanism.

Resources used for these actions: The SEA team is responsible for the overall management of all complaints received through our third-party complaints mechanism – including any material impact on human rights defenders.

How we address potential negative impacts

adidas believes in transparently reporting any severe human rights issues and incidents connected to affected communities.

Our approach to addressing negative impacts related to water and sanitation in communities is linked closely to our supply chain compliance program. As we identify such negative impacts through the new community complaints reporting mechanism, we rely on suppliers to support in taking action to resolve such impacts.

With regard to negative impacts related to water and sanitation, we ensure that remedial action will take place by working in close collaboration with our suppliers, who are the primary recipients of community complaints through the mechanism described above.

During the reporting period, there was one relevant case within the scope of the material topics of water and sanitation, and we have taken action to address the negative impacts identified to support in the remedy of these impacts.

In 2024, we received a community complaint through the supplier Major Incident Report Protocol in Indonesia, related to a Tier 2 supplier facility’s impacts on the local community. The complaint alleged that the facility’s operations caused local flooding, which adversely impacted the community. The facility has been required by adidas to take measures to update its rainwater run-off systems to prevent future flooding. Furthermore, in December 2024, adidas required the facility to commission an independent third-party investigation to validate that measures to enhance the rainwater run-off systems are effective and to review the facility’s compliance with all relevant local environmental regulations and permits.

Our approach to addressing negative impacts related to HRDs is outlined in our Human Rights Defenders Policy statement. Wider industry and collaborative action with relevant parties – including international trade unions, advocacy groups and NGOs and other external stakeholders – is often required to address material negative impacts on HRDs. We also commit to constructive engagement with governments where we believe the rights and freedoms of human rights defenders have been impinged by the activities of the state or its agents. This may apply, for example, in cases where there are credible reports of an HRD being threatened, intimidated, or detained by the police or government officials.

We have taken action to support advocacy groups which we consider to be HRDs to operate freely in contexts where governments have targeted such groups. In response to actions taken by the government in Cambodia to restrict local labor and human rights organization CENTRAL, adidas joined 18 other apparel and footwear companies sourcing from Cambodia in issuing A JOINT STATEMENT in September 2024, calling for the immediate cancellation of its investigation into CENTRAL and ensuring respect for civil society and freedom of speech.

To remediate negative impacts related to HRDs, we adhere to the process outlined in our third-party complaints mechanism – where cases of negative impacts on HRDs are received through this channel. In other cases, where negative impacts on HRDs may be identified through social compliance audits, we adhere to the processes related to social audit non-compliance corrective action, described in S2 WORKERS IN THE VALUE CHAIN.

Our approach to water/sanitation is closely linked to supplier conformance with our Environmental Standards, which is monitored by SEA’s Environmental Assurance program. With regard to HRDs, we seek to avoid causing or contributing to material negative impacts by monitoring supplier compliance with our Human Rights Policy and our Workplace Standards, which outline expectations for the fair and equal treatment of all employees, including those who may be considered HRDs.

We have allocated adequate human resources to the management of material impacts. The SEA team, a specialist group function within Global Legal, oversees human rights and environmental due diligence for adidas and manages supply chain compliance with the Workplace Standards. The 37-person team is global in nature, with staff based in a dozen countries, mainly our major sourcing countries, as well as Germany and the United States. Each SEA team member is dedicated to due diligence and to maintaining social and environmental compliance at a full-time (100%) capacity.

The SEA team works collaboratively with colleagues in the Sourcing Sustainability function, who have a mandate to remediate environmental impacts and measure the delivery of our key suppliers’ overall environmental performance, against published targets. See SEE ESRS E2 POLLUTION.

How adidas manages the identified potential material impacts on water and sanitation accessibility (related to communities’ economic, social and cultural rights) and impacts on human rights defenders (related to communities’ social and political rights) is detailed in the sections above.