Adidas and its Ethical and CSR

thics is defined as what is right and what is wrong. Every business should behave ethically. The moral principles that guide the way a business behaves are business Ethics. Ethics are moral guidelines to people or to an organisation which govern good behaviour. So behaving ethically is doing what is morally right. Doing an ethical business may always be not profitable but it will be more beneficial to company and the people involved in company as well as the people who are getting influenced by the company. If a company is acting ethically then it is trying to differentiate between right and wrong and then chose the right decision for everyone. It is very easy it identify any unethical behaviour. The unethical practise can be:- Child Labour.

Unlawfully uses of copyrighted materials.
Bribery.

Ethical Principal:-
Deontological
Teleological/utilitarian
Virtues
Justices
Right based
Fairness

Now a day every organisation is facing ethical issues. Just to benefit themselves organisation takes various steps and action which may have negative impacts on its stakeholders which is unethical. Whether it’s Nike or Adidas both of them had gone through some unethical issues within their organisation. Every organisation is now focusing on ethical business practise, as it could possibly help to create a competitive advantage to gain market shares. Ethics problem which Nike facing was a boycott of their products in the 1990’s because they used child labour in Cambodia which was completely unethical. In case of Adidas its uses sweatshops in Indonesia, Philippines and China which was highlighted before the London 2012 Olympic Games, with allegations that included 65 hour weeks for very low pay and physical and verbal abuse of their employees.

Despite this thing Adidas was voted as number one ethical company in Germany where as it didn’t even make in top 15 in UK. Since UK covers lots of its market share, Adidas need to focus on improvement in UK market. Adidas relying on subcontractors that are not monitored to its own corporate standards as a result in September of 2010 a supplier for Adidas from Indonesia called PT Kizone stopped making compensation payments to workers. A few months afterwards, the owner had fled the country and the new owner declared bankruptcy, leaving 2,800 workers without $3.3 million of back pay. Adidas needs to become a lot more transparent in their operations, and move away from the use of sweatshops in Asian countries. It is key that in order to improve their brand image, Adidas needs to move away from this practice and implement much fairer standards for the staff in their factories, and ensure it is clear for all stakeholders to see how they operate, in order to prevent any negative future reports surrounding their employment standards.

Adidas have an Employee Code of Conduct, which are rules around protecting their customers’ data and the Group’s Workplace Standards for their suppliers. The adidas Group Code of Conduct is the cornerstone of ethical behaviour for their employees in their day-to-day work. It covers issues such as how to treat business partners, handling information, complaints and also special rules for dealing with financial matters. To make sure everyone knows about this Adidas have got online training system available in 10 different languages. This training is aimed at raising awareness of ethical and social behaviour as well as promoting compliance with data protection requirements and other policies.

Corporate Social Responsibility:-

Corporate social responsibility (CSR) refers to companies taking responsibility for steps and action which they take and their impacts on society. In other words Corporate Social Responsibility (CSR) is the responsibility that modern business organisations have to creating a healthy and prosperous society. CSR is increasingly important to the competitiveness of enterprises. It can be benefits in terms of risk management, cost savings, access to capital, customer relationships, human resource management, and innovation capacity.

Michael Hopkins’ Definition of CSR:-
Corporate Social Responsibility is concerned with treating the stakeholders of a company or institution ethically or in a responsible manner. ‘Ethically or responsible’ means treating key stakeholders in a manner deemed acceptable according to international norms. Social includes economic and environmental responsibility. Stakeholders exist both within a firm and outside. The wider aim of social responsibility is to create higher and higher standards of living, while preserving the profitability of the corporation or the integrity of the institution, for peoples both within and outside these entities. CSR is a process to achieve sustainable development in societies. [Carroll, 1979; 2008, 500]: “The social responsibility of business encompasses the economic, legal, ethical and discretionary expectations that a society has of organizations at a given point in time.”

Benefits of CSR:-
Increase shareholder Value
Increase revenue
Operational Efficiency
Access to Capital
Customer Attraction
Brand Value and Reputation
Human and Intellectual Capital
Risk Profile

The main purpose of CSR is to identify and improve a company’s impact on society and the environment, while driving stronger business results such as brand enhancement, market differentiation, and employee satisfaction. Adidas group are always trying to be eco and environmental friendly. They are not only focus on their products but also concern on the impacts that their production does on other stakeholders. Recently Adidas have approach 4 pillars concept or 4Ps:- People, Planet, Product and Partnership. It provides a conceptual framework that enables Adidas stakeholders — from its 50,000 employees on through to suppliers, customers and communities — to better and more easily understand, assess and realize the multinational footwear and sportswear company’s sustainability goals.

Adidas 4Ps approach:-

Recently Adidas have launched waterless dying technology known as DryDye technology. This technology instead of consuming 25 litters of water necessary to dye one t-shirt, the DryDye technology uses none–instead, the dye is injected using compressed carbon dioxide. The result is a garment using not only 50 percent less chemicals and energy, but in the long run has a lower environmental impact because the CO2-based dye actually lingers in the fabric longer. This concept helps in reduction of consumption of water in dying process.

Before Adidas used to produce large number of samples for marketing purpose and we all know that samples produced where all wasteful. Now designers and marketers in Adidas are using Virtual technology which is far better and cost effective. In comparison to 2010 they have reduced the number of samples produced to 600000 in 2011/2012. It helps to save lot more of resources which would have being used in production of samples.

Grievances in the supply chain via SMS, Recently in Adidas one of the largest footwear suppliers in Indonesia agreed to a pilot program in which employees with grievances to air could communicate them by texting from their mobile phones. The grievances-by-SMS system was cost-effective to install allows workers to air concerns from anywhere and can give the factory’s managers a better idea of where to focus on improvement. Since the company is too big it isn’t possible to solve each and every employee’s problems, so communicating by the means of SMS was better idea to hear each and every one voice.

Adidas conducts “Fair Wage Assessments” In 2012 Adidas conducted a series of “Fair Wage Assessments,” qualitative case studies, management self-assessments and workers’ surveys among its suppliers’ factories. As part of the “Fair Wage Assessments,” they interviewed 1,817 workers spanning 12 factories in five countries to gather information on how workers believe they are being treated, and what they believe is a fair wage. By this survey they got positive feedbacks, employees were paid on time, were paid national minimum wages, and compensation packages included “many non-monetary benefits.” Less encouragingly, “Fair Wage Assessment” staff found instances of “under-payment of overtime, workers not being well informed of the current legal minimum wage, the piece-rate system being the overly dominant method of calculating wages, and the lack of a direct link between the wages paid and the factory’s economic performance.”

There are other many thing which Adidas have adapted to become eco-friendly. They have optimise packaging solution, implement Green Design requirements for new buildings at suppliers, Drive solution for sound chemical management in the global supply chain, establish full traceability of more sustainable materials, have establish a common industry-wide monitoring platform, methodology and tools to check and measure fair, healthy and safe workplace condition, 10-15% reduction of energy consumption by product output at strategic supplies. As a part of the revised Adidas strategy is a pledge to use 100% “better cotton” and improve its environmental impact on the cotton industry over the next seven years. The “better cotton” initiative aims to improve the environmental impact in the mainstream cotton industry by reducing the amount of water and pesticides used in farming the product.