Monitoring Compliance

Enforcement

The Enforcement Guidelines cover the principles of enforcement of the Workplace Standards, and those sanctions or remedies we will apply where the Standards are breached. Such sanctions or remedies include:

  • Termination of the manufacturing agreement - in situations of severe or repeated non-compliance
  • Stop-work notices - in life-threatening situations or where the manufacturing process is likely to have significant negative consequences for the environment
  • Third-party investigations - where persistent or repeated violations of the Workplace Standards or local laws have become a matter of public interest
  • Warning letters - in cases of ongoing and serious non-compliance
  • Reviewing orders
  • Commissioning of special projects - to remedy particular compliance problems.

Two types of non-compliance

Breaches of the Workplace Standards are categorised into zero tolerance points and threshold issues. Zero tolerance includes prison labour, serious, life-threatening health and safety conditions and repeated or systematic abuse. Any finding or reported finding of a zero tolerance elicits an immediate and urgent engagement with a supplier. If the zero tolerance is verified, then the Enforcement Guidelines call for the supplier's disqualification from the adidas Group's supply chain.

Threshold compliance issues include serious employment issues, serious health, safety or environmental issues and any combination of the two. The Enforcement Guidelines for threshold issues can disqualify a new supplier from production or lead to enforcement actions with existing suppliers.

Warning letter system

We strongly believe in a partnership approach, and where a supplier is performing poorly in terms of Workplace Standards compliance, we will work closely with them to find solutions. However, where we find ongoing and serious non-compliances and a lack of commitment on the part of the management to address the issues, we will, when appropriate, issue a formal warning letter.

For threshold compliance issues, three warning letters will usually result in an immediate recommendation to terminate. In very serious cases or in cases of zero tolerance level non-compliance, a single 'stop work' letter will be issued advising the offending supplier that SEA has recommended the business relationship be terminated. Our Sourcing, Business Unit and Legal departments would then follow up with a formal notification to end the business relationship.

In 2010, issuing warning letters was the most common enforcement practice followed. No 'stop work' notices were issued.

Third party investigations were initiated in Central America to address the illegal discharge of workers, insufficient compensation and breaches to the freedom of association. In at least one case, these investigations were done at a factory where we no longer had a business relationship, so warning letters would not have been an effective sanction. The investigations provided transparency and verification that the requisite corrective actions were taken.

See the tables showing numbers of warning letters, terminations and rejections on the Enforcement data page in the Performance section.

Reading this report

Performance counts and reporting is about making performance clear to readers.

So in this year's report each page identifies which Global Reporting Initiative (GRI) indicators it addresses, complementing the GRI Index.