Supply Chain

Labour - Target 1

To review, revise and prepare the launch of updated SEA Employment Guidelines.

Why was this target chosen?

Following the integration with Reebok - which had its own set of clear human rights and labour standards - together with the emergence of new labour problems and employment trends in major sourcing countries, it is clear that the adidas Group needs to provide an up-to-date set of guidelines on labour standards and practices which reflects the challenges faced today across the supply chain.

What was the approach taken?

The original Employment Guidelines were developed to provide supplementary guidance for suppliers in relation to core ILO labour standards upon which most brands base their codes of conduct. The first edition of our Employment Guidelines was a compilation of international law, 'Do' and 'Don't' checklists, sample documents, and case studies based on the experience of our own field staff.

The second edition is more ambitious. We seek to improve upon the existing, and still relevant, set of standards and practices set out in the first edition. Simply, the world has changed. Our programme - in the area of labour compliance - cannot be captured by reference to seven core standards alone (dealing with Forced Labour, Child Labour, Discrimination, Wages and Benefits, Working Hours, Freedom of Association and Disciplinary Practices). Migrant worker issues, privacy rights, reproductive health, human resources management and local legislative trends don't fall within the traditional compliance standards 'boxes'. Yet, these issues all require serious attention and our suppliers desperately need guidance if they are to navigate this new terrain successfully and humanely.

The second edition of the adidas Group Employment Guidelines will be a user-friendly tool for internal compliance staff, sourcing colleagues, supplier factories and various stakeholders who wish to understand the dynamic landscape of labour compliance, and the relationship between factory employment conditions and current socio-economic trends.

Score

50 percent

Barriers encountered along the way

The only constraint we faced relate to available internal capacity, that is our ability to develop a quality product, measured against ambitious timelines, given the existing workload of those field staff with the necessary expertise.

Conclusion

We developed and strengthened a Labour Network: key field staff with expertise in the labour area are now working collectively to define priorities for the SEA labour programme, seek solutions for new compliance problems, provide senior management with recommendations, mentor colleagues and drive improved performance within the supply chain. Our entire approach to labour monitoring should become more consistent across the SEA team over time.

Lessons learnt in 2008

The formatting of our Guidelines came under review. It was decided that we need to move to a more user-friendly electronic format, where CDs/DVDs serve as both the reference document and the training tool. This will also apply to the development of other SEA guidelines in the future.

New target for 2009

  • Launch of a pdf version of the Guidelines is delayed until end Q2 2009
  • Roll-out, briefings and training to take place at the end of 2009, once the Guidelines have been translated into applicable languages, with the prospect of using an interactive CD box-set if this proves viable.

Labour - Target 2

To develop and launch a Human Resources Management System training programme in China, Vietnam, Indonesia and Thailand.

Why was this target chosen?

In 2004, we discussed with our colleagues in Nike and Reebok the need for more sustainable solutions to basic labour compliance problems, and a more systematic approach to managing the workforce within our suppliers' factories. At the same time, within the adidas Group, we were developing the Sustainable Compliance Guideline for key suppliers, a critical component of which is the establishment of an effective Human Resources Management System (HRMS) at a factory level. The key goal was to build a framework for effective human resources management in the supply chain which results in sustainable compliance with code standards and supports high performance workplace systems and production processes. Simply, an effective HRMS can provide long-term solutions for labour problems and it fundamentally supports and enhances production.

What was the approach taken?

By the end of 2005, we had begun working in collaboration with other brands on an HRMS training and implementation pilot programme in China, a project managed by TUV Rheinland. The China pilot lasted for two years and provided training to four groups of suppliers (approximately 100 trainees) in various locations. In addition to developing an HRMS Manual and the materials for delivery of six core modules covering the various components of HRMS, the project group developed a number of other key tools: HR Objectives & Metrics; Factory Reporting Template to capture details and progress reports on each implementation activity designed by the factory trainees and a Project Issues Tracking tool, for the project group to identify, record and resolve any problems that emerged during the training or implementation process. At the completion of their training, Groups 1 & 2 and Groups 3 & 4 joined together to review good and best practices at workshops to which key sourcing people from the various brands were invited. Two new groups (Groups 5 & 6) have now commenced the programme in China.

The kick-off meeting for the first group in Vietnam took place in early December 2008, using the materials developed in China, the project model, the lessons learnt, and incorporating the best practices identified in China. The materials and training content is being reviewed by local brand staff and consultants retained by TUV Rheinland Vietnam, to ensure that they are relevant to the local context. This work has been funded by the Vietnam Chamber of Commerce & Industry (VCCI), a key stakeholder for our industry and this project.

Score

50 percent

Note

China - 100%

Vietnam - 75%

Indonesia and Thailand - 0%

Barriers encountered along the way

No roll-out has yet been planned for Indonesia or Thailand. There are several reasons for this:

  • In Indonesia there has been an ongoing and fairly comprehensive local programme, managed by SEA staff, which addresses the HR needs of key footwear, apparel and accessories & gear suppliers. The SEA Labour Network is looking at ways in which the materials developed in China can complement and enhance the work being done in Indonesia.
  • In Thailand, there are two clear barriers: (1) lack of interest amongst other brands to apply the collaboration model - any project roll-out would involve adidas Group only; and (2) the nature of the supply chain in Thailand is completely different from China and Vietnam. Thailand is a smaller sourcing country, almost exclusively apparel, with completely local management and workers (whereas China and Vietnam are both countries with large supply chains, factories with large worker populations, covering all product categories, with a mix of foreign investment management teams and domestic migrant workforces).
  • The lead time to build multi-brand agreement on roll-out, select a service provider, recruit factories etc. is more time consuming than originally understood.
  • The current financial crisis makes extended roll-out of this project, which requires significant investment (both financial and in terms of resources) by brands and their suppliers, very challenging.

Conclusion

Suppliers participating in the training have begun to understand the links between HR management and compliance performance, as well as adopting a more holistic approach to the 'soft' tools, systems and approaches required to support productivity and production planning.

All factories participating in the programme were required to develop a factory committee to oversee the implementation activities designed by the trainees during the delivery of the 6 modules. Therefore, all factories have engaged in HR improvement programmes with significant results, showcased at the sharing best practice meetings. Some practical examples include: recruiting HR professionals; establishing electronic employee information & data systems; designing comprehensive training plans and job analysis & performance evaluation mechanisms; ability to track recruitment and turnover costs; and installing automatic payroll calculation software.

Many suppliers have seen measurable cost savings and improvement in production planning and performance. The SEA team is beginning to collect data that confirms the business benefits for suppliers who develop their HRMS capacity.

Lessons learnt in 2008

There have been many lessons learnt from the entire project process, concerning:

  • Multi-stakeholder interests and needs
  • Managing project plans, expectations, materials and tools
  • Selecting service providers and managing that relationship
  • Supplier capacity for a long-term training and implementation programme.

New target for 2009

  • Review of the application of the project model for those countries that do not fit the China/Vietnam sourcing model and further research the validity of an HRMS roll-out in India.
  • In order to 'close the loop' between implementation of HRMS at the factory level and our own monitoring programme: (1) develop an internal training for selected SEA field staff; and (2) update the KPI and other monitoring tools to reflect expectations concerning HRMS within suppliers.

Labour - Target 3

To critically review and strengthen the network of confidential reporting channels for worker complaints in all three regions. Specifically:

  1. To evaluate the existing communication channels between workers and the SEA team, then identify gaps and solutions that improve those communication channels and tools.
  2. To compile information on the best practices for worker-management communication system and distribute relevant guidance to suppliers.

Why was this target chosen?

As part of our goal to develop long-term, sustainable compliance processes, the SEA team has been keen to partner with credible members of local civil society to tackle issues in the workplace. This includes an effective address of workers concerns and channelling their complaints to local NGOs and advocacy groups. Moreover, ensuring that workers have proper communication systems at the factory level and with our compliance teams is critical to SEA efforts to protect worker rights as well as an obligation of a participating company of the Fair Labor Association.

What was the approach taken?

A survey was created and then distributed to SEA staff in each region to capture the diverse local experiences. The survey assessed multiple types of communication channels used by factory management and workers to address work related issues and grievances, as well as evaluating the different communication methods between factory workers and the SEA team. Though surveys have been used in earlier efforts to evaluate different components of the SEA programme, this was the first time that surveys were used to determine the efficacy of our global supply chain's worker-management communication channel.

Score

75 percent

Notes:

  • The survey was completed in September 2008 - 100%
  • Based on the survey results, the SEA's internal working group (Labour Network) is developing recommendations to improve communications between factory workers and SEA team - 75% complete
  • The Labour Network drafted guidance notes for suppliers on reliable worker-management communication, the effective use of suggestion boxes, and the development of a non-retaliation policy - 100% complete

Barriers encountered along the way

There were no real barriers in completing the review and developing supplier guidance.

Conclusion

The survey was successfully launched and completed. The results showed similar trends, gaps and roadblocks in each region. Most factories use a mix of passive and active mechanisms to support and encourage worker-management communication including suggestion boxes, communication committees, 'open door' policies, and factory hotlines.

Neutral or even negative management attitudes played a critical role in the use of any communication channels available in the factories. A second factor was the level of workers' trust in the factory management team, and this had a direct impact in workers' willingness and interest to use the complaint and feedback mechanisms.

The supply chain's internal communication channels with workers are diverse but generally ineffective. Worker feedback directly to SEA varies between the regions and relies on their familiarity with individual SEA team members. Overall, the existing channels for worker-management communications lack effective means for workers to realise their rights or to have grievances and complaints adequately addressed.

ASIA

West Asia - Many factories use suggestion boxes, union representatives and internal hotlines as communication channels. In factories where workers trust the management, or get a timely response from management, the communication channels are used by workers; in factories where management is not responsive or does not have workers' trust, the factories' internal systems are not readily used.

South China - According to the survey, face-to-face communication was the most common channel used by workers. However, if workers do not get feedback from management, they do not use any of the systems created by the factory.

North China - Suggestion boxes, worker hotline, open door policy, worker-management committees, and SMS are the most common channels used by workers, with hotlines and SMS being the most popular ones as they are the quickest and easiest. However, the survey responses also indicated that if workers do not receive response from management, they quickly lose trust in the system.

South-East Asia - Worker-management committee and suggestion boxes were the most commonly used communication channels. Worker committees sometimes find it challenging to address issues to management in a structured way. However, if workers don't get a response from management, they do not use any of the communication channels in place.

EUROPE, MIDDLE EAST, AFRICA

Suggestion boxes were the most common channel used by workers. However, if management does not reply or take any action, workers use it less or not at all. In Turkey, there was a plan to introduce a factory subscribed worker-management communication tool called the Clear Voice Hotline (CVH) but the external service provider dropped the launch due to insufficient funding and participation by local factories. In late 2008, the Turkish Ministry of Labour opened a 24-hour hotline that allowed workers to report labour and employment issues.

AMERICAS

Workers tend to use suggestion boxes most frequently to communicate with management. One Central American factory participated in the CVH. Initially results showed that workers did use this communication tool to report grievances. However, the factory did not act quickly enough to solve some of the grievances and respond to workers so workers gradually stopped using it. Anticipating that management response would be a potential issue, CVH developed management-training modules for the improvement of response practices and grievance management but the training was costly and supplemental to factory's CVH subscription fee.

Lessons learnt in 2008

We learnt that accessibility to our team critically affects worker feedback. Where our field monitors are in the country or city where the factories are located we receive frequent communications from workers and actively respond to complaints. In those countries where our monitoring teams infrequently visit factories and where we have no permanent presence, feedback is restricted. In terms of communication channels, special attention therefore has to be given to areas where we have no permanent field presence.

New target for 2009

As part of the launch of the revised Employment Guidelines we will distribute guidance on ways to improve worker-management communication mechanisms at a factory level. Also we aim to finalise internal recommendations and best practices for improved worker communication to SEA field staff. As a minimum this will include the replacement of the Open Letters to workers with more visible posters that show complaint hotline or SEA contact numbers.

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Within this report
KEY
  • 0%: no progress
  • 10%: initiated
  • 25%: partly complete
  • 50%: good progress
  • 75%: substantially complete
  • 100%: fully complete