Sustainability Practices Analysis
Strategic Management
ADIDAS
Submitted by:
22020932 Niharika Dewan
22020282 Peehu Manglik
22020275 Riya Pargal
22020152 Prerit Verma
22020160 Pawandeep Chhabra
Contents
01 Introduction of the Company
02 Analysis of Sustainability Standards
03 Inequality and Societal Impacts
04 Governance
05 ESG Ratings
06 NGOs
07 Overall Evaluation
01. INTRODUCTION:
Adidas, a multinational sportswear corporation, shows a strong understanding of the
discourse on carbon emissions and their environmental impacts. Adidas actively participates
in a variety of developmental efforts, including production, supply chain management, and
marketing, to support and maintain its growth trajectory, like many global organizations.
Although these activities contribute to the brand's success, they also generate carbon
emissions that need careful consideration and mitigation. Consequently, this leads to
substantial carbon emissions.
Adidas has a global supply chain that includes the transportation of raw materials and
finished products. Since it includes shipping, road transport, and air travel, the global supply
chain of Adidas is a major contributor to the company's carbon emissions. Transporting
goods, whether within the supply chain or to consumers, relies on fossil fuels, resulting in the
emission of carbon dioxide into the atmosphere. The transportation of goods to retail stores,
establishments, and online consumers significantly contributes to greenhouse gas emissions
through last-mile delivery operations. The clothing and footwear production process is
associated with greenhouse gas emissions at various stages. Further, retail operations
contribute to carbon emissions through the activities of Adidas stores and distribution centers
and even their corporate offices. The emissions can originate from different sources, such as
energy consumption and heating, cooling, and lighting systems. The materials Adidas uses
can also drastically affect its carbon footprint.
However, the main aim of developing an ESG (Environmental, Social, and Governance)
report for Adidas is to furnish stakeholders with a thorough and transparent depiction of the
company's sustainability and responsible business strategies. Further, our research will be
conducted based on the proposed hypothesis which highlights a notable increase in carbon
emissions during the year 2023 in relation to 2022, after the decline of the COVID-19
epidemic. This increase is attributed to a sudden rise in economic activity, particularly in
sectors such as transportation, consumer spending, and tourism. Additionally, the report will
ponder about Adidas' strong alignment with the United Nations Sustainable Development
Goals (SDGs), indicating the company's commitment to addressing worldwide sustainability
issues.
Link to Sustainability Report: https://report.adidas-
group.com/2023/en/_assets/downloads/annual-report-adidas-ar23.pdf
Issuers of Sustainability Standards References:
02. ANALYSIS OF SUSTAINABILITY STANDARDS:
a) GRI Standards
b) SASB Standards
c) Other Standards and Frameworks
d) Evaluation
Timeline of Changes in Sustainability Reporting and Standards
GRI STANDARDS
In accordance with GRI standards
• Company website provides an exclusive section called ‘GRI Standard Content Index’
In 2022, starts to use GRI 2 instead of GRI 102
• Among all of the required disclosures, provides 27 disclosures
• 3 disclosures are not contained, which are:
o Disclosure 2-4 Restatements of information
o Disclosure 2-21 Annual total compensation ratio
o Disclosure 2-30 Collective bargaining agreements
https://report.adidas-group.com/2023/en/additional-information/gri-standard-
content-index.html
Process to Determine Material Topics
Conducts a full-scope materiality analysis to confirm non-financial topics relevant to the
company’s external reporting
Step 1: Understands the existing & future regulatory disclosure requirements applicable to
Adidas + existing material topics
Step 2: Creates a long list of potentially material ESG topics
Step 3: Conducts workshops with internal stakeholders, identifies and validates related
impacts, risks and opportunities for these topics from double materiality perspectives
→ Form a two-dimensional materiality matrix and a list of material topics
Step 4: determines material topics…(no detailed explanation)
GRI Material Topics
Environmental
● Environmental Approach
○ More sustainable materials and circular services
○ Decarbonization
○ Water consumption
○ Waste diversion
○ Biodiversity
Social
● Product Responsibility
○ Product safety & integrity
● Human Rights
○ Fair labor conditions
○ Supplier relationships
● Employee Matters
○ Diversity & Equity & Inclusion
○ Experience & Engagement
○ Learning
○ Rewards
● Consumer Matters
o Membership
Governance
● Description of Business Model
● Anti-bribery & Corruption
○ Ethical business practices
● Tax
○ Approach to tax
● Sustainable Finance
○ EU taxonomy
SASB Standards
→SASB Metrics & Activity Metrics (Apparel, Accessories & Footwear Industry)
Evaluation of SASB Metrics
● The Most Helpful Metric:
○ A quantitative measurement → Allow to make comparisons from different
years or with competitors
○ Convenient for managers to see which types of raw material get the most and
the least certification → make further improvements
● The Least Helpful Metric:
○ A descriptive metric
○ Although explains the processes of verifying that its products are in
compliance with the restricted substances regulation in detail
→ Too complicated and not very helpful for investors to make decisions.
Other Standards and Frameworks
➢ Coordinated the identification and prioritization of climate-related risks and
opportunities taking ‘TCFD’ framework into consideration.
➢ Not mentioned in 2023 annual report, but mentioned in 2021 report: complied with 11
Sustainable development goals
➢ Responded to the CDP forest assessment for the first time in 2022, and managed to
already score equal to the industry and European average.
➢ Endorsed the human rights standards from International Labour Organization.
Evaluation
● The Most Helpful in Understanding the Impact of the Company on the
Environment and Society
○ Stakeholder-oriented
○ Role: help businesses and other organizations identify, gather, and report their
impact on sustainability issues in a clear and comparable manner
● GRI standards are organized by:
o Universal standards that apply to all organizations,
o Sector-specific standards for 40 high-impact industries, and
o Topic standards for specific topics such as waste, health and safety or tax
● The Most Helpful in Understanding the Financial Impact of the
Environment and Society on the Company
○ Shareholder-oriented
○ Role: identify the subset of sustainability issues most relevant to financial
performance in each of 77 industries, and allow for comparing sustainability
information within an industry.
● SASB Standards are:
o Industry-specific
o Designed to be decision-useful for investors and cost-effective for companies.
03. INEQUALITY AND SOCIETAL IMPACTS
Supply chain:
o Social impact (‘S-KPI’ => accident rates, worker satisfaction, and worker
empowerment)
o Fair wages (industry wages, minimum wages and living wages)
o Gender Equality policies
Human Rights and Environmental Due Diligence
o Support the recruitment of migrant workers
o Equal opportunities for different communities
Metrics
Total employees ratio: Management positions:
Male 48% Male 61%
Female 52% Female 39%
Steps to mitigate Negative Social Impacts
Diversity, Equity, and Inclusion
● Human Rights Policy implemented
● Responsible recruitment of migrant workers addressing modern slavery risks
● Follow ILO and UN conventions relating to human rights and to fundamental
principles and rights at work
● Model code of conduct of the World Federation of the Sporting Goods Industry
● ‘Gender Strategy for Business Partners’ tool suppliers to identify gender-related gaps
● Conduct of announced and unannounced audits
Support of communities:
- Investments in the US toward ending racism and supporting Black communities
- 50 university scholarships in the US each year for Black and LatinX students
- Increased representation of Black and LatinX people within US workforce,
→ at least 30% of all new positions in the US with Black and LatinX people by 2025
- Over 30 Employee Resource Groups and Diversity Ambassador teams
Focus on diversity dimensions (ethnicity, gender, LGBTQ+, experienced generation, faith,
disability, and mental health)
04. GOVERNANCE
Sustainability and Compensation:
● Compensation structure:
○ 30% Fixed Compensation
○ 25% Performance Bonus
○ 45% Long-Term Incentive Plans Bonus
● Introduction of a second KPI for the Long-Term Incentive Plan related to
environmental, social and governance (ESG) with a weighting of 20%
○ Share of sustainable products offered
○ 8% increase in 2021 is 100% of the target
○ Supervisory board sets target for every year to achieve 90% sustainable
products in 2025
05. ESG RATINGS
S&P Global ESG Score
• Environmental profile:
o Thorough innovative solutions more advanced than industry
o Leader in innovation and the manufacturing of new materials
o 2050 climate neutrality is realistic.
• Social Profile:
o Uses long lasting relationships in the supply chain to promote fair labour
practices.
o Community-projects "through sport, we have the power to change lives".
• Governance Profile:
o Headquarters in Herzogenaurach, Germany → high governance standards
o Supervisory board with broad skill set
o Comprehensive training on ethics, human rights, and modern slavery
o Issued a €500 million sustainability bond in 2020.
• Preparedness Opinion:
o Identified many structural trends shaping its industry in the long-term
o Raise membership base to 500 million users by 2025
o Efforts on innovation and collaboration have helped it maintain its brand
identity and supported its long-term sustainability focus
Comparison to Industry Average
● Strong in governance due to Germany
as home country.
● Leader in innovation.
● Long term relationships with
suppliers.
06. NGOs
Penalties for Sustainability Violations
● Consumers complaint in France greenwashing
○ French Advertising Ethics Jury ruled Adidas’ ads as greenwashing.
○ Decision as penalty
● Shareholders lawsuit for corporation with Ye
○ No verdict yet
● No information about penalties in annual report
07. OVERALL EVALUATION
Environmental and Societal Impacts:
• Detailed plan - precise metrics to measure the progress - on-time integration of new
policies.
• Only “sustainable” suppliers
• International certifications & standards
• Material topics relevant to environment and society:
• Human rights-oriented, support of employee communities
• No negative news & low rankings affecting their reputation or activity
Financial Impacts:
• Mentions the financial impacts but not explicitly. States the exact financial numbers,
focuses on current and future actions to mitigate these issues.
• Implemented United Against Racism in June 2020
o Promote racial equity and investment in the US workforce
o Education support for Black and LatinX Communities.
Strengths and Weaknesses
Strengths:
• Strong governance due to strong German Corporate Code
• Strong impact on suppliers due to long-term relationships
• High innovation level for products
Weaknesses:
• No common standards, comparison is complicated.
• Lack of financial information to reflect the influence of their sustainable strategies on
financial performance.
