The Adidas Group is one of the world’s sporting goods giants, and says it is all about striving ‘to help you perform at your best,’ And as you might expect from a company that employs over 50,000 people and has sales of 14.5 billion euros a year, the adidas Group knows that it can only perform at its best if it manages the risks to its business.
Among these are challenges that come with its outsourced business model. With around 1,000 suppliers at any one time, mostly with factories in the developing world, labour rights issues for its suppliers’ workers as well as the environmental impact of a company with manufacturing operations of that scale are high on the risk register.
“We have been working towards sustainability for many years and recognise that the task ahead of us is a marathon, not a sprint. It is about preparedness and setting the right pace, having both the drive and stamina to make the distance.”
This neatly encapsulates the incremental approach adidas Group takes to addressing its responsibilities to society. But this business-focused approach is one that is also having an impact on the wider industry.
For many years now, the company has had a Social and Environmental Affairs team reporting to its General Legal Counsel. Conscious of the importance of the intangible value of its brands, which include Reebok and TaylorMade as well as adidas, this team now numbers over sixty.
Consistent with what could be characterized as a cautious and methodical approach, the company talks in terms of ‘strengthening systems and processes’ and sets itself improvement targets on a five-year horizon. This approach has been successful: the performance of its suppliers is improving and the company is reducing its relative environmental impact. There have been innovations too: in 2012 the company piloted an SMS-based hotline for workers in an Indonesian factory to raise the alarm about breaches of workplace safety or rights; this worked so well that the company has extended it to other factories in Indonesia and Vietnam. And thanks to DryDye™ technology, the company can now dye t-shirts without using water, saving 25 litres of water per t-shirt dyed in this way.
Understanding CSR as a driver of business decisions
These good works are not about changing the world. They are about changing the business. Step by step. T-shirt by t-shirt.
Talent engagement and positive PR are very tangible benefits of taking sustainability seriously. Many employees, and particularly millennials, will quickly flee a brand whose CSR integrity is compromised. These fundamental motivators are why companies will choose to act more responsibly.
In the case of the adidas Group, taking care of the social and environmental risks in its supply chain and on its own sites supports the company’s HR ambition to be a ‘world-class recruiter.’ It wants to attract the best—and retain them. A strong sustainability or CSR programme can help with that, as long as it is communicated well and people know about it.
In their most recent report (2013), the adidas Group launched its own “4 Ps” rubric—People, Product, Planet, Partnerships—to showcase the breadth of its sustainability programme. As well as being well received by public audiences, the simple and memorable mnemonic worked well to increase internal traction.
The report is like way-finding signage to help staff get “under the skin” of what sustainability means. Sustainability is not a simple topic, and for the adidas Group to continue making steady progress against their stated sustainability milestones, all their employees need to be engaged.
Cooperation with external partners fosters success
The adidas Group’s strong understanding of what is important comes to them through the ‘P’ of Partnerships and engagement with stakeholders. They don’t describe specific targets for partnerships in their CSR report; instead, it’s their way of engaging with the whole sustainability topic.
The adidas Group is in ongoing dialogues with NGOs, trade unions, pressure groups, and regulators. For a long time now the adidas Group has partnered with NGOs to deliver specific solutions: in 2003 they worked with international health care provider Marie Stopes International (MSI) to deliver a programme on sexual health for young women in factories. And they maintain working relationships with some of their harshest critics (and critics of the global economy). For example, they have an ongoing partnership with the NGO the Fair Labor Association, that conducts independent audits of its suppliers’ factories.
More recently, adidas Group has built on its partnership approach with the commitment to use bluesign to improve its chemical management. Bluesign Technologies has a bespoke system for assessing chemicals, checking for toxicity and environmental harm. This partnership has the potential to be game-changing because adidas Group’s size and influence pressures their competitors to follow suit with responsible chemical management processes.
Materiality refers to those issues or topics that are ‘material’ to a complete understanding of a company’s impacts. For an example of one technical application of the concept, see “Materiality in the context of the GRI reporting framework”
The adidas Group’s collaborative and open approach gives them a solid understanding of materiality. They know what the issues are, they listen to stakeholders, they know their impacts and know their responsibilities as leaders. And because they understand the material aspects of CSR and sustainability the adidas Group is effectively managing business risks, and credibly filling the role of sustainability leader in their industry.
Looking ahead along the ‘sustainability marathon’
The adidas Group still has a distance to go before they fully integrate their sustainability ambitions with their core business strategy. The two are aligned, but the adidas Group has not set a corporate agenda to solving a major societal issue. Something in the health and wellbeing area would seem to be a natural fit for a sporting goods company, but so far the company is committed to doing what it does with commitment and integrity, and getting better at it over time.
Pursuing the path of incremental change leads to doing more and going further…. It is a commitment to a marathon, not a sprint. The adidas Group’s attention to incremental CSR improvement is helping them to be industry leaders in a traditional business sense—their sales, market share, brand awareness, and competitive advantage are on a firm footing. And by showing others in the industry what is possible in CSR, they are also acting as leaders in that field. Their approach produces significant real, measurable cumulative impacts and social benefits.