Performance Counts Sustainability Progress Report 2011

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Programme Strategy Reporting Approach

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suppliers 12 Direct Suppliers Indirect Suppliers Systems and Guidelines Stakeholder Engagement

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environment 19 Management Processes 20 Innovation 20 Design 21 Marketing 22 Development 23 Sourcing 24 Own Operations 27 Sales 29 Communication 30 Human Resources 30 IT 31

EMPLOYEES 32 2012 milestones

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PERFORMANCE 42 Supply Chain 43 Audits and Training 46 Enforcement 52 Environment 54 Employees 56 Community Affairs 61

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CEO STATEMENT

While working towards these strategic goals, we also want to meet society’s evolving expectations of business practices.

Growing our business brings with it many challenges. Our Strategic Business Plan until 2015 – called Route 2015 - sets out ambitious targets for the growth of the adidas Group. While working towards these strategic goals, we also want to meet society’s evolving expectations of business practices. These include our responsibilities towards our employees, the people who make our products, the environment and the communities where we operate. In 2010 we set 2015 social and environmental targets that aim to shape how we will grow and meet our business goals in a sustainable way. Targets are important because they give us a clear orientation and landmarks to reach and they spur us on to go further and achieve more. This report is focused on reporting our efforts to reach the milestones we set ourselves for 2011.

Progress in 2011 Two milestones highlight the progress we are making in managing social compliance in our supply chain: 1. Our direct suppliers’ performance is rated through a key performance indicator, or C-rating, on a scale of 1C-5C. In our direct supply chain, which accounts for fourfifths of our sourcing volume, nearly 40% of our direct suppliers and 62% of our strategic tier 1 suppliers were rated as 3C factories or better. So we are on track to meet our 2015 target to see 60% of our direct suppliers reaching at least 3C. 2. We aimed to improve the lowest performing suppliers in our direct supply chain and we had remarkable success: reducing the lowest rated factories (1C) from 19% of our supply chain in 2010 to 8% by the end of 2011. In the environmental area, we continued to increase the number of products containing environmentally optimised components. The amount of adidas footwear meeting our baseline environmental criteria more than doubled in 2011 and now accounts for 65% of all adidas athletic footwear. The starting point for delivering our Environmental Strategy 2015 is to have the right systems and guidelines in place. We have met our 2011 milestone to develop a format for these guidelines and we have introduced a new system to record and track our key environmental data covering around 80% of our own operations’ footprint. PERFORMANCE COUNTS / Sustainability Progress Report 2011

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We cannot reach our goals without engaged employees. Following our global employee engagement survey, we began a comprehensive Results-to-Action process to maintain our top scoring areas and improve upon areas of weakness. We now have action plans in place covering more than 83% of the organisation.

In July 2011, we published a complete list of the names and addresses of the factories producing adidas clothes, shoes and equipment for the London 2012 Olympic Games. The list also shows the status of worker or trade union representation and whether there is a Collective Bargaining Agreement in place at the individual facility.

Engagement and collaboration

Recognition

Engaging with stakeholders has remained an important element of our sustainability strategy in 2011. This engagement helps us to understand issues and be responsive to concerns raised. It also leads to collaborative working. We recognise that many of the issues we face cannot be solved by the adidas Group alone and working with other actors in our industry helps drive lasting change.

We value feedback from stakeholders on our sustainability strategy and programmes. For the 12th consecutive year, in September 2011, adidas AG was selected to join the Dow Jones Sustainability Indexes (DJSI), which track the performance of leading sustainability-driven companies worldwide. Based on this result, adidas AG was not only rated as SAM Sector Leader 2012 in managing sustainability issues but was also classified as SAM Gold Class in our industry. Furthermore, our company was once again acknowledged to be one of ‘The Global 100 Most Sustainable Corporations in the World’.

So for example, the adidas Group acted as the lead party in a supplier-brand caucus formed in 2010 to engage with Indonesia’s trade union movement. Its aim was to develop a basic framework for the exercise of trade union rights in the workplace. An agreement was finally reached and signed in Jakarta in June 2011. The protocol is recognised as a landmark achievement in Indonesian labour rights. When Greenpeace launched its Detox Campaign calling for an end of discharge of hazardous chemicals in the textile industry, we worked with a coalition of other brands to develop a joint roadmap towards the zero discharge of hazardous chemicals by 2020.

Preparing for London 2012 – the ‘Sustainable Games’ As the Official Sportswear Partner of the London 2012 Olympic and Paralympic Games, adidas has an important role to play in delivering the ‘Sustainable Games’ vision. All London 2012 adidas products and services must be sourced and manufactured to environmental, social, and ethical guidelines and standards set by the London Organising Committee of the Olympic and Paralympic Games (LOCOG). Suppliers and factories have been briefed on these standards and regular audits are conducted to ensure that all products are sourced and transported in an ethical manner. Around 90% of all adidas Olympic articles have some sustainable content.

The future There are challenges ahead. The rising costs of limited resources create a commercial and environmental imperative to adopt more sustainable practices. Calls for greater social justice demand business plays a part in tackling poverty and poor living conditions. Addressing these and other concerns requires us to embed our sustainability strategy deeply into our company. I am particularly excited about innovative programmes such as our virtualisation and product excellence projects contributing to a significant reduction in resource use. Their positive impact on both our financial and environmental performance represents a strong alignment between our business and sustainability goals. By focusing our report around our 2011 milestones, we hope we have provided a clear account of the first steps on our five-year journey towards our sustainability targets for 2015. There is still much for us to do but we are confident we are on the right track. Please let us know what you think at [email protected]. Thank you. Herbert Hainer Chief Executive Officer adidas Group

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our approach to sustainability

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Our Approach to sustainability We are striving to be the global leader in the sporting goods industry and this demands that we return strong financial results. But leadership is not only about results, it is also about how success is achieved. It is about striking the balance between business needs and social and environmental demands. Balancing these interests requires strong commitment, strategic direction, efficient and careful execution, as well as regular reflection on the progress made. The adidas Group’s sustainability strategy is rooted in the Group’s values – performance, passion, integrity and diversity. It is built on the achievements and learning from previous years. It takes into account changes in the societal landscape, global trends and goes hand-in-hand with our overall business strategy. It reflects the feedback that we have captured from our stakeholders and sets clear targets we are striving to achieve.

Overview of our sustainability strategy The five areas of our strategy are: • Embedding environmental sustainability in all products, processes and services to significantly improve our environmental impact across our value chain and to positively contribute to our business performance. • Effectively managing business risks and social compliance in our supply chain, which is expanding, and becoming more complex with multiple relationships and stretched lines of communication and control. • Extending our engagement internally and externally – partnering with others to embed new thinking and better ways of collaboration within our business and along our supply chain. Working together to make a difference. • Creating the best and most productive workplace in the industry by becoming a champion in talent and succession management, a world-class recruiter and a Top 10 employer in every key market in which we operate. • Making a difference in the communities where we operate by supporting programmes that truly meet local needs.

governance of our sustainability strategy We are a company that operates globally and outsources most of its production to a multi-tiered supply chain. So it is essential to develop an approach that covers our social and environmental responsibilities both inside and outside the company. In no way can a single corporate unit carry this out. Group Social & Environmental Affairs (SEA) and Group Human Resources (HR) play a critical role in fulfilling our responsibilities in this area. Group Social and Environmental Affairs (SEA) reports into the General Counsel of the adidas Group and is tasked with: • Ensuring compliance with the “Workplace Standards” within the supply chain, and with that being part of the Group’s risk and compliance management system. • Leading, promoting and managing the development and implementation of environmental strategies across the Group’s value chain. • Extending and maturing the engagement and collaboration with others to drive changes in the industry. • Managing the Community Affairs programme at Group level. • Managing the Group’s corporate sustainability communication and reporting.

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Programme Strategy How sustainability supports our business strategy

Environmental sustainability Integrating environmental thinking and acting into our daily operations and developing smarter solutions – this is what we want our Environmental Strategy to achieve.

It aims to substantially improve the Group’s environmental In October 2010, we presented the most footprint by changing our processes across every part of comprehensive and aligned Strategic Business our value chain from innovation and product design via development and manufacturing operations to our own Plan our Group has ever created: Route 2015. stores and other sales channels. Over these five years, we want to achieve qualitative and sustainable growth by building social compliance in the supply chain desirable, leading brands in the consumers’ Workers in our suppliers’ factories play a central role in our and customers’ perception. Consumers programme. It was concern for their welfare and rights that led us to write our “Workplace Standards” and to establish a nowadays increasingly expect companies compliance management system covering all brands of the to do more than just consider social and adidas Group. environmental issues. They want the products Our supply chain is large, multi-tiered and varied. they buy to be the best, helping them be the We have a detailed approach to managing relationships best they can be. But they also want to buy with our suppliers and we continue to develop ways for these products from companies that are at the engaging suppliers who are part of our direct and indirect leading edge in terms of making a difference to supply chain. the world at large.

engaging stakeholders

We know that we can only follow this route if we are fully committed to managing our business operations in a sustainable way. While we have made big strides in laying the foundations for success in previous years, we must continue to drive innovations and to strengthen our systems and processes.

As a company we do not operate in isolation and we seek feedback from internal and external stakeholders by carefully listening, responding and engaging with them. Our engagements are with people in the company as well as externally including governments, civil society, investors, analysts, customers, and industry alliances.

We also recognise that while the individual elements of our sustainability strategy are robust and well-managed, we could improve the cross-linkages, which would increase the strategy’s effectiveness. The stronger our sustainability strategy, the more it will help us realise our business ambition to be the global leader in the sporting goods industry.

We engage internally with employees and managers to develop appropriate and innovative ways of embedding sustainability thinking and processes within our organisation. Externally we look for innovative forms of partnerships and collaboration that drive change in the industry.

There are five elements to our sustainability strategy: • Environmental sustainability • Social compliance in our supply chain • Engaging stakeholders

developing our employees Our people are crucial to our success. We strive to create a working environment that promotes team spirit, passion, engagement and achievement.

• Contributing to local communities.

We promote a performance culture based on strong leadership and therefore link employee compensation to Group and individual achievements. We aim to continuously develop our employees with opportunities for career progression, while upholding a culture that celebrates diversity and encourages global mobility.

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• Developing our employees

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We also know how important it is to continue to attract and recruit new people to the adidas Group. In this so-called ‘war for talent’, it is important that we become a world-class recruiter, and this ambition has led us to launch innovative programmes to raise our profile with potential employees. We aim to create a stimulating and attractive work environment as we strive to be a Top 10 employer of choice in the key markets in which we operate.

contributing to local communities As a multinational enterprise, the adidas Group is represented in many countries around the world and its business operations impact people’s lives in those communities. While there are many possible ways to get involved in aid or community programmes, the challenge is to know the local needs of the communities. We therefore have chosen a largely decentralised and brand-oriented model for community involvement recognising that people in the subsidiaries best understand the needs and cultural sensitivities of their local communities. Brand programmes are managed under the Adi Dassler Fund, the Reebok Corporate Responsibility Programme and the TaylorMadeadidas Golf Charity Programme. At Group level we continue to support our suppliers’ communities as we make contributions to organisations that promote sustainable development practices within the industry.

Reporting Approach

We aim to act responsibly and communicate honestly. We recognise that stakeholders have a legitimate interest in our social and environmental performance and our ambition is always to satisfy that interest with complete and accurate information.

reaching milestones – the basis of our report Last year the adidas Group launched its five-year business strategy Route 2015. We also set targets for 2015 across our sustainability programme with milestones for 2011. This year our report is focused on the progress we have made on reaching those 2011 milestones. The title we gave last year’s report still holds: Performance counts. It is this focus on performance, and the outcomes of this year’s efforts, which is at the heart of our Sustainability Progress Report for 2011. To complement this focus on reporting progress in reaching our milestones, we have added content to the sustainability section of our corporate website. This now covers the context for our sustainability programme, our approach to the issues in more detail, and includes case studies where we have put our strategy into practice. We envisage maintaining this two-pronged approach in the remaining years up to 2015, with additional enhancements, as we further develop our sustainability communications strategy.

using the gri We recognise that the Global Reporting Initiative (GRI) Guidelines are the international benchmark for sustainability reporting. Since information provided on our corporate website and in our 2011 Sustainability Progress Report is deeply interconnected and built on each other, we apply the GRI 3.1 Guidelines to the total content of both sites. To show how we have complied with the GRI, we are preparing a GRI Content Index, which will be added to our corporate website. For more information about the Global Reporting Initiative, please see www.globalreporting.org

We have produced annual reports on our sustainability performance since 2000. Each year we reflect on what we can do better, taking on board feedback we have received, reviewing who is reading our reports and visiting our corporate website and reflecting on the fact that more and more people are interested in our social and environmental performance.

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highlights 2011

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highlights 2011 These highlights from our year represent some of the key steps we have taken in 2011 to be a more sustainable business. In keeping with the ongoing challenges of sustainability, some are milestones we have reached while others describe the early stages of initiatives that will help us meet our targets for 2015 and beyond.

publishing a roadmap to zero discharge In November 2011, the adidas Group, C&A, H&M, Li Ning, Nike, Inc. and Puma released a joint roadmap towards zero discharge of hazardous chemicals (ZDHC) in the supply chain by 2020 for public consultation. It is an ambitious plan, one that sets a new standard of environmental performance for the global apparel and footwear industry. The roadmap includes specific commitments and timelines to realise this shared goal. More about our roadmap to zero discharge on our corporate website.

reaching out to stakeholders in london

improving the performance of suppliers

In May 2011, we hosted a stakeholder dialogue on the topic ‘Respecting Labour Rights in Global Supply Chains: The Impact of Major Sporting Events’. Representatives from UK labour and human rights organisations, the London Organising Committee for the Olympic Games and Paralympic Games (LOCOG) and socially responsible investment analysts attended along with senior staff from the adidas Group. The meeting has helped shape how we work with our suppliers around major sporting events, including the London 2012 Olympic Games.

At the end of 2010, the adidas Group adopted an aggressive policy to improve the lowest performing suppliers in our direct supply chain. In India, close to 80% of our local suppliers had failed to meet or maintain our minimum expected score of 2C under our social compliance KPI system. Focused capacity building by our local compliance team led to a marked turnaround in 2011, with over 80% of our local suppliers now meeting our 2C minimum. Those that have failed to meet our expectations will be phased out in 2012.

More about this stakeholder engagement on our corporate website.

More about improving suppliers’ performance in the ‘Suppliers’ section of this report.

publishing our supplier list for the olympics

world of sports iso 14001 certification

In July 2011, the adidas Group published a complete list of London 2012 Olympic Games suppliers with the names and addresses of the factories by country. The list also shows the status of worker or trade union representation and whether there is a Collective Bargaining Agreement in place at the individual facility. We took this step as part of our ongoing effort to be transparent about our supply chain.

As part of the adidas Group’s Green Company programme, in 2011, our site in Indianapolis, USA, and our World of Sports Headquarters location in Herzogenaurach, Germany, were successfully certified in accordance with the ISO 14001 standard for environmental management systems. This brought us to ten major adidas Group sites covered by certified environmental management systems by the end of 2011.

See the list of our suppliers on our corporate website.

Read more in the ‘Environment’ section of this report.

Keeping our sustainability promises at the olympics

environmental data tool for both green company and suppliers’ data

As the Official Sportswear Partner of the London 2012 Olympic Games, adidas fulfilled its commitment to provide products with sustainable content for the Games. The volunteer uniforms are an important part of this commitment and 100% of the uniforms contain sustainable content, while the special edition Fluid trainer is our most sustainable shoe.

In 2011, a new reporting tool was designed and implemented for both our Green Company reporting and our suppliers’ reporting of environmental performance. The tool will help drive environmental improvements for our own operations and for our suppliers, and will allow us to compare data more easily.

More about meeting Olympics commitments in the ‘Suppliers’ section of this report.

PERFORMANCE COUNTS / Sustainability Progress Report 2011

More about the new reporting tool in the ‘Environment’ section of this report.

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piloting the apparel coalition index across many product categories As a founding member of the Sustainable Apparel Coalition, 2011 saw the adidas Group participate in both the development and testing of a cross-industry apparel sustainability measurement tool. Nearly 20 products were piloted from brand adidas, Reebok and Rockport, and these covered all business units and global creation centres. More about this pilot project on our corporate website.

lauching the sustainable manufacturing initiative During 2011 the adidas Group launched an ambitious research project to help our suppliers manufacture products while minimising negative environmental impacts – that is, sustainable manufacturing. The first phase of the project – a partnership with the Royal Melbourne Institute of Technology University in Australia – was piloted in Indonesia, with the participation of a cross-section of footwear and apparel suppliers, as well as Tier 2 material suppliers. The results of the pilot exercise will be shared on an open source basis. More about the Sustainability Manufacturing Initiative on our corporate website.

dow jones sector leader In September 2011, for the 12th consecutive time, adidas AG has been selected to join the Dow Jones Sustainability Indexes (DJSI), the world’s first global sustainability index family tracking the performance of the leading sustainability-driven companies worldwide. In the category ‘Clothing, Accessories & Footwear’, adidas AG was rated as industry leader in sustainability issues and corporate responsibility for the eighth time. More about this on our corporate website.

women in leadership positions Starting in 2011, the adidas Group has set itself the goal of increasing the number of women in leadership positions. We recognise we have a role to play in supporting employees who are striving to balance family life with a successful career. Therefore, among other initiatives, we have put a strong focus on work-life integration during the remodelling of our headquarters and have planned in parent-child offices and an investment into a childcare centre. More about our efforts to support women in the workplace in the ‘Employee’ section of this report.

employee development programmes responding to revised un human rights principles In September 2011, the adidas Group issued its position on the integration of Human Rights into its business operations. With this step we wanted to inform stakeholders how the Company is responding to the revised OECD Guidelines, the final report published by the UN Special Representative on Business and Human Rights, Professor John Ruggie and State of California’s Transparency in Supply Chains Act of 2010.

We continue to invest in developing our own employees because we believe in internal talent pools and systematic talent and performance promotion. Therefore, in 2011, we have launched two new development programmes: the ‘People Development Programme’ targets young employees with remarkable potential and the ‘Fit to Lead’ programme teaches leadership skills to our first-time people managers. More about how we develop our employees on our corporate website.

More about our position on human rights on our corporate website.

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suppliers

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suppliers

The clusters show that we moved closer to our target that by 2015 80% of strategic Tier 1 suppliers will meet compliance expectations and a minimum performance rating of 3C.

Direct Suppliers target 2015: 80% of strategic tier 1 supplier factories to meet 3c (good) or better under our social compliance Kpi rating and 25% of them to be in the self-governance compliance model

2011 Milestone

PROGRESS/PERFORMANCE IN 2011

Tackle the lowest performers by improving 1C-rated suppliers to a minimum rating of 2C and exit those suppliers that do not meet this grade.

In 2011, comprehensive capacity building was designed and implemented for suppliers who were at 1C rating in 2010 across Asia. Target countries included India, Indonesia, Thailand and China. The capacity-building programme has resulted in more than 70% of 1C factories making the required improvements to achieve a 2C rating. Those suppliers who failed to reach a minimum of 2C are to be phased out in 2012. LARGELY ACHIEVED

Additional comments During 2011 we improved how we monitor supply chain compliance by customising programme activities with three redefined clusters of the supply chain. These clusters stressed more value-added practices by the fair, good and best compliance performers. The highest performing suppliers implemented “self-governance” activities, including more sophisticated reporting. Fair, good and best performers participated in the “Partnership” cluster, focusing on collaboration with multiple buyers in shared factories (such as the Sustainable Compliance Initiative and the Brown Shoe Collaboration), and participating in multi-stakeholder initiatives (such as the Fair Labor Association and Better Work). The poorest performing suppliers are in the “Risk Management” cluster.

Suppliers who are rated 1C (with social compliance KPI scores of 29% or below) are viewed as having systemic problems. Typically they are factories which have inadequate or underdeveloped management systems and are unable to support long-term sustainable compliance with the adidas Group’s Workplace Standard. By the end of 2011, 8% of all suppliers were rated as 1C. This is a substantial decrease from 19% in 2010 and has been achieved through a focused effort on capacity-building. We designed a comprehensive capacity-building programme that required suppliers to develop and improve HR and Health, Safety and Environment management systems, as well as strengthen the capabilities of their personnel and organisation. The programme includes classroom training, project assignments and periodic progress reviews. Members of the Social & Environmental Affairs (SEA) team were actively involved in providing consultation to suppliers where needed. In countries like India and Indonesia, the team also engaged and commissioned external experts to deliver tailored training. Progress was then measured and improvements noted for each of the Unit of Measures of our social compliance key performance indicators.

2012 milestones In 2012, our supplier KPI capacity-building programme will build on our experience and successes from 2011. We aim, by the year end, to: • Achieve 68% of our strategic Tier 1 suppliers at 3C rating or better, and 15% at 4C rating or better • 45% of all direct suppliers to meet 3C rating (good) or better • Target newly approved suppliers to help them achieve a minimum 2C rating • Provide ongoing training and consultation for existing suppliers to improve their KPI rating to the next level.

• The Risk Management cluster includes those factories scoring at 1C or 2C – about 61% of our supply chain • The Partnership cluster includes 3C factories – about 28% of our supply chain • The Self-governance cluster is composed of 4C and 5C factories – about 11% of our supply chain.

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Indirect Suppliers

2012 milestone

target 2015: scorecards for business units and intermedaries managing our indirect suppliers to achieve an average performance rating of 70% or higher

• In 2012, scorecards to be reviewed and updated for 90% of our business units and licensees that have own sourcing arrangements.

2011 Milestone

PROGRESS/PERFORMANCE IN 2011

2011 Milestone

PROGRESS/PERFORMANCE IN 2011

Drive business entities’ accountability for their supply chains’ compliance performance by:

The number of strategic compliance plans has increased by 29% from 31 to 40 and report cards by 13% from 55 to 62.

Drive business entities’ accountability for their supply chains’ compliance performance by:

An environmental component was integrated into the standard strategic compliance planning tool and launched globally for application to all core suppliers.

• Expanding the number of strategic compliance plans (SCP) and report card (RC) assessments.

TARGET ACHIEVED

• Launching an environmental component to the SCP.

T  ARGET ACHIEVED (ROLLOUT AND IMPLEMENTATION) FOR APPAREL CORE SUPPLIERS

Additional comments Our target is for our Group business units (BU) and licensees, altogether known as our Business Entities (BE), to achieve an average report card score of 70% or higher by 2015. By the end of 2010, 55 report cards had been completed and the average score for all the BEs globally was 63%. By the end of 2011, 62 report cards were completed and the average global score improved to 67%. SEA works with the BUs and Licensees to develop their strategic compliance plans (SCP) and report cards (RC). The RC evaluates the Business Entities’ performance over the previous 12 months in integrating the Group’s ethical sourcing policies into their daily operations and throughout their supply chain. Gaps embedding the policies and practices are identified by assessing responses for defined standards and requirements. The final step develops and implements a forward looking strategic action plan. Some of the report cards in 2011 remained desk top exercises and were not updated. The RC assessment includes benchmarks to evaluate the Business Entity’s collaboration with the SEA team, the disclosure and accuracy of its supply chain data in the Fair Factories Clearinghouse (FFC), compliance with SEA standards and guidelines, and the effective management of supply chain audits and corrective actions. A final measurement benchmark assesses the overall compliance performance of its global supply chain. The report card score is a cumulative score up to 100%. Low scores indicate serious shortcomings in the Business Entity‘s management of SEA requirements within their organisation and in the supply chain. The SEA team meets with low-scoring BEs more frequently to support the improvement of compliance processes and management systems. Business entities with high scores, in particular those who already have established a compliance programme and an internal audit team, operate in a self-governance mode.

P  ARTIALLY ACHIEVED (ROLLOUT AND IMPLEMENTATION) FOR EMEA AND AMERICAS CORE SUPPLIERS

Additional comments Factories are required to prepare and keep updated a threeyear strategic compliance plan (SCP) that directs their internal efforts to comply with the adidas Group Workplace Standards, through the development of sound management systems, monitoring processes and training. Recognising the need to align the environmental aspects of the programme into the SEA core tools, we revised the SCP to incorporate an environmental element allowing the factory to address sustainability as a whole. This is in line with the need for suppliers to be transparent in their approach to addressing their overall sustainable practices. With the additional environmental element in the SCP, suppliers are now taking a closer look at their internal environmental programme and initiatives. They are also challenged to look at their activities in a more comprehensive manner – considering the interactions between labour, health & safety and environmental issues.

2012 milestone • We will continue to promote the environmental component of the SCP to core suppliers in the EMEA and Americas regions.

This means that they are allowed to enter the results of their internal audit findings in the FFC database. The SEA team conducts random audits in these factories to confirm the findings and to inform the regular KPI assessments.

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Systems and Guidelines target 2015: establish common industry-wide monitoring platform and tools used to check and measure workplace conditions

2011 Milestone

PROGRESS/PERFORMANCE IN 2011

Promote the mainstreaming of the Fair Factories Clearinghouse (FFC) as an industry-wide tool for compliance collaboration and harmonised activities.

The SEA team is an industry pioneer in harmonising corrective action plans with other brands using the FFC’s data sharing platform.

Furthermore, the SEA team and the FFC have started working with ARTS (Association for Retail Technology Standards) to create an industry-wide solution to interface compliance data between different database platforms. Several other brands, multi-stakeholder initiatives and organisations such as Nike, FLA, GSCP, SEDEX and Better Work are also part of this project. The FFC plays a crucial role in this project and its recognition and visibility within the industry increased in 2011.

2012 milestone • In 2012, SEA will continue to promote the FFC as an industrywide tool for sharing compliance information and harmonising corrective action plans.

LARGELY ACHIEVED

Additional comments We have been using the Fair Factories Clearinghouse (FFC) as the adidas Group’s compliance database since 2006. In 2008, the FFC created a feature to enable its member companies to share factory audit reports, corrective action plans (CAP) and other related documents. We have shared our audit results in the FFC with all the other members since then. The SEA team has been the leader in sharing the most number of monitoring documents in the FFC and in harmonising CAPs with other brands in shared factories. With the consent of the factory management, the CAPs of the two brands are harmonised into one CAP, which allows the factory to respond to just one CAP instead of two different ones. This saves valuable resources for the factory and for buyers, and creates consistency for everyone. It also reduces the number of audits in a factory as the brands can alternate audit responsibilities between each other and update the harmonised CAP. In 2011, the SEA team asked the FFC to further improve and simplify its collaboration aspect and the FFC subsequently introduced new specifications to its members by end of 2011. In order to promote collaboration further, the FFC even introduced a new membership model with both “full membership” and “sharing only” membership. In this way companies do not have to be full members to collaborate and harmonise CAPs with other members. The adidas Group strongly supports the FFC data sharing capabilities because we believe that if there are more companies using the FFC to share audits and to harmonise CAPs, the industry as a whole will benefit. In 2011, we introduced the FFC to the “Brown Shoe Collaboration” companies. The “Brown Shoe Collaboration” consists of a range of brands within the business and casual footwear segment. Most of them were not FFC members so the FFC provided them with trial memberships for six months to allow them to edit the harmonised CAP in shared factories. We continue promoting the FFC as an industry-wide solution in our interactions with other brands, federations and initiatives including the World Federation of Sporting Goods Industry, Better Work, the Fair Labor Association, the Sustainable Apparel Coalition (SAC) and the Global Social Compliance Programme (GSCP).

PERFORMANCE COUNTS / Sustainability Progress Report 2011

2011 Milestone

PROGRESS/PERFORMANCE IN 2011

Integrate the next generation of monitoring tools by benchmarking our tools and practices against those of other brands in key industry alliances, such as the FLA and GSCP.

Largely achieved and continuously acted upon. The launching of the Sustainable Compliance Initiative and the Global Social Compliance Programme equivalency process are still works in progress but we continue to mature our tools and methodology in collaboration with these programmes. LARGELY ACHIEVED

Additional comments We leveraged industry and sectoral initiatives such as the Fair Labor Association’s Sustainable Compliance Initiative (FLA-SCI), the Fair Factories Clearinghouse (FFC), and the Global Social Compliance Programme (GSCP) to continue calibrating our monitoring methodology, strategic compliance planning tool, and key performance indicators. The FLA’s SCI methodology focuses monitoring on all of the stages of the employment life cycle, from recruitment through the termination of employment. The adidas Group actively participated in global testing of the SCI tool in the Americas, Asia Pacific and EMEA. We are also working closely with brands like Nike and Philips van Heusen to identify standards for a commonly used set of monitoring question sets derived from the SCI tool. This will further advance the jointly applied monitoring content and practices with up to 100 shared factories. The SEA Human Resources Management Systems (HRMS) programme was evaluated and harmonised to seamlessly integrate with the SCI methodology. The Fair Wage Assessment project started in 25 factories (4 full assessments and 21 self-assessments in the Philippines, Thailand, and Latin America) and will collect and measure worker compensation practices against 12 wage benchmarks, and identify frameworks that sustainably improve wages. SCI, HRMS and Fair Wage Assessment continue to be thoroughly tested and will be completely integrated into the SEA team’s internal coverage and practice by 2013. See below for more on the Fair Wage Assessment exercise.

15

CEO STATEMENT

3

our approach to sustainability

5

highlights 2011

9

suppliers 12 environment 19 EMPLOYEES 32 2012 milestones

36

PERFORMANCE 42

We use the Fair Factories Clearinghouse (FFC), a shared compliance monitoring platform that enables us to collaborate on activities in factories shared with other buyers, in other words, to more efficiently engage with factories. In 2011, we shared compliance data in the FFC for 913 of our factories. Additionally, we engaged in 18 collaboration activities directly with other brands, and through Better Work. In many of these cases, we developed harmonised remediation plans with other buyers and established consistent messages for factory management. This clearly set expectations for suppliers to fulfil the benchmarks of the partnership compliance model and move to adopt practices for a self-governing compliance model. We have 93 Self-Governance audits conducted by our 4C and 5C-rated suppliers, FLA participating suppliers, and selected licensees. In 2012, we will start applying the “Equivalence Process” of the Global Social Compliance Programme. This helps companies and initiatives to benchmark their own systems, tools and processes against agreed best existing practices as described in the GSCP reference tools. A more detailed description can be found on the GSCP website at http://www.gscpnet.com/ equivalence-process.html

2012 milestones • Finalise the commonly shared (SCI) monitoring question sets with other brands and buyers. • Continue preparations to integrate SCI, HRMS and the Fair Wage Assessment to internal SEA practice by 2013. • Start applying the Global Social Compliance Programme Equivalence Assessment.

2011 Milestones

PROGRESS/PERFORMANCE IN 2011

Drive efficiencies and effectiveness in the monitoring and improvement of workplace conditions by leveraging our partnerships and collaborations with selected brands, multi-stakeholder initiatives and other stakeholders by:

The milestone was largely achieved and continuously acted upon. Fair Wage piloting and collaborations met the 2011 target but the increase in the number of suppliers with harmonised corrective actions plans was less than expected.

Additional comments The 2011 milestones were direct actions with the supply chain to achieve 2015 targets of 80% of our strategic Tier 1 suppliers reaching a 3C KPI rating and 25% of them to take direct responsibility for their own social compliance performance. The 2015 targets for collaboration and partnerships with multiple stakeholders (multi-stakeholder initiatives, brands, and local civil society) included work in 2011 to find resolutions in several factory reports – Ocean Sky, Style Avenue, PT Kizone. The Fair Wage project, rolled out in five countries, supports the 2015 target that strategic suppliers transparently report on sustainability performance. Stakeholder partnerships and collaborations In 2011, we worked closely with the Fair Labor Association and other brands to refine and finalise the Sustainable Compliance Initiative (SCI). The SCI is an innovative approach for assessing working conditions and developing corrective action that focuses on proper and effective human resource management systems. SEA staff participated in pilot testing of the tool with suppliers in China, India, El Salvador and Bulgaria. Team members attended training to assess the value of the systems and practices in the workplace, including identifying the item to be assessed, and then evaluating that item in a way that leads to sustainable recommendations and remedies. The SEA staff participated in developmental working groups with the Fair Factories Clearinghouse’s new programme (ARTS) to seamlessly share compliance data, and the Sustainable Apparel Coalition’s Sustainability Index content for the environment and social compliance. Notable collaborations with other brands included work on the FLA–SCI, and an increased number of corrective action planning with factories shared with another sports brand. Shared corrective action planning is rolled out in seven countries – Indonesia, Vietnam, Turkey, Egypt, Brazil, Honduras, and Mexico. Ongoing efforts in partnerships with eight other brands in the “Brown Shoe Collaboration” continued for the third year, with the development of common corrective action plans for multiple shared factories for a large scale shoe supplier in China. The collaboration also expanded coverage by looking at opportunities to set common standards and approaches for the safe use of chemicals. Active engagements with local civil society, other buyers and regulatory authorities led to prompt and successful resolution in the Ocean Sky and Style Avenue factory cases in El Salvador.

• Promoting the harmonisation of corrective action plans at a factory level through brand collaborations and engagement with key suppliers. • Completing a Fair Wage pilot in collaboration with the FLA and ILO by prototyping in the Philippines and Central America.

LARGELY ACHIEVED

PERFORMANCE COUNTS / Sustainability Progress Report 2011

16

CEO STATEMENT

3

our approach to sustainability

5

highlights 2011

9

suppliers 12 environment 19 EMPLOYEES 32 2012 milestones

36

PERFORMANCE 42

Stakeholder Engagement

Fair Wage pilot The Fair Wage approach is based on assessing 12 complementary Fair Wage benchmarks to gain a complete overview of wage practices at the enterprise level and to identify remedial needs. Different Fair Wage tools capture the different aspects of the wage story in the enterprise and provide findings that are reliable and robust. These include an online questionnaire for managers, a table of statistics on wages, employment and company performance, quantitative interviews of workers and qualitative surveys of a few selected companies. In 2011, three suppliers in the Philippines and one supplier in Mexico started full Fair Wage assessments, and 21 suppliers in El Salvador, Brazil, Thailand and China worked on Fair Wage self-assessments. In Q3 2012, a consolidated Fair Wage Assessment report will be completed and given to the adidas Group and the four factories which completed full assessments.

2011 Milestones

PROGRESS/PERFORMANCE IN 2011

Address external requirements for transparency and disclosure:

The opportunities in the Fair Wage project will help individual suppliers, as well as the adidas Group, to identify the management practices required in Fair Wage dimensions. The assessments evaluate compliance with legal wage provisions, wage levels and wage adjustments, and set a series of wage policy recommendations. These recommendations encompass the quality of pay systems, their fairness and efficiency, as well as the strength of communication and social dialogue.

• Publicly disclose Olympic supplier list from mid-2011 and update quarterly to ensure it is current and accurate.

As a local sponsor of the 2012 London Olympic Games, the adidas Group comprehensively met the requirements as outlined in the Sourcing Code of the London Organising Committee of the Olympic and Paralympic Games (LOCOG).

target 2015: Strategic suppliers to have transparent reporting practices about their sustainability performance in place

• Fulfil LOCOG requirements and contract obligations on supplier disclosure and SEDEX uploads.

2012 milestones • Integrate SCI methodology into current monitoring practices and tools; deeper application from 2013 onwards.

Beyond these requirements we disclosed our Olympic supplier list to the public and updated it quarterly. We also developed and delivered a legacy programme of outdoor sports facilities for local communities in the UK and ran the first ever sports eventfocused stakeholder dialogue. TARGET ACHIEVED

• Complete and report on 25 full and self-assessments by suppliers using the Fair Wage methodology and tools. Additional comments Engaging openly with stakeholders and establishing leadership approaches for transparency and disclosure is a fundamental part of our sustainability strategy. Being so visible at major sporting events draws attention to how we do business, so the adidas Group has taken a proactive approach in engaging with stakeholders about its corporate responsibility practices for the London 2012 Olympic Games. The approach has included specific actions: • Meeting the requirements of the LOCOG Sourcing Code and disclosing our Olympic supplier list to the public • Providing a sporting legacy to the UK and delivering a grassroots programme to the community • Seeking direct dialogue with UK-based labour and human rights groups about how events are organised and how the parties involved manage their wider responsibilities when it comes to protecting human or labour rights.

PERFORMANCE COUNTS / Sustainability Progress Report 2011

17

CEO STATEMENT

3

our approach to sustainability

5

highlights 2011

9

suppliers 12 environment 19 EMPLOYEES 32 2012 milestones

36

PERFORMANCE 42

Meeting the LOCOG Sourcing Code

Leaving a legacy to the UK community

The London Organising Committee for the Olympic Games and Paralympic Games (LOCOG) issued a Sustainable Sourcing Code to its partners. The code clearly outlines four key principles for commercial partners to follow:

As a sponsor of the London 2012 Olympic Games, we wanted to provide a sporting legacy to the UK that would get more people active and break down barriers to sport and physical activity. We engaged with local and central government, organisations like the Youth Sports Trust, Sport England, and LOCOG in the development and rollout of the adiZone programme. The adiZone programme revolves around creating innovative multi-sport venues that provide a social platform for members of the community to do a range of activities.

• Ensuring responsible sourcing • Using secondary materials • Minimising embodied impacts • Using healthy materials. Ensuring responsible sourcing All direct suppliers and sewing subcontractors selected to manufacture LOCOG-licensed products: • Are to meet the adidas Group Workplace Standards • Are fully disclosed in SEDEX (Supplier Ethical Data Exchange) • Are subject to regular labour, health & safety compliance inspections by adidas Group SEA compliance staff • Meet a defined key performance indicator (KPI) which rates a factory’s compliance performance • Have a management plan in place that details a factory’s compliance programme and future targets • Are publicly disclosed via the adidas Group website. Using secondary materials Overall, 90% of the adidas Games products contain sustainable content including 100% of athlete village-wear, 100% volunteerwear, and 73% of on-field performance products. The London Volunteer’s uniform is a prime example. All items in the volunteer package contain, at a minimum, 35% sustainable content, with three-quarters of the volunteer clothing and accessories containing more than 50% sustainable content. Additionally, all volunteers will be wearing the London version of the popular Fluid Trainer shoe. The Fluid Trainer is technically advanced in the area of sustainability, with pattern innovations and sustainable content that impact the whole shoe. The shoe contains recycled polyester mesh, recycled EVA (ethylene vinyl acetate), as well as recycled rubber, and has achieved a 70% or greater pattern efficiency for every piece of the upper. Minimising embodied impact All direct suppliers selected to manufacture adidas-branded LOCOG-licensed products and their major materials suppliers have undergone environmental assessments of their sites. Assessments are used for the development of individual factory improvement programmes. Factories’ progress is tracked regularly. Using healthy materials

By end of 2011 the company has built over 50 adiZones spanning across every region in England equipped with sustainable facilities for both able-bodied and disabled users. Brand adidas is determined to increase the number in the UK by setting up more than 100 adiZones across the country by the time the Games start. The goal is to make sports participation accessible by offering everybody a chance to get active. Each adiZone is a free-to-use, permanent “outdoor gym-like” installation measuring 625sq metres and is open 365 days a year, incorporating basketball, football and tennis areas, a climbing wall, an outdoor gym and an open area to encourage dance, aerobics and gymnastics, set up by the local communities together with adidas. Stakeholder dialogue 2011 Building on previous engagements, in May 2011, the adidas Group hosted a stakeholder dialogue on the topic “Respecting Labour Rights in Global Supply Chains: The Impact of Major Sporting Events”. The dialogue included representatives from UK labour rights and human rights organisations, from the London Organising Committee for the Olympic Games and Paralympic Games (LOCOG), SRI analysts and senior staff from the adidas Group. The feedback from the meeting helped to shape our approach to managing our supply chain for major sporting events, including the London 2012 Olympic Games. The dialogue was hosted by an independent facilitator. A paper summarising views from the meeting is available on the adidas Group sustainability website.

2012 milestones • To share the findings from the stakeholder dialogue with sports events organisers to raise the sustainability bar for future events where the adidas Group is a sponsor. • To further promote transparent reporting practices about our suppliers’ sustainability performance, we will identify key jurisdiction where public listed supplier companies are required to conduct non-financial (ESG) reporting; we will start engagements with partners who are listed in those markets.

LOCOG-licensed products comply with the adidas Group restricted substances list and are in compliance with standards listed in the LOCOG Sourcing Code.

PERFORMANCE COUNTS / Sustainability Progress Report 2011

18

CEO STATEMENT

3

our approach to sustainability

5

highlights 2011

9

suppliers 12 environment 19 EMPLOYEES 32 2012 milestones

36

PERFORMANCE 42

environment

PERFORMANCE COUNTS / Sustainability Progress Report 2011

19

CEO STATEMENT

3

our approach to sustainability

5

highlights 2011

9

suppliers 12 environment 19 EMPLOYEES 32 2012 milestones

36

PERFORMANCE 42

environment

2012 milestones • Develop a manual for the entire governance framework that strengthens the uptake of the Strategy by the global organisation.

Management Processes target 2015: Overall target - develop a management system that ensures a successful strategy implementation as well as an effective management of environmental impacts, risks and opportunities

2011 Milestone

PROGRESS/PERFORMANCE IN 2011

Develop a format for guidelines and tools.

The overall structure for guidelines has been developed.

• Develop a general set of templates for guidelines, toolboxes and tools based on existing templates and tools, and introduce them Group-wide. • Develop specific guidelines and tools for specific brands, business functions or targets. • Mature and develop quantitative and/or qualitative KPIs for all business functions engaged with the Environmental Strategy 2015; ensure that KPIs are meaningful and practical. • Develop a Group-level Index Guideline.

LARGELY ACHIEVED

Innovation Additional comments Managing the Environmental Strategy 2015 across our brands and functions is a complex process. The Strategy covers the entire adidas Group and value chain. In 2011, we developed a format for guidelines and tools to ensure that the Strategy is comprehensive, coherent and that the targets complement and strengthen each other. This will be further refined and implemented to support all functions and brands in their environmental strategy work. Valuable input for the structure of the guidelines was delivered by two university theses: one dealing with ‘Innovative tools for Corporate Environmental Strategies’, and one on ‘Environmental management accounting (EMA): a Means of Ensuring Business Integration of Environmental Strategies’.

target 2015: All future innovation projects to contain some environmental elements

2011 Milestone

PROGRESS/PERFORMANCE IN 2011

Develop partnerships with research institutions and suppliers.

Several research institutions and supplier partnerships have been established by the adidas Innovation Team with the specific goal to increase capacity for sustainable product creation. Process is now a fundamental and required part of all new innovation projects.

Key performance indicators In order to follow up on all targets and to measure the achievements over time, key performance indicators (KPIs) were introduced in 2011 for several business processes, such as Development, Sourcing and Green Company. We will look to develop further KPIs for other business processes in 2012.

Group-wide index development This year saw the development and piloting of version 1 (V1) of a Sustainable Apparel Index. The V1 Apparel Index is an initiative of the Sustainable Apparel Coalition (SAC), an industry-wide group of leading apparel and footwear brands, retailers, manufacturers, non-governmental organisations, academic experts and the U.S. Environmental Protection Agency. The Index is built around three different levels: brand, product and manufacturing facility level. As a member of the SAC we participated in the pilot of the V1 Index that took place from September 2011 to January 2012 with a project team of around 15 employees and several product teams from adidas, Reebok, TaylorMade and Rockport. The pilot results confirm the complexity of the undertaking and also highlight the challenge in developing a robust assessment methodology across the entire apparel supply chain. In 2012, we will launch a project to understand which elements of the SAC V1 Index can be applied within the adidas Group and its brands with the aim of developing a Group-level Index Guideline.

PERFORMANCE COUNTS / Sustainability Progress Report 2011

TARGET ACHIEVED

Additional comments This milestone was developed in order to begin building a deeper technical understanding about the environmental impacts of conventional manufacturing processes and emerging product creation technologies. The adidas Innovation Team also maintains long-term research and leading edge supplier relationships to jointly bring new, environmentally-preferred technologies to the market.

2012 milestones • Most of the adidas branded products for the London 2012 Olympic Games are to contain sustainable innovations from on-field competition wear through to clothes and equipment for volunteers and the public. • New product innovations will be quantitatively assessed for environmental performance. • Integration of sustainability into 2014 FIFA World Cup™ projects.

20

CEO STATEMENT

3

our approach to sustainability

5

highlights 2011

9

suppliers 12 environment 19 EMPLOYEES 32 2012 milestones

36

PERFORMANCE 42

Design

Additional comments

target 2015: 50% REDUCTION IN COLOURS USED WITHIN THE ADIDAS SPORTS PERFORMANCE DIVISION (EXCLUDING COLOURS REQUIRED BY CLUBS OR OTHERWISE OUTSIDE THE CONTROL OF DESIGN)

2011 Milestone

PROGRESS/PERFORMANCE IN 2011

Consolidate colours by 20% in apparel and 40% in footwear.

The milestone has not been achieved due to a switch in systems that has impacted the project by:

The use of colours and dyes has an environmental impact which we can reduce by choosing certain dyes and colours that are less environmentally harmful and also by reducing the number of colours and dyes. Having larger batches of materials to dye significantly reduces the environmental impact because fewer changes from one colour to another reduce lost lead-time and wastage. In addition, larger machines can be used which are usually more efficient than smaller ones.

• Eliminating governance functionality

Our plans in this area have been informed by a thesis with the title ‘The Environmental Benefits and Process Impact of Consolidation of Fabrics in Apparel’, which identified the potential benefits in terms of chemicals, water and energy savings. This thesis also helped us in identifying improvement processes in the development area.

• Removing reporting capability

Creating guidelines for designers

NOT ACHIEVED

The best way to encourage behaviour change is to address people in ways that make sense to them in their daily life. One project managed by our Design department in 2011 was the Design for Environment Guidelines project, which aimed to develop environmental guidelines that designers would find engaging and inspiring to use. The project team extracted relevant parts of the V1 Apparel Index of the Sustainable Apparel Coalition and combined these with environmental aspects, the product life cycle and design considerations to create visually-led guidelines that resonate with designers.

2012 milestones • Revive the roadmap towards 2015 colour reduction targets - Consolidate colours by 20% in apparel and 40% in footwear - Maintain the pace of reporting - Start check-and-reduce processes for emphasising compliance to targets, and addressing issues as they arise - Initiate IT-based governance processes. • Start sustainability round-tables and workshops in design - Run at least 12 round-table meetings - Conduct sustainable design workshop for SS14 designer days. • Design a sustainable shoe or one additional range of sustainable products.

PERFORMANCE COUNTS / Sustainability Progress Report 2011

21

CEO STATEMENT

3

our approach to sustainability

5

highlights 2011

9

suppliers 12 environment 19 EMPLOYEES 32 2012 milestones

36

PERFORMANCE 42

Marketing

target 2015: Reduce number of ranges as a whole by 20% (adidas Sports Performance division)

target 2015: 100% of footwear and an increasing amount of apparel to have ‘more sustainable content’ (by 2012), i.e. to be included into the Better Place product range (in 2010 defined as applicable to the adidas Sports Performance division, but in the meantime expanded to cover all adidas sub-brands)

Additional comments The target of reducing the number of ranges was developed based on a few general principles: • Product excellence and complexity reduction.

2011 Milestone

PROGRESS/PERFORMANCE IN 2011

• Larger scale design, development and production lead to a lower environmental impact.

Revise Better Place Guidelines to ensure alignment with the Eco Index and the Index developed by the Apparel Coalition.

The Better Place Guidelines are regularly updated to reflect improvements in industry best practice. Changes to the guidelines are made once new processes and improvements are available to the product creation teams to integrate into the business. Aligning the Guidelines with the Apparel Index V1 is still ongoing.

The Sports Performance division of brand adidas has been successful in driving towards smaller ranges and therefore reducing samples, resource and wastage as well as emissions.

PARTIALLY ACHIEVED

To measure our progress we use a comparison between the same seasons, year to year. So we have compared SS11 (Spring-Summer 2011) and FW11 (Fall-Winter 2011) with the corresponding season’s production in 2012. Parameter

Seasonal production ‘11

Seasonal production ‘12

Season

SS11

FW11

SS12

FW12

Change SS11-> SS12 1

Change FW11-> FW12

37,000

37,400

32,800

+2.1%

-12.8%

Number of articles/ 36,600 Change

Change

Additional comments The objective will ensure that the adidas Group and its brands stay well tuned with the development of the Sustainable Apparel Coalition Index, which is currently being developed for the Apparel Index, Version 1 (V1). The Better Place Guidelines are regularly checked and maintained. The experiences from the innovation teams, designers as well as from manufacturers are constantly being integrated into the Guidelines. Complete integration of the SAC V1 Index will emerge over time as new processes and improvements are available to the product creation teams to integrate into the business. The target for footwear is on track to be met in 2012. The trend for apparel (Performance division) is currently negative, with growth shifted into the Style division.

adidas Sports Performance shows a 2.1% increase in the SS season article count from the 2011 to the 2012 seasons and a 12.8% decrease in the FW seasons for the same time period2. These figures show us that we are on track for the 2015 target to reduce the number of ranges as a whole by 20% within the adidas Sports Performance division. The comparison must be done by looking at the same season that is Spring-Summer one year to the next, since there might be a slight carryover of articles between SS and FW, e.g. products that are produced in the next season as well.

1

2

These figures do not include local article production.

2012 milestone • Continue reducing the number of ranges according to targets.

2012 milestones • Continue the integration of SAC Index principles into the adidas Better Place Guidelines system where feasible. • Continue to develop and expand targets for greater growth of Better Place sustainable product programme.

PERFORMANCE COUNTS / Sustainability Progress Report 2011

22

CEO STATEMENT

3

our approach to sustainability

5

highlights 2011

9

suppliers 12 environment 19 EMPLOYEES 32 2012 milestones

36

PERFORMANCE 42

target 2015: Virtualisation project to drive reduction in samples

Additional comments It was back in 2004 that a team of experts at the adidas Group came up with a new and innovative way of showcasing products using virtual technology. The first trials were conducted in 2005. The benefits of virtualisation are speed, efficiency, innovation and savings and it has revolutionised the way we do sampling and selling-in of new products. Ultimately, we want to move towards a seamless process from design to sell-in that starts with the creation of a 3D model by design and concludes in a virtual sell-in process which features not only the product but also an experience for our retailers and consumers.

Additional comments In 2011, the material toolboxes for both footwear and apparel were overhauled and significant reductions of colour-material combinations were made. These efforts were informed by a study with the title ‘The Environmental Benefits and Process Impact of Consolidation of Fabrics in Apparel’ which identified the potential benefits from consolidation in terms of chemicals, water and energy savings. This target is linked with a strategic business initiative to reduce complexity, and during the year we developed a Footwear Sourcing Matrix as a benchmarking tool. When this is live, we will be able to measure and report progress on complexity reduction more accurately.

Progress made:

2012 milestones

• We have now launched the first market where the sampling and selling-in process was 100% supported through virtualisation.

• Go live with Footwear Sourcing Matrix.

2012 milestones

2011 Milestone

PROGRESS/PERFORMANCE IN 2011

Increase number of more sustainable materials in toolboxes for apparel and footwear.

Several projects have been initiated successfully for footwear as well as apparel, e.g. regarding the use of Better Cotton, recycled polyester, or sourcing practices.

• Go fully virtual from design to sell-in across all of Western Europe in Spring-Summer 2013. • Continue expanding the range of products covered.

• Create a model to quantify the environmental impact from the complexity reduction initiative in apparel.

Development

TARGET ACHIEVED target 2015: 20% Reduction in colour-material combinations

2011 Milestone

PROGRESS/PERFORMANCE IN 2011

Establish baseline measurements and KPIs.

Some baseline measurements have been established for the related targets.

PARTIALLY ACHIEVED

Additional comments By increasing the number of more sustainable materials in the toolboxes for apparel and footwear, product teams are automatically guided towards selecting materials with a lower environmental and/or social impact. With regard to apparel, the engagement with the Better Cotton Fast Track Fund and the successful inclusion of the first volumes of ‘Better Cotton’ into our supply chain were important milestones. For footwear, in 2011, a total of 97% of non-European leather finishing achieved a Leather Working Group rating of silver or above with 64% scoring gold and 33% silver.

PERFORMANCE COUNTS / Sustainability Progress Report 2011

23

CEO STATEMENT

3

our approach to sustainability

5

highlights 2011

9

suppliers 12 environment 19 EMPLOYEES 32 2012 milestones

36

PERFORMANCE 42

Sourcing

2012 milestones • Achieve sourcing target of 5% ‘Better Cotton’. • 99% of non-Europe leather finishing with a Silver Standard or above (based on the LWG audit protocol). • 70% of non-Europe leather finishing with a Gold Standard or above (based on the LWG audit protocol). • All Rockport leather suppliers to become Silver Standard certified by July 2012 ((based on the LWG audit protocol).

A detailed Environmental Sourcing Strategy has been developed that builds on the following three steps: • Risk mitigation • Performance improvement • Collaboration target 2015: Extend environmental assessments to selected supplier groups

target 2015: Optimise packaging solutions

2011 Milestone

PROGRESS/PERFORMANCE IN 2011

Review packaging status and define 2015 targets.

The current status has been reviewed. Targets for 2015 are under development.

2011 Milestone

PROGRESS/PERFORMANCE IN 2011

Conduct environmental assessments of high-risk suppliers

An environmental screening methodology has been applied to all Tier 1 suppliers and all major Tier 2 suppliers, resulting in a list of high-risk and high-impact suppliers. A total of 208 supplier facilities were covered through a combination of Environmental Assessments and Environmental KPI processes.

PARTIALLY ACHIEVED

Additional comments One of the targets of the Environment Strategy 2015 is to optimise packaging solutions. We made some progress on our 2011 milestone to review the current status of our efforts so we were able to develop our targets. We reviewed current packaging volumes as well as the Sustainable Apparel Coalition packaging module. The outcome of the review has been used for the development of a sustainable packaging approach. We used 200 million shoe-boxes across the adidas Group in 2011. All outer cartons are made of 100% recycled materials, and the shoe-boxes have an overall recycled content of 95% based on weight. Improvements have been made in pattern efficiency and weight reduction, and for adidas Sport Performance, Originals and Neo boxes, we now use standardised materials which do not require any glue. Inks are water or soy-based. FSC certification for our main suppliers is in progress. TaylorMade successfully implemented initiatives to reduce packaging including: • Reducing the apparel hangtag size to use 33% less paper. • Removing the packing tissue and cardboard insert on those apparel styles without heat transfers, colour blocks and prints.

TARGET ACHIEVED

Additional comments Our Environmental Assessment Tool and supplementary remediation guideline continue to be the basis from which we conduct assessments of our suppliers. Annual reviews have been carried out to reflect on the best practices learned in the past year and to update the remediation guideline so that they can be shared with a wider audience. These two tools have been further supplemented by the rollout of our Environmental KPI (EKPI) in mid-2011. In 2011, we continued to carry out the Environmental Assessment and KPI analysis of core product suppliers. In addition, we also assessed suppliers based on the results of a risk analysis which looked at the nature and type of the production processes, and whether the general site conditions or location presented potential environmental risks or placed pressure on resources. A total of 208 supplier facilities were covered through a combination of the Environmental Assessment and Environmental KPI processes.

2012 milestone • Define 2015 targets and annual milestones for packaging optimisation and reduction.

PERFORMANCE COUNTS / Sustainability Progress Report 2011

24

CEO STATEMENT

3

our approach to sustainability

5

highlights 2011

9

suppliers 12 environment 19 EMPLOYEES 32 2012 milestones

36

PERFORMANCE 42

Product type

Total Number of Total Number of Total Number of Environmental Environmental Combined assessments KPI assessments Environmental Assessments and Environmental KPI Assessments

Tier 1 Footwear

29

56

24

Tier 1 Accessories & Gear

18

18

13

Tier 1 Apparel

19

98

24

Tier 2 Material Suppliers

48

36

30

Total

114

208

91

Our continued focus on the core group of suppliers has encouraged them to develop their environmental programmes, which supports our drive towards building a sustainable supply chain. Those suppliers who have appointed a dedicated sustainability manager and made a conscious effort to address issues holistically (that is, considering social, health & safety and environment) have scored higher in their EKPI results. So we will be encouraging others to do the same and we will continue to use the EKPI tool to benchmark supplier performance while working with them on areas of improvement. The EKPIs are used as input to the sourcing KPIs and hence directly influence sourcing decisions. On average, the EKPI result across the suppliers assessed was 2E, on a scale from 1E to 5E.

target 2015: Establish an industry-wide recognised audit protocol and certification scheme for dye house facilities in collaboration with other brands and associations

Additional comments Although we had no specific milestone set for this area in 2011, the 2015 target has become of critical importance in the context of the ‘Joint Roadmap Towards Zero Discharge of Hazardous Chemicals’ (ZDHC) in the supply chain by 2020. The roadmap was announced in November 2011 by the adidas Group, C&A, H&M, Li Ning, Nike, Inc. and Puma and released for public consultation. It is an ambitious plan, one that sets a new standard of environmental performance for the global apparel and footwear industry. The roadmap includes specific commitments and timelines to realise this shared goal. One of the key initiatives of the roadmap is the establishment of an industry-wide audit protocol for dye houses and printing facilities. Read more about this in the environmental section of our corporate website.

2012 milestones (primarily related to ‘Joint Roadmap Towards Zero Discharge of Hazardous Chemicals’) • Plan, develop and implement the projects as listed in the roadmap schedule. • Further support the creation of a strong brand collaboration with a significant number of members. • To reach out further to all stakeholders.

2012 milestones • 5% EKPI improvement over the previous year for 3E and above suppliers; 10% EKPI improvement over the previous year for suppliers below 3E. By 2015, we are aiming for a 30% improvement in average KPI based on the 2011 baseline. • Strategic Compliance Plan (SCP, our sustainability mid-term plan for selected suppliers) to contain environmental components on achieving reductions in energy, water and waste.

2011 Milestone Review environmental audit tools in the light of external initiatives.

target 2015: ’Better Cotton’ (‘Sustainable Cotton’) use: 40% by 2015, 100% by 2018 of all cotton used

2011 Milestone

PROGRESS/PERFORMANCE IN 2011

Introduce ‘Better Cotton’ into the adidas Group supply chain.

‘Better Cotton’ has been introduced into the adidas Group supply chain according to schedule.

PROGRESS/PERFORMANCE IN 2011 Environmental audit tools linked to external initiatives have been reviewed. This is an ongoing process.

TARGET ACHIEVED

TARGET ACHIEVED

Additional comments We regularly reflect on how we can adapt our audit tools. This year we have considered the tools developed in the Global Social Compliance Programme, for example.

PERFORMANCE COUNTS / Sustainability Progress Report 2011

25

CEO STATEMENT

3

our approach to sustainability

5

highlights 2011

9

suppliers 12 environment 19 EMPLOYEES 32 2012 milestones

36

PERFORMANCE 42

Additional comments Cotton is an important raw material for the adidas Group. We are a founding member of the Better Cotton Initiative (BCI) which works with organisations from across the cotton supply chain and interested stakeholders to address the negative social and environmental impacts of mainstream cotton farming. This milestone is a first step towards our 2018 goal to use 100% ‘Better Cotton’ (40% by 2015). We have joined the Better Cotton Fast Track Programme in order to facilitate the uptake of BCI in the supply chain and to support joint projects with other member brands. A multi-brand supply chain event was held in Sri Lanka. In 2011, ‘Better Cotton’ was introduced into the adidas Group supply chain, and communication efforts are ongoing to further increase volumes. In addition, we created a long-term BCI strategy together with our suppliers. In November 2011, a field trip was held with adidas Group managers to India. Read more about the trip on the adidas Group blog. In 2011, we used 23 tons of BCI cotton lint in fabric produced in India.

target 2015: 10-15% cut in energy emissions by product output at core suppliers (baseline year 2010)

Additional comments While there was no specific milestone set for 2011, we did take an important step towards improved measurement and reporting. In collaboration with the data experts who manage the Group’s Green Company reporting, a new reporting tool was commissioned and implemented. The reporting tool covers both Green Company reporters (our own facilities) and external suppliers. It includes the entire spectrum of environmental parameters, as well as (for suppliers) some production-relevant data. The tool was implemented and around 100 suppliers inserted their 2010 data.

2012 milestones • Qualify and verify the reported data from 2010. • Continue to roll out the tool to new groups of suppliers.

2012 milestone

• Include all data from the covered suppliers for 2011.

• Achieve sourcing target of 5% ‘Better Cotton’.

• Develop an understanding of the baseline. • Develop target requests for 2012.

target 2015: Establish full traceability of more sustainable materials (apparel products) by 2014

target 2015: Leather tanneries: 100% of non-Europe tanneries to achieve Leather Working Group (LWG) Silver or above rating (based on the LWG audit protocol). 85% of sourcing volume (non-European) of leather finish should be certified at Gold level

Additional comments In 2011, there was no milestone defined. However, we did roll out the use of ‘String’, an online tool that tracks sustainable materials and products used in our apparel business. We extended its use to high-volume suppliers of apparel products with more sustainable materials.

2012 milestones • Continue to monitor process and suppliers‘ compliance. • Conduct benchmarking study to evaluate software for product tracking.

2011 Milestone

PROGRESS/PERFORMANCE IN 2011

At least 80% of the value of leather sourced from non-Europe tanneries to be from Silver Standard tanneries (based on the LWG audit protocol).

The target of sourcing at least 80% of non-Europe leather finishing with a Silver Standard or above (based on the LWG audit protocol) was achieved. The result was 97% with 64% of all sourcing volume of leather finishing certified at Gold level.

(Correction of the target as stated in the 2010 report)

TARGET ACHIEVED

2012 milestones • 99% of non-Europe leather finishing to achieve a Silver Standard or above (based on the LWG audit protocol). • 70% of non-Europe leather finishing to achieve a Gold Standard or above (based on the LWG audit protocol). • All Rockport leather suppliers to achieve LWG Silver Standard by July 2012.

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26

CEO STATEMENT

3

our approach to sustainability

5

highlights 2011

9

suppliers 12 environment 19 EMPLOYEES 32 2012 milestones

36

PERFORMANCE 42

target 2015: Implement Green Design requirements for new buildings at suppliers

2011 Milestone

PROGRESS/PERFORMANCE IN 2011

Review design and construction reports prior to approval.

Design and construction reports are reviewed prior to approval. TARGET ACHIEVED

2012 milestone • Adapt and implement green building standards for suppliers.

In North America, ISO 14001 certified locations have undergone in-depth energy audits. Each of them developed a plan (including a detailed technical proposal and investment plan) that shows the feasibility of reaching Green Company energy saving targets in North America. Furthermore, other audited North American sites have begun to implement energy saving measures. A new data management tool for our own sites and for our suppliers was used for the first time for the 2011 reporting period. All data collected is automatically compared with the data reported in previous years. Furthermore, the tool can be used to calculate KPIs and define targets, and it includes a library that features best practice solutions as established by adidas Group entities. The 2008-2010 reports, including their complete data sets from reporting locations, have been migrated to the new reporting tool. The new reporting tool enables us to: • Track and evaluate progress of our performance

Own Operations

• Follow up and report on our targets • Learn from best practice.

target 2015: • • • •

Additional comments

20% relative reduction in energy consumption 30% relative reduction in carbon emissions 20% water savings/employee 25% waste reduction/employee

2011 Milestone

PROGRESS/PERFORMANCE IN 2011

Strengthen implementation plan to meet annual saving targets.

Staff at all sites that report into the Green Company data system were given training on energy efficiency. Energy audits were conducted at North America sites and the results were shared. Individual first time users received training and support on target-setting and correct application of the data reporting tool.

In 2011, we reduced the number of sites that are included in the reporting. The original goal of having around 70-80% coverage of all in-house emissions remains unchanged. The locations that have been removed from reporting are sites that were either closing down in 2011, contributed less than 0.5% of total emissions or were located in buildings where the limitations of their tenancy contract meant they could not calculate specific resource use or emissions. It was scheduled to publish the detailed Green Company performance review highlighting the achievements and progress of the Group’s Green Company programme together with this 2011 Sustainability Progress Report. When reviewing the environmental data sets as submitted by the business entities through the new environmental data reporting tool, we noticed a range of deviations in data sets from previous years that have required us to conduct an accurate analysis to identify the root causes. At the cut-off date for the completion of the 2011 Sustainability Progress Report, this review and analysis was still ongoing. So, the 2011 Green Company performance review will be published at a later date in the year 2012. The review will be posted in the Green Company section of our corporate website.

TARGET ACHIEVED

2012 milestones • Further rollout of trainings for energy audits and energy efficiency. • Develop and implement a best practice sharing programme with a focus on energy management.

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CEO STATEMENT

3

our approach to sustainability

5

highlights 2011

9

suppliers 12 environment 19 EMPLOYEES 32 2012 milestones

36

PERFORMANCE 42

2011 Milestone

PROGRESS/PERFORMANCE IN 2011

2011 Milestone

PROGRESS/PERFORMANCE IN 2011

Refine ISO 14001 environmental management system.

The environmental management system was further refined and optimised. Management system manuals on Group and regional level were merged into one manual. An annual planning process for North America and EMEA and on Group level has been implemented.

Certify the adidas Group headquarters site ‘World of Sports’ to the ISO 14001 standard.

The adidas Group Headquarters locations in Herzogenaurach were successfully certified: they include locations at World of Sports (WOS), Adi-Dassler Platz (ADP) and World of Global IT (WOGIT). TARGET ACHIEVED

TARGET ACHIEVED

Additional comments

2012 milestones • Streamline and optimise processes and documentation of the ISO 14001 management system. • Review additional large adidas Group sites and locations as candidates for ISO 14001 certification.

2011 Milestone

PROGRESS/PERFORMANCE IN 2011

Strengthen and expand engagement with Green Teams.

The Green Teams engaged throughout the Group and shared information about the progress made at their locations. An Earth Day event was held at several locations, among others in Istanbul, Canton, Portland and Herzogenaurach.

Certifying the adidas Group Headquarters sites in Herzogenaurach in accordance with ISO 14001 has been an important milestone in the history of the Green Company Initiative. More than 3,000 employees work at these locations. The achievement is exceptional because the management system had to accommodate for the new administration building ‘Laces’, which was only opened in mid-2011. Prior to the actual certification, a series of briefings and announcements about different Green Company topics were launched via various internal communication platforms. This created strong interest, buy-in and engagement among employees. The project was led by Corporate Facilities and Services and their environmental, health & safety management team. In North America, the Sports Licensed Division factory in Indianapolis was successfully certified in accordance with the ISO 14001 management standard.

2011 Milestone

PROGRESS/PERFORMANCE IN 2011

Develop a Group ‘Green car’ policy.

Guidelines coordinating all adidas Group car policies were developed.

TARGET ACHIEVED

Additional comments The Earth Day event at the adidas Group Headquarters took place in collaboration with the community of Herzogenaurach and other large companies in the area. The Reebok HQ in Canton participated in Earth Day activities as well, and updated their internal communication with new information on Green initiatives, including ISO 14001 and commuter options.

Additional comments

Under the Green Company programme, TaylorMade launched a company-wide recycling campaign and adidas North America in Portland organised an E-waste recycling day which diverted over 2.5 tons of electronic waste from landfills.

We issued a Group-wide Green Company car directive which contains incentives for the use of low-carbon vehicles and public transportation. Markets and locations have been asked to follow the guidelines when they set up or amend their car policy.

TARGET ACHIEVED

2012 milestone • Appoint a Green Team ambassador for all Green Teams. The Green Team ambassador will stand available for existing and starting Green Teams. Earth Day events to be held at several locations in 2012.

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CEO STATEMENT

3

our approach to sustainability

5

highlights 2011

9

suppliers 12 environment 19 EMPLOYEES 32 2012 milestones

36

PERFORMANCE 42

Sales

target 2015: Own retail stores: 5-15% savings of resources (applicable to Western Europe market)

target 2015: Develop strategic sustainability alliances with key customers in all key markets

2011 Milestone

PROGRESS/PERFORMANCE IN 2011 In 2011, the Global Retail organisation was restructured. This change also influenced our follow-up work on targets we had set for our own stores within the western Europe region. These targets are currently being reviewed with the aim of setting globally applicable and more measurable targets.

2011 Milestone

PROGRESS/PERFORMANCE IN 2011

• Develop global saving targets for retail outlets.

Pilot partnership with one key account.

We engaged with one key account in sharing best practice and information related to both parties’ environmental strategies and collaborations.

• Develop new lighting concepts for retail stores. • Pilot greener energy sources. • Pilot paper-saving options.

Due to organisational changes within this area of our business, the work will be restarted in 2012.

NOT ACHIEVED

PARTIALLY ACHIEVED

Develop toolbox of different approaches for strategic partnerships with wholesalers.

This milestone was put on hold in 2011 due to organisational changes within this area of our business. NOT ACHIEVED

2012 milestone • Revisit targets 2015 and develop a mid-term plan.

Additional comments Through environmental store audits we had identified energy use in our stores as one of the key areas where we can improve their environmental performance, with the positive side-effect that it reduces operational costs. One major finding of the audits was that lighting used in our stores accounts for 30-50% of our overall energy consumption, depending on the size of the store. The new lighting concept, which was piloted in 2010, will reduce energy use and save money too. The concept is currently being rolled out globally. Although we are in the process of developing a global approach, our retail organisation has started to implement best practice in some markets. Reebok US Retail committed to installing LED lights in all retail outlet remodels and nine sites had lights installed in 2011. They also introduced a new online communication system, eliminating the need for daily/weekly mailing of print materials to each retail outlet.

2012 milestones • Revisit 2015 targets and develop a mid-term plan. • Revisit previously conducted store audits to inform the plan. • Evaluate reporting options via existing Green Company data reporting tool.

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CEO STATEMENT

3

our approach to sustainability

5

highlights 2011

9

suppliers 12 environment 19 EMPLOYEES 32 2012 milestones

36

PERFORMANCE 42

Communication target 2015: Create awareness and engage employees by driving messaging through internal communication channels

2011 Milestone

PROGRESS/PERFORMANCE IN 2011

Create awareness and engage employees by driving messaging through internal communication channels.

We have further strengthened our internal communication about the Group’s and brands’ sustainability programmes through dedicated platforms like newsletters, blogs and magazines. TARGET ACHIEVED

2011 Milestone

PROGRESS/PERFORMANCE IN 2011

Develop training and e-Learning courses.

Several trainings have been developed and held for interested staff. LARGELY ACHIEVED

Set HR-relevant targets for environmental achievements by management functions.

PARTIALLY ACHIEVED

Run employee events supported by senior management.

2012 milestone • Further strengthen internal communication efforts by applying tailor-made presentations to all our businesses.

Human Resources

Several employee events supported by senior management have been held. TARGET ACHIEVED

Additional comments Our employees need to be aware of and understand our strategy to buy in to the programmes and to help deliver them. So we have further strengthened our communication and have made corporate sustainability a regular key communication topic of our blogs, our monthly newsletter, our employee magazine Inside as well as employee events. On the brands’ side, TaylorMade-adidas Golf for example launched an internal sustainability website for its employees in Carlsbad.

The HR management team has set itself the task of being ambassadors for sustainability and the Green Company Initiative.

Additional comments In 2011, information on the Environmental Strategy, related efforts and progress were included in the Orientation Seminar, which is a training course for new employees. This will be continued in 2012. Existing staff have the opportunity to find out about specific environmental issues through the regular Environmental Academy events. In-depth training was also given as necessary on topics such as the Better Cotton Initiative, the Environmental Audit Programme and Green Company reporting and target-setting. For long-term success, it is crucial to integrate environmental sustainability into Human Resources programmes and to inform, engage and motivate employees to contribute in their everyday work-life. This is reflected in the HR team’s overall commitment to drive awareness and activation of the Environment Strategy, to develop ambassadors for environmentally responsible behaviour and to ensure top management involvement. As part of our Earth Day event, we engaged employees at several locations on the many different topics, such as waste separation.

target 2015: Integrate environmental sustainability into global HR programmes: • Drive awareness and activation of Environmental Strategy. • Develop ambassadors for environmentally responsible behaviour. • Drive Group-wide awareness and top management involvement.

2012 milestones • Continue to develop trainings. • Assess the viability of developing a competence network for the Environmental Strategy. • Continuation of management-supported employee events.

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CEO STATEMENT

3

our approach to sustainability

5

highlights 2011

9

suppliers 12 environment 19 EMPLOYEES 32 2012 milestones

36

PERFORMANCE 42

IT target 2015: Reduce the environmental footprint of IT infrastructure 20% through the following initiatives:

2011 Milestone

PROGRESS/PERFORMANCE IN 2011

Focus on energy efficient infrastructure solutions.

In 2011, we took several steps to improve the energy efficiency of IT infrastructure, for example regarding the selection of IT vendors/ solutions and individuals’ computers.

• 80% of all PCs to have ‘green’ power management options. • 30% less energy consumption of PCs. • 100% of requests for proposals to evaluate ‘green’ performance of possible vendors. • Virtualisation of servers/data centre consolidation.

PARTIALLY ACHIEVED

2011 Milestone

PROGRESS/PERFORMANCE IN 2011

Decommission more than 40 physical systems and/or virtualise them.

45 physical systems have been decommissioned in 2011. TARGET ACHIEVED

Additional comments This milestone contributes to the overall objective of reducing the environmental footprint of the IT infrastructure by 20% by 2015 (baseline year 2011). It is also part of the adidas Group’s data centre strategy to consolidate applications and services to the three strategic data centres in Canton, Herzogenaurach and Hong Kong, and to improve the power usage effectiveness (PUE), among other objectives. In 2011, 45 physical server systems were decommissioned.

2012 milestone • Decommission a further 45 physical servers.

Additional comments Besides efforts to decommission physical servers and reduce the ratio of physical to virtual servers, in 2011, we focused on consolidating data centres to three global hubs. We also worked to reduce the energy consumption of client computers through standard image energy settings and using end-user-friendly energy management tools. One important step forward is that since 2011, requests for proposals, which we send out when selecting IT vendors or solutions, now always include environmental criteria. This requirement has been implemented Group-wide.

2012 milestones • Achieve a power usage effectiveness (PUE) value of 1.6 in the HQ data centre located on the World of Sports, Herzogenaurach. • Introduce environmental criteria in purchase decisions related to workstations. • Set up a global ‘Green Printing’ policy.

2011 Milestone

PROGRESS/PERFORMANCE IN 2011

Improve the physical-tovirtual ratio by at least 11%.

The physical-to-virtual ratio of our servers was reduced by more than 11% in 2011.

• Set up a ‘Green Printing’ default setting in the new Printer Software Uniflow. • Develop a Green IT strategy and related Green IT communication strategy.

TARGET ACHIEVED

Additional comments In 2010, 49% of our servers were physical and 51% virtual ones. This ratio has been improved to 37% physical servers and 63% virtual ones by the end of 2011.

2012 milestone • Reduce the ratio of physical/virtual servers by a further 12%.

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31

CEO STATEMENT

3

our approach to sustainability

5

highlights 2011

9

suppliers 12 environment 19 EMPLOYEES 32 2012 milestones

36

PERFORMANCE 42

EMPLOYEES

PERFORMANCE COUNTS / Sustainability Progress Report 2011

32

CEO STATEMENT

3

our approach to sustainability

5

highlights 2011

9

suppliers 12 environment 19 EMPLOYEES 32 2012 milestones

36

PERFORMANCE 42

employees target 2015: Learning Organisation – Our learning strategy and opportunities support our employees to help them achieve their targets, deliver high performance and set the basis for efficiency and innovation. Learning is a key performance driver within the adidas Group and ensures the fitness of our employees

2011 Milestone

PROGRESS/PERFORMANCE IN 2011

Based on the findings of the global employee survey, drive the engagement R2A (“Results-to-Actions”) process in all business areas to further improve employee engagement.

Following our global employee engagement survey, which 90% of our workforce participated in, a comprehensive “Results-toAction” process was initiated to address survey findings. In 2011, the focus of our “Results-to-Action” initiative was to maintain some of our top-scoring areas and improve upon areas of weakness. Since implementing the “Results-toAction” teams, we have action plans in place in more than 83% of the organisation.

Areas for further improvement identified by employees included career development and transparency, availability of IT tools and performance recognition. As in previous years, based upon the feedback received, “Results-to-Action” teams were established to drive initiatives to enhance the Group’s performance. In 2011, the focus of our “Results-to-Action” initiative was to maintain some of our top-scoring areas and improve upon areas of weakness. Since implementing the “Results-to-Action” teams, we have action plans in place in more than 83% of the organisation. This means in more than four out of five adidas Group teams our managers are evaluating their engagement scores and working with their employees to improve. The adidas Group also took action at a strategic level, focusing on areas such as workspace, collaboration and knowledge management, employee careers, work-life-integration and more. “Results-toAction” is becoming a way of working for the adidas Group.

2012 milestone • In 2012, some functions of the adidas Group will conduct a pulse check survey to review the impacts of our actions. In 2013, we will conduct our next global employee engagement survey across the adidas Group.

TARGET ACHIEVED

Additional comments We believe that employee satisfaction drives commitment, commitment drives engagement, and engagement drives business performance. Consequently, we have defined engagement as one of our Group’s key performance indicators for measuring our efforts to sustain a “performance culture”. To capture employee perception, we introduced formal engagement surveys in 2008. Engagement surveys enable us to evaluate our position as the employer of choice for our employees and also provide a framework for benchmarking. In 2010, we conducted the first Group-wide engagement survey. We achieved an outstanding participation rate of 90% and an engagement score which places us close to the top-performing organisations within the consumer goods industry. Compared to 2008, when we conducted an employee survey in various regions, we were able to increase our engagement score significantly.

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33

CEO STATEMENT

3

our approach to sustainability

5

highlights 2011

9

suppliers 12 environment 19 EMPLOYEES 32 2012 milestones

36

PERFORMANCE 42

target 2015: Talent acquisition – We become a world-class talent acquisition organisation that utilises branding, strategic search and internal recruiting excellence to ensure the continuous pipeline of top talent required to achieve business objectives

2011 Milestone

PROGRESS/PERFORMANCE IN 2011

Focus on the activation of our concepts and tools that constitute our HR foundation and help us to become the employer of choice.

We further strengthened and expanded our key activities in the area of succession management, talent management, performance management, and diversity and work-life-balance programmes. LARGELY ACHIEVED

Additional comments Our Human Resources management focuses on the activation of our concepts and tools that support and enhance our performance and leadership culture. We implemented a leadership calendar to lay out content, timing and functionality of all our leadership tools, be it succession management, talent management or compensation reviews, to mention just a few. Succession management The adidas Group succession management approach aims to ensure business continuity. We achieve this through a globally consistent succession plan which covers successors for director level positions and above. These positions and the respective successors are regularly discussed by senior management. The succession management information shows a clear picture of the successor readiness and development needs. Based upon this information, we draft individual development plans to prepare the successor for their potential next tasks. In addition, we use the successor information to create dynamic talent pools which provide us with additional flexibility in our succession management process. All information is consolidated in a succession management risk analysis.

Performance management Our global Performance Evaluation and Planning tool (PEP) is the cornerstone of performance management at the adidas Group. Based on business targets plus job tasks and competencies, each employee is evaluated and receives feedback at least once a year. Building on defined development goals, we offer and support our employees with targeted development activities both on- and off-the-job. Today, PEP is largely used in all business units of the adidas Group. The online version has coverage of 76% globally. Diverse workforce to achieve global goals As a global company, we understand that it takes people with different ideas, strengths, interests and cultural backgrounds to ensure we achieve our goals. A high degree of diversity is already represented within our workforce. At our corporate headquarters, for example, we have employees from more than 60 countries. We strive to assure an environment that embraces diversity through various initiatives, such as networking events, intercultural training and our work-life integration department. In addition, starting in 2011, the adidas Group has set itself the goal of increasing the number of women in leadership positions. We are focusing mainly on our management development programmes where we want to increase the number of female participants to at least 35% starting in 2012. We recognise we have a role to play in supporting employees – especially women – who are striving to balance family life with a successful career. We are aware that this goal is not purely of a cultural nature, but has a tangible aspect to it as well. Therefore, among a number of tailored initiatives, we put a strong focus on work-life integration during the remodelling of our headquarters and have planned in parent-child offices and the investment into a childcare centre at our headquarters.

2012 milestones • Reach 100% online coverage of the Succession management system. • Reach 96% online coverage of the Performance Evaluation and Planning tool. • Create a Global Talent Management platform.

The succession management process is supported by a system solution which hosts position and employee data related to performance, potential, career aspirations, mobility and other factors. Our system solution is applied in 91% of the adidas Group business units.

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CEO STATEMENT

3

our approach to sustainability

5

highlights 2011

9

suppliers 12 environment 19 EMPLOYEES 32 2012 milestones

36

PERFORMANCE 42

target 2015: Leadership Excellence – Our leadership culture is recognised as best-in-class by our employees and the external business world

Additional comments Group-wide strategic business plan Route 2015 Considerable effort went into the formulation of our “Driving Route 2015” HR-related strategy which is summarised in three workstreams: Leadership (foster an open, non-political, fact-based and collaborative leadership from the top), People (systematically promote motivation and accountability through talent and performance management) and Capabilities (jointly define a focused capability building programme, establish and implement a sustainable capability management process to ensure that we instil a new way of working throughout the Group and achieve our ambitious goals).

2012 milestones • Rollout of a “Leadership Journey” for first and second management levels of the Group. • Design future-oriented functional training platforms, focusing initially upon the commercial areas.

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35

CEO STATEMENT

3

our approach to sustainability

5

highlights 2011

9

suppliers 12 environment 19 EMPLOYEES 32 2012 milestones

36

PERFORMANCE 42

2012 milestones

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36

CEO STATEMENT

3

our approach to sustainability

5

highlights 2011

9

suppliers 12 environment 19 EMPLOYEES 32 2012 milestones

36

PERFORMANCE 42

2012 milestones Environment 2015 Targets

2012 Milestones

Overall target – develop a management system that ensures a successful strategy implementation as well as an effective management of environmental impacts, risks and opportunities.

• Develop a manual for the entire governance framework that strengthens the uptake of the strategy by the global organisation.

Management processes

• Develop a general set of templates for guidelines, toolboxes and tools based on existing templates and tools, and introduce them Group-wide. • Develop specific guidelines and tools for specific brands, business functions or targets. • Mature and develop quantitative and/or qualitative KPIs for all business functions engaged with the Environmental Strategy 2015; ensure that KPIs are meaningful and practical. • Develop a Group-level Index Guideline.

Business processes INNOVATION

All future product innovation projects to contain some environmental elements.

• Most of the adidas branded products for the London 2012 Olympic Games are to contain sustainable innovations from on-field competition wear through to clothes and equipment for volunteers and the public. • New product innovations to be quantitatively assessed for environmental performance. • Integration of sustainability into 2014 FIFA World Cup™ projects.

DESIGN

50% reduction in colours used within the adidas Sports Performance division (excluding colours required by clubs or otherwise outside the control of Design).

• Revive the roadmap towards 2015 colour reduction targets −− Consolidate colours by 20% in apparel and 40% in footwear −− Maintain the pace of reporting −− Start check-and-reduce processes for emphasising compliance to targets, and addressing issues as they arise −− Initiate IT-based governance processes. • Start sustainability round-tables and workshops in design −− Run at least 12 round-table meetings −− Conduct sustainable design workshop for SS14 designer days. • Design a sustainable shoe or one additional range of sustainable products.

MARKETING

• 100% of footwear and an increasing amount of apparel to have ‘more sustainable content’ (by 2012), i.e. to be included into the Better Place product range (in 2010 defined as applicable to the adidas Sports Performance division, but in the meantime expanded to cover all adidas sub-brands).

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• Continue the integration of SAC Index principles into the adidas Better Place Guidelines system where feasible. • Continue to develop and expand targets for greater growth of Better Place sustainable product programme.

CEO STATEMENT

3

our approach to sustainability

5

highlights 2011

9

suppliers 12 environment 19 EMPLOYEES 32 2012 milestones

36

PERFORMANCE 42

Environment (continued) MARKETING (continued)

2015 Targets

2012 Milestones

• Reduce number of ranges as a whole by 20% (adidas Sports Performance division).

• Continue reducing the number of ranges according to targets.

• Virtualisation project to drive reduction in samples.

• Go fully virtual from design to sell-in across all of western Europe in Spring-Summer 2013. • Continue expanding the range of products covered.

DEVELOPMENT

• 20% reduction in colour-material combinations.

• Go live with Footwear Sourcing Matrix. • Create a model to quantify the environmental impact from the complexity reduction initiative in apparel.

SOURCING A detailed Environmental Sourcing Strategy has been developed that builds on the following three steps:

• Optimise packaging solutions.

• Define 2015 targets and annual milestones for packaging optimisation and reduction.

• Extend environmental assessments to selected supplier groups.

• 5% EKPI improvement over the previous year for 3E and above suppliers; 10% EKPI improvement over the previous year for suppliers below 3E.

• 30% improvement in average KPI for selected suppliers based on 2011 baseline.

1. Risk mitigation 2. Performance improvement 3. Collaboration

• Establish an industry-wide recognised audit protocol and certification scheme for dye house facilities in collaboration with other brands and associations.

• Strategic Compliance Plan (SCP, the sustainability mid-term plan for selected suppliers) to contain environmental components on achieving reductions in energy, water and waste. • 2015 target to be merged with targets and milestones as defined in the ‘Joint Roadmap Towards Zero Discharge of Hazardous Chemicals’. −− Plan, develop and implement the projects as listed in the roadmap schedule. −− Further support the creation of a strong brand collaboration with a significant number of members. −− To reach out further to all stakeholders.

• ‘Better Cotton’ (‘Sustainable Cotton’) use: 40% by 2015, 100% by 2018 of all cotton used.

• Achieve sourcing target of 5% ‘Better Cotton’.

• Establish full traceability of more sustainable materials (apparel products) by 2014.

• Continue to monitor process and suppliers‘ compliance. • Conduct benchmarking study to evaluate software for product tracking.

• 10-15% cut in energy emissions by product output at core suppliers.

• Qualify and verify the reported data from 2010. • Continue to roll out the tool to new groups of suppliers. • Include all data from the covered suppliers for 2011. • Develop an understanding of the baseline. • Develop target requests for 2012.

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CEO STATEMENT

3

our approach to sustainability

5

highlights 2011

9

suppliers 12 environment 19 EMPLOYEES 32 2012 milestones

36

PERFORMANCE 42

Environment (continued) SOURCING (continued)

2015 Targets

2012 Milestones

• Leather tanneries: 100% of non-Europe tanneries to achieve Leather Working Group (LWG) Silver or above rating (based on the LWG audit protocol). 85% of sourcing volume (non-European) of leather finish should be certified at Gold level.

• 99% of non-Europe leather finishing to achieve a Silver Standard or above (based on the LWG audit protocol). • 70% of non-Europe leather finishing to achieve a Gold Standard or above (based on the LWG audit protocol). • All Rockport leather suppliers to achieve LWG Silver Standard by July 2012.

OWN OPERATIONS

• Implement Green Design requirements for new buildings at suppliers.

• Adapt and implement green building standards for suppliers.

• 20% relative reduction in energy consumption.

• Further rollout of trainings for energy audits and energy efficiency.

• 30% relative reduction in carbon emissions. • 20% water savings/employee. • 25% waste reduction/employee.

• Develop and implement a best practice sharing programme with a focus on energy management. • Streamline and optimise processes and documentation of the ISO 14001 management system. • Review additional large adidas Group sites and locations as candidates for ISO 14001 certification. • Appoint a Green Team ambassador for all Green Teams. The Green Team ambassador will stand available for existing and starting Green Teams. Earth Day events to be held at several locations in 2012.

SALES

• Develop strategic sustainability alliances with key customers in all key markets.

• Revisit targets 2015 and develop a mid-term plan.

• Own retail stores: 5-15% savings of resources (applicable to western Europe market).

• Revisit targets 2015 and develop a mid-term plan. • Revisit previously conducted store audits to inform the plan. • Evaluate reporting options via existing Green Company data reporting tool.

Support processes COMMUNICATION

Create awareness and engage employees by driving messaging through internal communication channels.

• Further strengthen internal communication efforts by applying tailor-made presentations to all our businesses.

HUMAN RESOURCES

Integrate environmental sustainability into global HR programmes:

• Continue to develop trainings.

• Drive awareness and activation of Environmental Strategy. • Develop ambassadors for environmentallyresponsible behaviour. • Drive Group-wide awareness and top management involvement.

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39

• Assess the viability of developing a competence network for the Environmental Strategy. • Continuation of management-supported employee events.

CEO STATEMENT

3

our approach to sustainability

5

highlights 2011

9

suppliers 12 environment 19 EMPLOYEES 32 2012 milestones

36

PERFORMANCE 42

Environment (continued) IT

2015 Targets

2012 Milestones

Reduce the environmental footprint of IT infrastructure 20% through the following initiatives:

• Decommission a further 45 physical servers.

• 80% of all PCs to have ‘green’ power management options. • 30% less energy consumption of PCs. • 100% of requests for proposals to evaluate ‘green’ performance of possible vendors. • Virtualisation of servers/data centre consolidation.

• Reduce the ratio of physical/virtual servers by a further 12%. • Achieve a power usage effectiveness (PUE) value of 1.6 in the HQ data centre located on the World of Sports, adidas Group HQ. • Introduce environmental criteria in purchase decisions related to workstations. • Set up a global ‘Green Printing’ policy. • Set up a Green Printing Default Setting in the new Printer Software Uniflow. • Develop a Green IT strategy and related Green IT communication strategy.

Social compliance in the supply chain (labour, health & safety) DIRECT SUPPLIERS

2015 Targets

2012 Milestones

• 80% of strategic Tier 1 suppliers to meet 3C (good) or better under our social compliance KPI rating.

• 68% of strategic Tier 1 supplier factories to meet 3C (good) or better.

• 25% of our strategic Tier 1 suppliers to be in a self-governance compliance model (where they take responsibility for their own performance) that includes reporting of key social and health & safety indicators. • NEW: 60% of all direct suppliers to meet 3C (good) or better.

• 15% of our strategic Tier 1 suppliers to meet 4C or better (self-governance model).

• 45% of all direct suppliers to meet 3C (good) or better. • Target newly approved suppliers to help them achieve a minimum 2C rating. • Provide ongoing training and consultation for existing suppliers to improve their KPI rating to the next level.

INDIRECT SUPPLIERS

• Scorecards for all business units and intermediaries managing our indirect suppliers to achieve an average performance rating of 70% or higher.

• Scorecards reviewed and updated for 90% of our business units and licensees that have own sourcing arrangements.

SYSTEMS AND GUIDELINES

• Establish common industry-wide monitoring platform and tools used to check and measure workplace conditions.

• Participate in SAC, GSCP, FLA and WFSGI forums to promote the use of FFC as a sharing platform for compliance data.

• A sustainable monitoring methodology and remediation ensures fair, healthy and safe work conditions.

• Integrate SCI methodology into current monitoring tools; apply tools from 2013 onwards. • Deliver 25 full and self-assessments using the Fair Wage tool. • Start applying the Global Social Compliance Programme Equivalence Assessment.

STAKEHOLDER ENGAGEMENT

• All strategic suppliers who have achieved 4C or better to have transparent reporting practices about their sustainability performance in place.

PERFORMANCE COUNTS / Sustainability Progress Report 2011

40

• Key jurisdiction has been identified where public listed companies are required to conduct non-financial (ESG) reporting; start engagements with partners who are listed in those markets to benchmark them.

CEO STATEMENT

3

our approach to sustainability

5

highlights 2011

9

suppliers 12 environment 19 EMPLOYEES 32 2012 milestones

36

PERFORMANCE 42

Employees 2015 Targets

2012 Milestones

• Leadership Excellence – Our leadership culture is recognised as best-in-class by our employees and the external business world.

• Employee Engagement: 5 functions of the adidas Group will conduct a pulse check survey to review the impacts of actions taken.

• Talent acquisition – We become a world-class talent acquisition organisation that utilises branding, strategic search and internal recruiting excellence to ensure the continuous pipeline of top talent required to achieve business objectives.

• Succession Management: The Succession Management process is supported by a system solution which hosts position and employee data related to performance, potential, career aspirations, mobility and other factors. The target for 2012 is to reach a full Group-wide online coverage.

• Learning Organisation – Our learning strategy and opportunities support our employees to help them achieve their targets, deliver high performance and set the basis for efficiency and innovation. Learning is a key performance driver within the adidas Group and ensures the fitness of our employees.

• Performance Management: Our global Performance Evaluation and Planning tool (PEP) is to reach an online coverage of 96% of the adidas Group workforce. • Workforce diversity: Focus mainly on our management development programmes where we want to increase the number of female participants to at least 35% starting in 2012. Focus on work-life-integration during the remodelling of our headquarters and have planned-in parent-child offices and the investment into a child care centre at our headquarters. • “Driving Route 2015“ HR-related strategy: −− Roll-out of “Leadership Journey” for first and second management levels of the Group. −− Design future-oriented functional training platforms, focusing initially upon the commercial areas. −− Create a Global Talent Management platform.

PERFORMANCE COUNTS / Sustainability Progress Report 2011

41

CEO STATEMENT

3

our approach to sustainability

5

highlights 2011

9

suppliers 12 environment 19 EMPLOYEES 32 2012 milestones

36

PERFORMANCE 42

PERFORMANCE

PERFORMANCE COUNTS / Sustainability Progress Report 2011

42

CEO STATEMENT

3

our approach to sustainability

5

highlights 2011

9

suppliers 12 environment 19 EMPLOYEES 32 2012 milestones

36

PERFORMANCE 42

PERFORMANCE Supply Chain 1. Number of supplier factories In the course of any calendar year there is a notable movement of factories, as suppliers are added or removed, because business entities are created, bought or sold by the adidas Group, or intermediaries, such as agents, are hired or their services are terminated. The data we are reporting here is a snapshot in time, a static point capturing the situation at the end of 12 months of these movements. Data is presented on a year-on-year basis, as at the 31st December. In 2011, we worked with 1,232 independent factories (excluding factories of our licensees) who manufacture adidas Group products in 63 countries. 67% of the factories are located in the Asia Pacific region, 20% in the Americas and 13% in Europe, Middle East and Africa (EMEA). Over one quarter, or exactly 28%, of all these factories are in China. The total number of supplier factories is almost the same as in 2010. It is estimated however that over the course of 2011 approximately 20% of the supply chain turned over, with supplier factories being added and exited in equal number. Number of supplier factories (excluding own factories and licensee factories)

1400 1200 1000 800 600 400 200 0

• 2009 • 2010 • 2011

Asia

Americas

EMEA

TOTAL

775 851 833

168 215 242

185 170 157

1,128 1,236 1,232

Supplier factories by region in 2011 (excluding own factories and licensee factories) • EMEA (13%) • Americas (20%) • Asia (67%)

PERFORMANCE COUNTS / Sustainability Progress Report 2011

43

CEO STATEMENT

3

our approach to sustainability

5

highlights 2011

9

suppliers 12 environment 19 EMPLOYEES 32 2012 milestones

36

PERFORMANCE 42

2. Factories by country Compared with year-on-year data for 2010, there was an almost unchanged number of total factories worldwide. There are many reasons for the lack of change in total numbers of factories while increasing or decreasing at national levels. The trend in Brazil is fewer new factories, but improved compliance by existing business entities with fuller disclosure of manufacturing locations. In Asia Pacific region, Indonesia and Vietnam grew marginally, a response to higher operating costs in China. In China, additional factories have been added as suppliers have built secondary facilities to access labour in more remote locations, while retaining their existing coastal manufacturing facilities as product development and management hubs. There has also been a marked decline in the number of factories in other countries. In India, we have seen factory consolidation following the Group’s integration of local sourcing activities by brand adidas and Reebok. There has also been rationalisation of the supply chain in South Korea, Taiwan and Thailand. Number of supplier factories per country1 ASIA

AMERICAS

Total number of factories Country

Australia Bangladesh

Total number of factories

2009

2010

2011

10

3

4

9

6

7

8

16

13

308

337

349

2

2

India

77

Indonesia

Country

2011

2009

2010

Argentina

13

19

22

Brazil

27

50

63

Canada

32

29

33

Chile

1

1

1

1

Colombia

2

3

4

99

84

Costa Rica

2

0

0

64

79

80

Dominican Republic

1

1

2

Japan

63

59

60

El Salvador

3

4

4

Korea

52

44

37

Guatemala

3

4

4

Laos

0

1

1

Haiti

0

0

4

Macao

2

1

0

Honduras

5

6

5

Madagascar

2

2

0

Mexico

12

19

20

Malaysia

7

6

9

Nicaragua

1

3

6

Mauritius

1

1

2

Paraguay

1

1

2

New Zealand

5

1

1

Peru

4

4

0

Pakistan

8

13

16

United States

61

71

72

Philippines

17

17

18

Total Americas

168

215

242

Singapore

1

1

1

Cambodia China Hong Kong

8

7

8

27

35

27

Thailand

41

45

38

Vietnam

63

76

77

775

851

833

Sri Lanka Taiwan

Total Asia

PERFORMANCE COUNTS / Sustainability Progress Report 2011

44

CEO STATEMENT

3

our approach to sustainability

5

highlights 2011

9

suppliers 12 environment 19 EMPLOYEES 32 2012 milestones

36

PERFORMANCE 42

EMEA

GLOBAL Total number of factories

Total number of factories

2009

2010

2011

Belarus

1

1

0

Belgium

0

0

1

Bosnia and Herzegovina

1

1

1

Total EMEA

Bulgaria

1

1

1

Total Global

Czech Republic

3

3

3

1

Denmark

1

1

0

Egypt

3

2

2

Finland

1

1

1

France

3

3

2

Georgia

0

0

1

Germany

19

23

27

Greece

4

3

0

Hungary

0

1

1

Israel

2

1

1

24

18

20

Jordan

1

1

1

Lesotho

2

3

1

Lithuania

2

2

3

Macedonia

1

1

1

Moldova

1

1

1

Poland

8

9

8

Portugal

9

9

7

Romania

3

1

2

Russia

7

4

0

Slovakia

0

1

2

Slovenia

3

4

3

South Africa

19

13

10

Spain

Country

Italy

15

15

11

Swaziland

2

2

0

Sweden

7

7

5

Switzerland

1

2

3

Tunisia

3

1

2

Turkey

16

13

17

Ukraine

2

2

0

19

20

19

United Kingdom Zimbabwe Total EMEA

1

0

0

185

170

157

PERFORMANCE COUNTS / Sustainability Progress Report 2011

Country

2011

2009

2010

Total Asia

775

851

833

Total Americas

168

215

242

185

170

157

1,128

1,236

1,232

I ndependent supplier production sites of the adidas Group, excluding licensee factories and own production sites.

45

CEO STATEMENT

3

our approach to sustainability

5

highlights 2011

9

suppliers 12 environment 19 EMPLOYEES 32 2012 milestones

36

PERFORMANCE 42

3. adidas Group licensees In 2011, the adidas Group worked with 44 licensees whose suppliers manufactured products in 269 factories in 45 countries. The total number of licensee factories is lower than the number reported in 2010, but the number of sourcing countries remains similar. In some cases the factories producing for licensees of cosmetics, watches and glasses, are very stable, highly capitalised, and specialised manufacturing facilities. A majority of the licensees are however apparel producers and as with the adidas Group’s own direct sourcing arrangements licensees see expansion and contraction of the numbers of factories throughout the course of a year. For this reason, the data we are reporting here is a snapshot in time, a static point capturing the situation at the end of 12 months of these movements. adidas and Reebok licensees divided by product range in 2011

adidas Group Licensees 2009

2010

2011

• Footwear (5%)

Licensees 41 45 44 288 307 269 Factories producing for licensees1 Production countries 44 45 45 1 This might include factories which produce both, for the adidas Group directly as well as for licensees/agents.

• Watches (2%) • Glasses (2%) • Cosmetics (2%) • Hardware (30%) • Apparel (59%)

Audits and Training 4. Number of factory audits/visits and training sessions During 2011, 1,591 factory visits (including 1,501 factory audits) were undertaken for management and worker interviews, reviews of policies, practices and documents, facility inspections and training sessions at different levels in our supply chain. The SEA team conducted 170 training sessions and workshops for suppliers, licensees, workers and adidas Group employees. Number of factory audits/visits and trainings* 1800 1600 1400 1200 1000 800 600 400 200 0

2009

2010

2011

• Factory audits/visits 1,592 1,451 1,591 • Trainings 216 193 170 * Including multiple audits/visits in the same factory conducted by the adidas Group SEA team and external monitors, but excluding FLA audits. Including audits in licensee factories; visits involving management and worker interviews, document review, facility inspections and trainings on-site. Audit data for 2011 includes environmental audits conducted at supplier sites; these were not recorded in previous data sets. PERFORMANCE COUNTS / Sustainability Progress Report 2011

46

CEO STATEMENT

3

our approach to sustainability

5

highlights 2011

9

suppliers 12 environment 19 EMPLOYEES 32 2012 milestones

36

PERFORMANCE 42

5. Number of training sessions divided by region and type For 2011, there were fewer training sessions conducted by SEA than in the previous two years, but the number of training participants increased significantly, nearly 800 people more. The number of fundamental and performance training sessions was reduced, whereas sustainability training sessions increased slightly. Reasons for this were: 1. There were less individual but more group (i.e. more than one supplier) training sessions undertaken that offer both higher efficiencies but also the added advantage of cross-learning and best practice sharing among suppliers. 2. Due to longer term and more mature business relationships, the demand for more sophisticated and advanced trainings (sustainability training sessions) was achieved. Number of training sessions divided by region and type1 Type and number of training Performance3

Fundamental 2 Region

Asia Americas EMEA Total

Sustainability4

Total

2009

2010

2011

2009

2010

2011

2009

2010

2011

2009

2010

20115

47 53 19 119

33 55 12 100

34 32 10 76

48 13 0 61

33 18 0 51

31 4 0 35

32 1 3 36

33 7 2 42

53 5 1 59

127 67 22 216

99 80 14 193

118 41 11 170 6

Trainings conducted for suppliers, workers, licensees, agents and adidas Group employees. Fundamental training covers: Workplace Standards & SEA introduction; FFC training; SEA policies & SOPs. 3 Performance training covers: Specific labour, health, safety and environmental issues. 4 Sustainability training covers: Sustainable compliance guideline & KPI improvement; Factory Self-Audits (factory internal audits). 5 In 2011, nearly 3,000 people participated in these trainings. 6 Including 83 group training sessions, i.e. trainings with participation of more than one supplier, business entity or licensee. 1

2

Supplier trainings by type in 2011 • Fundamental (45%) •P  erformance (20%) • Sustainability (35%)

6. Number of audits divided by region and type In 2011, the SEA team conducted 1,501 social compliance and environmental audits (including external monitoring audits). The total number of Initial Assessments – the first approval stage for new entry factories – and Performance Audits for our established suppliers was slightly higher than in 2010. As a new category, we added the number of Environmental Audits conducted at supplier sites. Already in 2010 more than 100 environmental audits and verification visits took place. We recorded and disclosed them separately in last year’s report but added them in the below table for reasons of completeness and transparency. In order to not change all tables and graphs that were published last year, we decided to exclude the 2010 environmental data from the total 2010 number. In addition to these audits, suppliers’ sites were the subject of multiple other visits by compliance staff to discuss specific remedial issues, to follow up project work or conduct training sessions. Meeting the high demand for Initial Assessments remained a challenge in 2011, particularly in Asia Pacific where new factories were proposed in more remote locations and a wide range of countries. There was a total of 476 Initial Assessments, of which about 80% were in Asia, with China accounting for nearly 50% of all assessments conducted. Overall 20.8% of candidate factories were rejected either out rightly, or for failure to remediate threshold issues in a timely manner. PERFORMANCE COUNTS / Sustainability Progress Report 2011

47

CEO STATEMENT

3

our approach to sustainability

5

highlights 2011

9

suppliers 12 environment 19 EMPLOYEES 32 2012 milestones

36

PERFORMANCE 42

But this number also includes factories that were rejected but given a second chance to remediate non-compliances. At the end of 2011, these factories were neither rejected nor accepted but in a status of ‘Rejected with a Second Visit’. See also data on ‘Termination and Rejections’. The rejection rate reported during the last three years actually represents a much lower figure than our real first time rejection rate due to the reporting limitations of our compliance database, the FFC. Therefore, in 2011, we were only able to look at the final designation of the factories and not include those who had a preliminary rejection but successfully completed a remediation and were subsequently SEA accepted. We know that we have many factories which had been “SEA Rejected with Second Visit” after Initial Assessment. In 2012, we will be able to accurately report a “first time rejection” rate. Audits conducted by external monitors were commissioned by adidas Group entities, including licensees with indirect sourcing models. In total, there was audit coverage of 61% of all active suppliers in 2011, which signifies an increase by 3% compared to 2010. The audit coverage of all active suppliers in region Asia increased by 3% to a total of 77%, with higher risk countries like China, India, Indonesia, Thailand and Vietnam showing more than 80% audit coverage. Our monitoring programme is characterised by a risk management approach – this means that we explicitly do not envisage audit coverage of 100% in every country where our factories are located. Number of audits divided by region and type Initial Assessments1 Region

Asia Americas EMEA Total 3

Performance Audits 2

Environmental Audits

2009

2010

2011

2009

2010

2011

406 49 28 483

355 59 33 447

381 50 45 476

853 63 47 963

788 78 37 903

790 75 46 911

2010 4

(118) 0 0 (118)

Total

2011

2009

2010 4

2011

114 0 0 114

1,261 112 75 1,448

1,142 137 71 1,350

1,285 125 91 1,501

Every new supplier factory has to pass an Initial Assessment to prove compliance with the Workplace Standards prior to order placement. Audits conducted in approved supplier factories. 3 Includes audits done in licensee factories. In addition, there was a considerable number of full environmental assessments conducted for selected suppliers in Asia. 4 The number of Environmental Audits was recorded and disclosed separately in 2010; therefore it is not included in the total number of audits for 2010. 1 2

Number of audits in supplier factories 1600 1400 1200 1000 800 600 400 200

• SEA Team • External Monitor • Total

2008

2009

2010

2011

861 400 1,261

948 500 1,448

844 506 1,350

861 640 1,501

PERFORMANCE COUNTS / Sustainability Progress Report 2011

48

CEO STATEMENT

3

our approach to sustainability

5

highlights 2011

9

suppliers 12 environment 19 EMPLOYEES 32 2012 milestones

36

PERFORMANCE 42

Initial Assessments by Country Asia

Americas

Bangladesh Cambodia China India Indonesia Japan Korea Malaysia Mauritius Pakistan Philippines Sri Lanka Taiwan Thailand Vietnam Asia Total

14 7 234 19 27 2 8 4 2 7 9 2 9 7 30 381

EMEA

Argentina Brazil Canada Costa Rica Dominican Republic El Salvador Guatemala Honduras Mexico Nicaragua Paraguay United States

7 5 2 1 2 3 4 2 12 5 5 2

Belarus Bosnia and Herzegovina Egypt Georgia Jordan Kenya Russia South Africa Tunisia Turkey Ukraine United Kingdom

2 1 9 1 1 1 1 1 1 10 1 16

Americas Total

50

EMEA Total

45

7. Number of audits conducted in licensee factories The lower number of Initial Assessments indicates a fewer number of new entries to the supply chain and as shown in Section 3, the total number of factories making for licensees has shrunk by a little over 12% between 2010 and 2011. Although the number of Performance Audits declined compared to 2010, these represented a higher percentage of licensee suppliers being subject to more in-depth compliance work. Number of audits conducted in licensee factories1 Initial Assessments2 Region

Asia Americas EMEA Total

Performance Audits 3

Environmental Audits 4

Total

2009

2010

2011

2009

2010

2011

2011

2009

2010

2011

97 7 5 109

58 13 6 77

54 6 5 65

151 8 5 164

171 18 10 199

142 15 9 166

9 0 0 9

248 15 10 273

229 31 16 276

205 21 14 240

This might include factories which produce both, for the adidas Group directly as well as for licensees/agents. Every new factory has to pass an Initial Assessment to prove compliance with the Workplace Standards prior to order placement. 3 Audits conducted in approved factories. 4 Environmental Audits in licensee factories were recorded and disclosed as such for the first time in 2011. 1 2

Number of audits in licensee factories by region 300 250 200 150 100 50 0

• 2009 • 2010 • 2011

Asia

Americas

EMEA

248 229 205

15 31 21

10 16 14

PERFORMANCE COUNTS / Sustainability Progress Report 2011

49

CEO STATEMENT

3

our approach to sustainability

5

highlights 2011

9

suppliers 12 environment 19 EMPLOYEES 32 2012 milestones

36

PERFORMANCE 42

Number of audits in licensee factories by audit type 300 250 200 150 100 50 0

• IA • PA • EA • Total

2008

2009

2010

2011

122 59 0 181

109 164 0 273

77 199 0 276

65 166 9 240

8. Key Performance Indicator (KPI) Assessment and C-Rating We audit our suppliers against our Standards and rate them according to their performance. We use an innovative way to rate the supplier on its ability to deliver fair, healthy and environmentally-sound workplace conditions in an effective manner. The following table shows the average audit score by unit of measure for those active core suppliers that were rated against the six units of measure in the KPI to date. Each unit of measure is scored out of 100%. In general, the units of measure showed higher scores achieved in 2011, especially in management commitment/responsiveness and management systems. This illustrates the take-up from our engagement with suppliers to implement human resources and health & safety management systems in their workplaces. KPI Assessment and C-Rating KPI Unit of Measure – Average score in %

Management commitment and responsiveness Management systems Worker-management communication and industrial relations Compliance training for workers and management Transparency in communication and reporting Compliance performance KPI Cumulative Score

2009

2010

2011

43.43 47.59 64.04 59.25 70.46 57.63 47.41

43.61 48.81 64.86 58.49 70.29 58.17 47.28

48.51 52.09 67.38 61.55 72.29 59.50 50.37

In 2010, we have adjusted our C-Rating system for factory assessment, raising the bar for factory performance and increasing the 2C threshold to an average score of 30% or more. The revised clustering for our C-Ratings is shown below. KPI score (%)

New C-Rating

0-29 30-59 60-79 80-89 90-100

1C 2C 3C 4C 5C

PERFORMANCE COUNTS / Sustainability Progress Report 2011

50

CEO STATEMENT

3

our approach to sustainability

5

highlights 2011

9

suppliers 12 environment 19 EMPLOYEES 32 2012 milestones

36

PERFORMANCE 42

The bar graph below shows comparable data for the past three years using the new rating classification. The number of factories that were the subject of KPI assessments to date in each specific year is indicated in the footnote. For 2011, we see that from 2005, where we started to assess suppliers with the KPI assessment tool, to date more than 571 active suppliers were KPI-assessed. In 2011, SEA increased the issuance of warning letters to non-performing suppliers, where serious and ongoing issues were not resolved despite close engagement. A warning letter has an immediate negative impact to a factory’s KPI score, hence the increased number of 2C suppliers overall. There was some improvement by poorly performing 1C suppliers, and this too contributed to an increased number of factories graded 2C. The total number of 3C and 4C factories increased, but in percentage terms this is masked by the number of new entry factories that received low initial KPI scores in the 2C range. A parallel environmental KPI tool has been developed and is being tested. From 2012 we will begin to report environmental ratings of Tier 1 manufacturing operations and Tier 2 material suppliers. Percentage of KPI-assessed factories by C-Rating*

60 50 40 30 20 10 0

1-C

2-C

3-C

• 2009 21% 40% 29% • 2010 19% 48% 25% • 2011 8% 53% 28% * Number of factories that were KPI-assessed to date: 2009 (347), 2010 (547) and 2011 (571).

4-C

5-C

9% 7% 9%

1% 1% 2%

9. Independent FLA audits Since joining the FLA in 1999, more than 280 Independent External Monitoring (IEM) audits and verification visits have been conducted at adidas Group suppliers. The number of conventional independent monitoring visits conducted by FLA accredited monitors has gone down because more of the conventional IEM requirements of the FLA have been redirected to an engagement in value-added FLA projects focused on reducing and eliminating chronic non-compliance issues or improving monitoring methodologies. In 2011, FLA activities included one independent external monitoring visit and four verification visits. Seven factories participated in one FLA special project in Asia and the Americas. These so-called re-directed audits are FLA participating company engagements in specific project work that addresses resolution of chronic compliance issues in the global workplace and the development of new auditing tools and methodologies, such as the Sustainable Compliance Initiative, which will standardise labour, health & safety monitoring practices and content across a number of FLA participating brands. Re-directs are substituted for independent external monitoring visits to factories. This substitution option is only available to FLA accredited programmes. The term derives from the ‘re-direction’ of IEM fees to financially support specific project work by the FLA to address chronic compliance issues.

Independent FLA Audits1

PERFORMANCE COUNTS / Sustainability Progress Report 2011

51

No. of Audits

FLA Year

Period

4th2

Jan – Dec 2005

30

5th

Jan – Dec 2006

43

6th

Jan – Dec 2007

15

7th

Jan – Dec 2008

19

8th

Jan – Dec 2009

16

9th

Jan – Dec 2010

16

10th

Jan – Dec 2011

12

1 As part of the FLA membership; the numbers include Independent External Verification audits. 2 Including audits conducted for Reebok before it was acquired by the adidas Group in 2006.

CEO STATEMENT

3

our approach to sustainability

5

highlights 2011

9

suppliers 12 environment 19 EMPLOYEES 32 2012 milestones

36

PERFORMANCE 42

Enforcement 10. Warning letters Warning letters are an essential part of our enforcement efforts and are triggered when we find ongoing serious non-compliance issues that need to be addressed by our suppliers. In 2011, we issued a total of 48 warning letters across eight countries. The largest number of warning letters continued to be issued in Asia, where nearly 70% of all supplier factories are located. Compared to the previous year, the number of first warning letters has dropped from 47 to 41 but the number of second warning letters increased from 2 to 7. This reflects SEA’s overall efforts in 2011 to raise the bar on supplier performance, with reduced tolerance for ongoing non-compliances. Suppliers who receive second warning letters have one step left before notification of possible termination of the manufacturing agreement and they receive focused monitoring activity by SEA. It is difficult to generalise as to the grounds for a warning letter, as this may be issued based on a single non-conformance which is unresolved, or multiple breaches of our Standards. The range of issues that resulted in warning letters in 2011 included poor management commitment, excessive working hours, non-payment of wages and benefits, poor electrical, fire or chemical safety, poor communication and transparency problems. Number of warning letters issued to adidas Group suppliers* 1st Warning Country

Argentina Bangladesh Cambodia China Guatemala India Indonesia Korea Mexico Nicaragua Pakistan Peru Philippines Sri Lanka Syrian Arab Rep. Thailand Vietnam Total

2nd Warning

3rd and Final Warning –> recommended termination

Total Warning Letters

2009

2010

2011

2009

2010

2011

2009

2010

2011

2009

2010

2011

1 1 1 10 1 7 2 – – – – 1 4 – – 1 5 34

– 1 2 18 – 9 4 1 2 – 1 1 – 1 1 – 6 47

– 4 2 16 – 7 5 – 1 1 – – – – – – 5 41

– – – 2 – 2 – – – – – – – – – – – 4

– – – – – 1 1 – –

– – 1 3 – – 2 – – – – – – – – – 1 7

– – – – – – – – – – – – – – – – – 0

– – – 1 – – – – – – – – – – – – – 1

– – – – – – – – – – – – – – – – – 0

1 1 1 12 1 9 2 – – – – 1 4 – – 1 5 38

– 1 2 19 – 10 5 1 2 – 1 1 – 1 1 – 6 50

– 4 3 19 – 7 7 – 1 1 – – – – – – 6 48

– – – – – – – 2

* Including warning letters issued by licensees and agents. But excluding warnings to main suppliers for the non-disclosure of subcontractors, which is issued either directly through business entities, or by the adidas Group legal department where there is a breach of contract obligations under a manufacturing agreement.

11. Terminations and Rejections We work closely with our suppliers to help them improve their performance. However, in the past where we have faced situations of severe or repeat non-compliance we have terminated our business relationship with suppliers. In 2011, we terminated agreements with thirteen suppliers for compliance reasons. We also work closely with Global Operations and other business entities to pre-screen potential new suppliers. Our so-called Initial Assessments are uncovering threshold or zero tolerance issues. A total of 476 Initial Assessments were conducted in 2011. On 31 December 2011, we identified that during the reporting period 99 factories have been either rejected directly after an Initial Assessment due to zero tolerance issues, or they were in a status of “rejected with a second visit” at the end of 2011, which means they were rejected after the Initial Assessment but given the chance to remediate non-compliance issues in a specific timeframe. Suppliers who have threshold issues (that is, serious but remediable non-compliances) are given three months to remediate those issues prior to re-auditing for final SEA acceptance. As a result, at the end of 2011, 20.8% of potential new supplier factories were rejected for threshold or zero-tolerance non-compliance issues. As in previous years, China dominates the number of new supplier initial assessments and corresponding rejection rates are high. In India, newly disclosed or proposed suppliers were also subject to rigorous assessments and due to weak remedial efforts resulting in a high rejection rate. PERFORMANCE COUNTS / Sustainability Progress Report 2011

52

CEO STATEMENT

3

our approach to sustainability

5

highlights 2011

9

suppliers 12 environment 19 EMPLOYEES 32 2012 milestones

36

PERFORMANCE 42

The rejection rate reported during the last three years actually represents a much lower figure than our real first time rejection rate due to the reporting limitations of our compliance database, the FFC. Therefore, in 2011, we were only able to look at the final designation of the factories and not include those who had a preliminary rejection but successfully completed a remediation and were subsequently SEA accepted. We know that we have several factories which had been “SEA Rejected with Second Visit” after Initial Assessment. In 2012, we will be able to accurately report a “first time rejection” rate. Rejections by region after Initial Assessment due to compliance problems 120 100 80 60 40 20 0

• 2009 • 2010 • 2011

Asia

Americas

EMEA

TOTAL

77 72 82

5 6 10

7 15 7

89 93 99

Number of business relationship terminations/rejections after Initial Assessment due to compliance problems ASIA No. of terminations per country Country

Bangladesh Cambodia China India Indonesia Korea Malaysia Pakistan Philippines Sri Lanka Thailand Vietnam

No. of rejections after IA per country

2009

2010

2011

1 – 7 – – – – – – – – –

– – – – – – – – – – – –

– – 2 1 6 – – – – – – –

2009

2010

2011

6 3 49 1 4 2 1 – – 2 1 8

3 5 43 13 1 – – 2 – – 2 3

8 1 56 5 2 2 1 1 1 – – 5

AMERICAS No. of terminations per country Country

Brazil Canada Dominican Republic El Salvador Guatemala Honduras Mexico Nicaragua

2009

1 – – – – – – –

PERFORMANCE COUNTS / Sustainability Progress Report 2011

No. of rejections after IA per country 2011

2010

– – – – – – 1 –

– – – – – – – –

53

2009

1 2 – 1 – – 1 –

2010

1 – 1 – 4 – – –

2011

1 – – – – 1 6 2

CEO STATEMENT

3

our approach to sustainability

5

highlights 2011

9

suppliers 12 environment 19 EMPLOYEES 32 2012 milestones

36

PERFORMANCE 42

EMEA No. of terminations per country Country

Belarus Egypt Jordan Russia South Africa Turkey Ukraine Zimbabwe

2009

– – – – – – – –

No. of rejections after IA per country 2011

2010

2009

– – – – – 3 – –

– – – – – – – –

2011

2010

– 3 1 – 2 – – 1

1 3 1 – – 2 – –

1 3 2 3 – 5 1 –

GLOBAL No. of terminations per country 2009

Global

2010

9

No. of rejections after IA per country 2011

2009

2010

2011

13

89

93

99

0

Environment 12. Certifications obtained by athletic footwear supplier sites producing for the international market We have limited control over the direct environmental impacts of the manufacturing process and how our suppliers act. The best way to influence the environmental impacts at our suppliers’ factories is to encourage the introduction of environmental management systems, and we have made implementing such a system mandatory for all our core suppliers. Achieving certification to a management system requires factory managers to plan, manage and review their own environmental performance. In 2011, we worked with 27 athletic footwear suppliers who are certified in accordance with the international environmental management standard ISO 14001 and/or the workplace health & safety management standard OHSAS 18001. These suppliers produced around 84% of the adidas Group’s global athletic footwear sourcing volume. Certifications obtained by athletic footwear supplier sites producing for the international market1 Number of FW suppliers Country

ISO 14001

OHSAS 18001

2009

2010

2011

2009

2010

2011

2009

2010

2011

2 2 – 7 1 1 6 1 1 1 10 32

1 2 1 14 1 1 9 1 – – 10 40

1 2 1 13 1 1 8 1 – – 11 39

– – – 7 1 1 3 – – – 7 19

– – – 10 1 1 4 – – – 8 24

– – – 10 1 1 6 – – – 9 27

– – – 7 – 1 3 – – – 7 18

– – – 10 – 1 4 – – – 8 23

– – – 10 – 1 6 – – – 9 26

Argentina Brazil Cambodia China Germany 2 India Indonesia Italy 3 Philippines Thailand Vietnam TOTAL

Excluding factories from the Rockport business segment and licensee factories. The site is subject to regular occupational health & safety inspections by authorities, although it does not hold a formal OHSAS 18001 certification. 3 Health & safety management system in place that is regularly inspected by local authorities. 1 2

PERFORMANCE COUNTS / Sustainability Progress Report 2011

54

CEO STATEMENT

3

our approach to sustainability

5

highlights 2011

9

suppliers 12 environment 19 EMPLOYEES 32 2012 milestones

36

PERFORMANCE 42

Certification of athletic footwear suppliers producing for the international export market in % 72% 69% 66% 63% 60% 57% 54% 51%

• 2009 • 2010 • 2011

ISO 14001

OHSAS 18001

59% 60% 69%

59% 60% 67%

13. Freight types used to ship adidas and Reebok products In 2011, we continued to register the environmental impact related to the transport of our goods. The relative use of air freight was slightly reduced for Apparel and Hardware, but increased slightly for Footwear. Freight types used to ship adidas and Reebok products1 2009

2010

2011

Truck

14

15

13

Sea freight

81

76

80

Air freight

4

8

7

Sea and air freight

1

1

0

% of product shipped

Apparel

Hardware2 Truck Sea freight

1

2

2

97

95

96

Air freight

2

3

2

Sea and air freight

0

0

0

Footwear Truck Sea freight

2

1

1

97

97

96

Air freight

1

2

3

Sea and air freight

0

0

0

Figures expressed as a percentage of the total number of products transported. Data covers products sourced through Global Operations, excluding local sourcing. Data for 2011 refers to adidas and Reebok products, while in earlier years only adidas brand was covered. 2 Accessories and gear. 1

PERFORMANCE COUNTS / Sustainability Progress Report 2011

55

CEO STATEMENT

3

our approach to sustainability

5

highlights 2011

9

suppliers 12 environment 19 EMPLOYEES 32 2012 milestones

36

PERFORMANCE 42

14. GREEN COMPANY DATA Following our vision to become a zero emission company, the Green Company Initiative was launched in 2008. This Initiative aims at improving the environmental performance at our own operations around the world. To achieve this goal, specific Groupwide targets were set in 2009 that focus on our administration offices, our distribution centres and manufacturing sites that we own, lease or rent. Since 2008 we have been specifically measuring the environmental footprint of our own locations and we have steadily increased the number of locations covered by our programme. A new data environmental reporting and management tool for our own sites and for our suppliers has been introduced for the first time for the 2011 reporting period. All data collected is automatically compared with the data reported in previous years. Furthermore, the tool can be used to calculate KPIs and to follow up on targets, and it includes a library that features best practice solutions. The 2008–2010 reports, including their complete data sets from reporting locations, have been migrated to the new reporting tool which enables us to: • Track and evaluate progress of our performance • Follow up and report on our targets • Learn from best practice. In 2011, we reduced the number of sites that were included in the reporting. The original goal of having around 70–80% coverage of all in-house emissions remains unchanged. The locations that have been removed from reporting are sites that were either closing down in 2011, contributed less than 0.5% of total emissions or were located in buildings where the limitations of their tenancy contract meant they could not calculate specific resource use or emissions. It was scheduled to publish the detailed Green Company performance review highlighting the achievements and progress of the Group’s Green Company programme together with the entire Sustainability Progress Report 2011. When reviewing the environmental data sets as submitted by the business entities through the new environmental data tool, we noticed a range of deviations in data sets from previous years that have required us to conduct an accurate analysis to identify the root causes. At the cut-off date for completion of the Sustainability Progress Report 2011, this review and analysis was still ongoing. So, the 2011 Green Company performance review will be published at a later date in the year 2012. The review will be posted in the Green Company section of our corporate website at www.adidas-group.com/en/sustainability/environment/Our_Green_ Company_programme/default.aspx

Employees 15. Employee Statistics Global employee base continues to grow On 31 December 2011, the Group had 46,824 employees, which represents an increase of 10% versus 42,541 in the previous year. This development is primarily related to the expansion of the Group’s own-retail activities in emerging markets. An increase in the sales force as well as additional hirings within our Global Operations function, in order to support the Group’s sales growth, also contributed to the overall increase in the number of employees. Furthermore, a change in the internal definition of full-time equivalents also impacted this development. On a full-time equivalent basis, our Group had 40,637 employees on 31 December 2011 (2010: 36,444). Due to the high share of employees working on a part-time basis in the Retail segment, this figure is lower than the figure reported on a headcount basis. At the end of 2011, 23% of our Group’s staff were employed in Western Europe (2010: 23%), 33% in European Emerging Markets (2010: 34%), 25% in North America (2010: 24%), 4% in Greater China (2010: 4%), 9% in Other Asian Markets (2010: 9%) and 6% in Latin America (2010: 6%).

PERFORMANCE COUNTS / Sustainability Progress Report 2011

56

CEO STATEMENT

3

our approach to sustainability

5

highlights 2011

9

suppliers 12 environment 19 EMPLOYEES 32 2012 milestones

36

PERFORMANCE 42

Key Employee Statistics Index/reporting unit

Total number of employees Total employees (in %) Management positions held by (in %)

2009

2010

2011

39,596

42,541

46,824 50%

Male

50%

52%

Female

50%

48%

50%

Male

69%

72%

73%

Female

27%

31%

28%

Average age of employees (in years)1

31

33

30

Average length of service per employee (in years)

4.1

4

3.5

Annual training hours by employee (in hours)

7.3

13

17

1

At year-end

Total number of employees 50000 45000 40000 35000 30000 25000 20000

Total number of employees

2009

2010

2011

39,596

42,541

46,824

PERFORMANCE COUNTS / Sustainability Progress Report 2011

57

CEO STATEMENT

3

our approach to sustainability

5

highlights 2011

9

suppliers 12 environment 19 EMPLOYEES 32 2012 milestones

36

PERFORMANCE 42

16. HEALTH & SAFETY STATISTICS FOR OUR MAIN ADMINISTRATION OFFICES, PRODUCTION SITES AND DISTRIBUTION CENTRES 2009 Administration Offices

Region EMEA adidas Group Headquarters – WOS Herzogenaurach, Germany adidas Group Headquarters – ADP Herzogenaurach, Germany adidas Group Headquarters – WOGIT Herzogenaurach, Germany adidas Factory Outlet, Herzogenaurach, Germany adidas Office, Amsterdam, Netherlands adidas Office, Stockport, United Kingdom adidas Office, Landersheim, France adidas Office, Monza, Italy adidas Office, Zaragoza, Spain adidas Office, Moscow, Russia Region Americas adidas Office, Portland, USA Reebok Headquarters, Canton, USA TaylorMade-adidas Golf Headquarters, Carlsbad, USA adidas Group Administrative Service Building 3, Spartanburg, USA adidas Office, Woodbridge, Canada adidas Office Baueri, Brasil Region APAC adidas Office, Shanghai, China adidas Office, Taikoo Shing, Hong Kong adidas Hong Kong Ltd. Office, Shatin, Hong Kong adidas Office, Gurgaon, India adidas Office, Seoul, South Korea adidas Office, Taipei, Taiwan adidas Office, Singapore, Singapore Total Administration Offices

Number of employees

Injuries with Lost days due >1 lost day to injury

Number of employees

Injuries with Lost days due >1 lost day to injury

Number of employees

20 10 2 3 n.a. n.a. n.a. n.a. n.a. n.a.

136 25 4 11 n.a. n.a. n.a. n.a. n.a. n.a.

1651* 1146* 568* 150 n.a. n.a. n.a. n.a. n.a. n.a.

9 3 0 4 n.a. 0 1 2 2 9

52 37 0 24 n.a. 0 5 65 17 153

1972* 1148* 580* 150 n.a. 478 346 260 220 847

18 9 3 1 2 0 4 13 1 5

108 11 11 18 3 0 187 72 33 75

2354* 907* 801* 150 427 479 355 287 230 741

10 0 4 0 n.a. n.a.

112 0 58 0 n.a. n.a.

850 1120 877 180 n.a. n.a.

0 2 18 0 0 4

0 12 47 0 0 811

850 1153 870 193 170 151

0 1 13 0 0 5

0 4 7 0 0 64

781 1168 948 0 192 221

0 n.a. n.a. n.a. n.a. n.a. n.a. 49

0 n.a. n.a. n.a. n.a. n.a. n.a. 346

600 n.a. n.a. n.a. n.a. n.a. n.a. 3777

0 2 n.a. n.a. 0 0 0 56

0 65 n.a. n.a. 0 0 0 1288

490 362 n.a. n.a. 305 110 199 7154

0 0 0 0 0 0 0 75

0 0 0 0 0 0 0 593

580 397 135 250 280 128 207 7956

* number of workplaces n.a. = not applicable as not included in reporting

PERFORMANCE COUNTS / Sustainability Progress Report 2011

2011

2010

Injuries with Lost days due >1 lost day to injury

58

CEO STATEMENT

3

our approach to sustainability

5

highlights 2011

9

suppliers 12 environment 19 EMPLOYEES 32 2012 milestones

36

PERFORMANCE 42

16. HEALTH & SAFETY STATISTICS FOR OUR MAIN ADMINISTRATION OFFICES, PRODUCTION SITES AND DISTRIBUTION CENTRES 2009 Own Production Sites

Region EMEA adidas Footwear Factory, Scheinfeld 1, Germany adidas Footwear Factory Scheinfeld 2, Germany Reebok-CCM Hockey Factory, Tammela, Finland Region Americas Sports Licensed Division Factory, Indianapolis, USA Sports Licensed Division Factory, Mattapoisett, USA Sports Licensed Division Factory, Cedar Rapids, USA Reebok-CCM Hockey Factory, St.Jean, Canada Reebok-CCM Hockey Factory, St.Hyacinthe, Canada adidas Canada Assembly Factory, Brantford, Canada Region APAC adidas Apparel Factory, Suzhou, China Total Own Production Sites

Number of employees

Injuries with Lost days due >1 lost day to injury

Number of employees

Injuries with Lost days due >1 lost day to injury

Number of employees

2 9 2

18 57 7

134 67 64

5 5 1

43 44 3

155 67 72

1 7 2

1 29 6

190 89 67

12 0 2 12 2 2

181 0 141 449 23 8

823 106 108 127 150 64

52 0 2 10 8 1

23 2 19 773 10 7

1204 108 112 127 140 76

26 1 1 5 0 0

565 120 6 709 0 0

1210 104 150 138 154 63

0 43

0 884

600 2243

0 84

0 924

243 2304

3 46

38 1474

249 2414

* number of workplaces n.a. = not applicable as not included in reporting

PERFORMANCE COUNTS / Sustainability Progress Report 2011

2011

2010

Injuries with Lost days due >1 lost day to injury

59

CEO STATEMENT

3

our approach to sustainability

5

highlights 2011

9

suppliers 12 environment 19 EMPLOYEES 32 2012 milestones

36

PERFORMANCE 42

16. HEALTH & SAFETY STATISTICS FOR OUR MAIN ADMINISTRATION OFFICES, PRODUCTION SITES AND DISTRIBUTION CENTRES 2009 Distribution Centres

Region EMEA adidas Distribution Centre, Uffenheim, Germany adidas Distribution Centre, Caspe, Spain adidas Distribution Centre, Dettwiller, France adidas Distribution Centre, Manchester, United Kingdom adidas Distribution Centre, Klimovsk, Russia adidas Distribution Centre, Obukhiv, Ukraine adidas Distribution Centre, Canot, Israel Reebok-CCM Hockey Factory, Malung, Sweden Region Americas adidas Distribution Centre 1 (Apparel), Spartanburg, USA adidas Distribution Centre 2 (Footwear), Spartanburg, USA Reebok-CCM Hockey Headquarters and Distribution Centre, Montreal, Canada adidas Distribution Centre, Adams Boulevard, Brantford, Canada adidas Distribution Centre, Embu, Brasil adidas Distribution Centre, Pudahuel, Chile adidas Distribution Centre, Cuautitlan Izcalli, Mexico Region APAC adidas Distribution Centre, Suzhou, China adidas Hong Kong Ltd., Distribution Centre, Kwun Tong, Hong Kong Total Distribution Centres Total

Number of employees

Injuries with Lost days due >1 lost day to injury

Number of employees

Injuries with Lost days due >1 lost day to injury

Number of employees

0 n.a. n.a. n.a. n.a. n.a. n.a. 0

0 n.a. n.a. n.a. n.a. n.a. n.a. 0

250 n.a. n.a. n.a. n.a. n.a. n.a. 110

16 6 1 2 1 0 0 1

147 81 5 6 67 0 0 4

250 215 21 130 400 30 28 76

12 2 0 1 0 0 0 0

73 26 0 2 0 0 0 0

190 220 20 157 455 44 40 78

1 0 39 n.a. n.a. n.a. n.a.

2 0 1283 n.a. n.a. n.a. n.a.

725 50 464 n.a. n.a. n.a. n.a.

4 5 22 1 9 20 22

64 175 1612 7 299 107 246

808 808 179 114 72 120 205

22 37 22 3 1 18 24

225 615 1053 18 1 105 288

1012 1010 179 104 135 128 246

8 n.a. 48

54 n.a. 1339

485 n.a. 2084

3 1 114

9 8 2837

180 290 3926

9 2 153

65 46 2517

125 41 4184

140

2569

8104

254

5049

13384

274

4584

14554

* number of workplaces n.a. = not applicable as not included in reporting

PERFORMANCE COUNTS / Sustainability Progress Report 2011

2011

2010

Injuries with Lost days due >1 lost day to injury

60

CEO STATEMENT

3

our approach to sustainability

5

highlights 2011

9

suppliers 12 environment 19 EMPLOYEES 32 2012 milestones

36

PERFORMANCE 42

Community Affairs 17. Community Affairs statistics In 2011, we saw a further increase of donation requests compared to the previous year and 2009. Donation requests significantly varied in nature and purpose. All requests were carefully reviewed on the basis of the adidas Group Corporate Giving Guidelines. In particular, we supported those requests which were in line with our policies and guidelines. Compared to 2010, the number of supported projects increased by 28%. The amount of product donations increased by 66%, in particular to support requests from aid organisations for product shipments that were used for relief efforts. Community Affairs statistics* Donation requests received Region

EMEA Latin America North America Asia Pacific Total

Total number of projects supported

2009

2010

2011

2009

2010

2011

1,564 150 5,784 108 7,606

1,792 131 6,429 69 8,421

1,748 69 7,763 112 9,692

208 3 569 78 858

191 3 733 38 965

206 11 983 38 1,238

Units of products donated Region

EMEA Latin America North America Asia Pacific Total

Volunteer hours

2009

2010

2011

2009

2010

2011

17,246 29,000 143,201 38,112 227,559

53,545 2,800 133,500 79,664 269,509

67,240 3,639 362,007 15,448 448,334

4,213 1,020 1,838 3,737 10,808

5,234 700 3,514 7,020 16,468

3,911 920 2,718 5,489 13,038

* Numbers include: brand activities, corporate activities, Reebok Foundation, Adi Dassler Fund.

PERFORMANCE COUNTS / Sustainability Progress Report 2011

61