Adidas should report more on its external impacts
The title of Adidas Group’s 11th sustainability report is: In the Real World, Performance Counts. And an intensive 116 pages of performance it is.
Light on design creativity but heavy on content, the Adidas report is an example of attention to detail and thoughtful preparation. Complete with analogies from the world of sport, giving the air of a disciplined approach to sustainability, this is probably the group’s best report yet.
Adidas shows steady performance improvement in many areas and showcases the new 2015 sustainability strategy, Route 2015.
The company manages several own production sites and 1,236 outsourced operations (plus 45 licensees with 307 factories) in 69 countries. It is a business that covers the spectrum of design, raw material sourcing, manufacturing, logistics right through to retail sales. Aspiring to achieve world-class sustainability performance is nothing short of an all-out effort.
Adidas reports on all the issues we might expect it to disclose, ranging from cotton sourcing in Uzbekistan, factory environmental issues including waste management, organic raw materials, practices at tanneries, human rights, packaging and recycling and more.
The company sets ambitious environmental goals – 30% reduction in relative carbon emissions by 2015 to name but one. Measuring and reporting have been seriously stepped up with a programme called Green Company, which includes environmental audits, a comprehensive system for ISO14001 certification for in-house operations and energized employee Green Teams.
The outcomes of all this in terms of significantly lower environmental impacts are expected in future years. However, in-house operations account for less than 5% of manufacturing, so this is hardly reflective of the Adidas Group’s total environmental footprint.
In the world of sustainability, performance is only part of the story. What counts are impacts. Adidas rarely ventures into the world of reporting impacts that describe what has happened as a result of their performance in terms of consumer impact, supplier training and even community engagement. This report stays very much at the level of the home game with the spotlight on what’s taking place on the Adidas field, but far less on the way Adidas is driving substantive and systemic change for stakeholders.
While it’s nice to see how many warning letters outsourced suppliers have received for not complying with ethical standards, some perspective of how Adidas has managed to change the game in over 10 years of focused working with suppliers would be welcome. In addition to data, the overall KPI score aggregating audit results in Adidas’s outsourced factories’ is lower than it was in 2007. The percentage of 3C (60% KPI score) or higher scoring suppliers is lower than it has been for the past two years and the number of warning letters issued to suppliers is higher.
This is explained by a change to the rating system (making it slightly more challenging) and new factories which start with low performance scores. With so much effort less than a third of the outsourced supply chain is performing to standard.
Stakeholders and suppliers
An ethical supply chain is one of the most material issues and Adidas discloses how the group has responded to issues raised by stakeholders, including freedom of association issues in Cambodia, workers’ rights in Bangladesh and labour standards in El Salvador.
But just how Adidas justifies the massive level of resource to support a sub-compliant supply chain is something that can be explored more fully in future reports. Performance is not only conducting audits. Monitoring is not the end result. Of greater interest is the effectiveness of such training, auditing and warning-letter activity and discussion of the outcomes of such changes.
The Adidas approach to assurance is also puzzling. The explanation for the lack of external verification of the report is that “much of the data is not always verifiable in a standardised way” and that “verification would not add value”. This is weak. Many businesses at least as complex as Adidas are able to achieve verification (including rival Puma, which reports at GRI A+ level). It’s time Adidas came off the fence on verification.
In summary, then, Adidas is improving sustainability performance and does a serious job with this report. However, while the group is making progress, a step change in strategy and disclosure could reasonably be expected in future reports to achieve the standard required, in Adidas’s terms, for completing a marathon rather than running a sprint.
Follows GRI? Yes, GRI B level, self-declared including apparel sector supplement.
Materiality analysis? No
Stakeholder input? Yes (mainly employees).
Seeks feedback? Yes, general sustainability email provided.
Key strengths? Detailed and methodological.
Chief weakness? Rather inward looking.
Pleasant surprise? Honesty about unmet targets and supply chain challenges.
Elaine Cohen is a sustainability consultant and reporter at Beyond Business and is a CSR blogger.