Multi-stakeholder collaborations

We value the opportunities to work in partnership with other brands as well as NGOs. These partnerships help us to improve the way we conduct our business, in particular through:

  • Gaining a deeper understanding of stakeholder concerns
  • Sharing information with each other
  • Pooling our expertise and collaborating in the development of innovative tools and new ways of working.

Three key multi-stakeholder collaborations that we participated in during 2008 are:

  • The Fair Labor Association
  • The Sustainable Compliance Leadership initiative
  • The Fair Factories Clearinghouse.

Fair Labor Association

Since 1999, the Fair Labor Association (FLA) has offered global brands and companies an opportunity to participate in a multi-stakeholder organisation devoted to activities that promote fair, healthy and safe working conditions in supply chains making their products.

Independent monitoring, public reporting and accreditation

FLA member companies disclose their supply chains to the FLA who designates 4% of factories in those supply chains (chosen through a random, automated risk analysis tool) to undergo annual audits by FLA-accredited independent and external monitors. The monitors make unannounced visits to the factories and then report the audit findings back to the FLA and member companies. The obligation of the member companies is to remediate the non-compliant findings, as well as incorporate the lessons learnt to their internally driven monitoring programmes and activities.

The FLA makes the audit findings available to the public on their website, and uses the monitoring activities to inform an annual public report that objectively evaluates the programmatic activities of the member companies. After the initial implementation period, FLA staff conduct comprehensive bi-annual reviews of those activities and determine accreditation of individual company compliance programmes. In late 2005, Reebok and adidas were among the first member companies to receive FLA programmatic accreditation. In October 2008, the adidas Group programme (including the integrated Reebok programme since 2006) was among the first group of member companies to receive an FLA re-accreditation.

More than monitoring needed

In late 2006, the FLA launched several initiatives to not only improve its monitoring methodology and effectively reduce the trends of chronic non-compliance issues, but more closely fulfil its mission to promote fair, healthy and safe working conditions. They included FLA 3.0, a compliance activity focused on more active, direct engagement by factory management and their worker populations to identify the root causes of non-compliance. Once identified, there was a more relevant indication of the training programmes required to enhance the human resource and health and safety management systems in the factory. A scorecard was implemented that started to track the factory's progress and improvement of the original non-compliant findings.

Addressing the issues sector-wide

Another initiative started was a series of FLA-managed projects that addressed chronic non-compliance on a sector-wide basis as well as at the individual factory level. During the last two years, the FLA has launched ten value-added projects with innovative and focused approaches for the reduction of chronic non-compliance. Those projects are, amongst others, related to the promotion of freedom of association, sound hiring, termination, grievance and discipline practices, as well as the development of innovative compliance and monitoring methodologies.

Promoting sustainable compliance

These projects were launched in partnership with FLA member companies whose programmes had been accredited, thereby showing capacities to act beyond conventional monitoring practices and participate in activities that promoted sustainable compliance solutions in workplaces (member companies working to complete their 3-year initial implementation period still participate in the conventional FLA 2.0, the performance-based monitoring methodology).

With a twice-accredited programme, the adidas Group has chosen to redirect a number of the conventional monitoring obligations to FLA 3.0 and FLA project work.

FLA Asia Board Meeting and Stakeholder Forum

In June 2008 the FLA held its first-ever board meeting in Asia. The meeting was hosted by the Chenfeng Group, an FLA-affiliated Participating Supplier and adidas Group apparel producer, at their plant in Kunshan, China. In conjunction with the meeting, the FLA organised a one-day Stakeholder Forum on labour law reform in China, as well as a study tour of factories at different levels of compliance. The adidas Group's Head of Social and Environmental Affairs for Asia joined the Stakeholder Forum, which involved a lively debate on purchasing practices and their impact on labour standards. The Forum was attended by over 100 participants representing local and international NGOs, companies and universities. A summary of the Stakeholder Forum presentations and discussion is available on the FLA website.

Sustainable Compliance Leadership

The Sustainable Compliance Leadership (SCL) is a 2008 collaboration between the FLA and six companies to develop self-reliant management systems at the factory level. The SCL companies identified common hurdles in managing supply chain compliance such as transparency issues, major non-compliances and unsophisticated management systems - even after many years of engagement. The FLA remains focused on creating a critical mass to influence change as well as developing standard KPIs for participating companies, measuring the impact of collective efforts by industry, and drawing industry-wide comparisons in sustainable compliance activities.

All six companies in the SCL desire a common tool that assesses the factory's human resource systems and non-compliance root causes, but ensures transparency of any egregious issues for each element of the code of conduct. The standardised tool should be comprehensive yet straightforward and relevant for a broader audience including company compliance practitioners, third-party monitors, less experienced companies, licensees, factory management and sourcing staff. It is intended to replace current compliance checklists. The tool should be universal and standardised but allow for a degree of customisation to meet country-specific requirements. The process will identify what a model factory looks like, with clear criteria and indicators established as guidelines and to measure progress. There will be efficiency gains in the requisite training for internal and external monitors, and the incorporation of lessons learnt from the FLA 3.0 supply chain empowerment model mentioned earlier.

The next steps are for the adidas Group to participate in monthly meetings with the SLC and the FLA consultancy to develop and finalise the launch of the tool in June 2009.

Fair Factories Clearinghouse

The adidas Group believes that the Fair Factories Clearinghouse (FFC) promotes long-term sustainability in compliance activities through more effective collaboration with other companies. The shared platform is a result of a three-year industry-wide collaboration to build efficiencies in ensuring fair, safer and healthier workplaces by sharing compliance data from multiple sources. The key benefit for companies is that having more buyers sharing information leads to more effectiveness in executing supply chain remediation.

There are also many benefits to the factories including the potential reduction in code of conduct assessments (avoiding audit fatigue), more streamlined code of conduct communication from FFC member companies, and a reduction in resources needed to respond to remediation activities from multiple sources and buyers.

Progress and next steps

During the past two years, the adidas Group has implemented the FFC platform as the adidas Group's internal compliance database. All SEA and commissioned external monitoring reports are archived in the FFC and as of November 2008, the adidas Group actively started sharing audit reports in all regions.

The next milestone for the industry will be to start accepting each other's audit reports. By reducing duplication in monitoring activities, brands will then be able to redirect resources to capacity building and remediation activities at the factory level. This will enable brands to reach more factories and more workers. Collaboration in compliance will also increase leverage and lead to more effective and sustainable solutions at the factories.