usiness ethics group assignment case study sweatshops in adidasasian factories

Child labor in IndonesiaChild labor is a serious problem in Indonesia, and Adidas has been criticized for its role in perpetuating the problem.One of the main criticisms of Adidas is tha

MINISTRY OF EDUCATION AND TRAINING

NATIONAL ECONOMICS UNIVERISTY

-*** -BUSINESS ETHICS GROUP ASSIGNMENT CASE STUDY Sweatshops in Adidas’ Asian factories:

Lecturer: Nguyen Bich Ngoc

Participants: Lê Thị Hồng Anh - 11210422

Vũ Nhật Linh - 11213483 Đào Phương Anh - 11210317 Phạm Minh Hòa - 11212304 Trần Ngọc Diệp – 11211320

Class: Finance 63D School of Advanced Education Program (AEP)

.

Hà Nội, 2023

Adidas is a worldwide company based in Herzogenaurach, Bavaria, which creates and produces athletic footwear, apparel, and accessories Located in Europe, it is the biggest sportswear company in the continent and ranks second globally

The goal of Adidas is to become the best sports brand in the world The daily goals at work are to produce and sell the most superior sporting goods, provide the finest customer service and experience, and accomplish all of this in a sustainable manner Adidas has expanded by utilizing a number of techniques, including marketing, strategic alliances, and product innovation The brand launched a number of iconic items, namely the Stan Smith sneakers and the Superstar, and it has cooperated with well-known designers and celebrities to produce limited-edition collections Adidas has also invested considerably in crucial sporting events and clubs, such as the FIFA World Cup and the Olympics, which has improved its sales and promoted its brand Adidas, however, has been accused of a number of ethical transgressions including exploitation of workers throughout, notably its utilization of sweatshops in Asian factories The public's mistrust and criticism of these incidents have reduced the public's trust in Adidas Adidas has been relentlessly searching for ways to reduce the negative impacts of the controversies on its company and has seen positive and encouraging results

In this report, our team analyzes Adidas' business ethics policies, unearths the difficulties the company has faced as a result of its controversial behavior, and evaluates the tactics it has used to recover from the scandals and destruction to its reputation in order to win back the public's trust and rebuild its position

Table of Contents

Abstract 1

I Adidas introduction 2

1 History and Background story 2

2 Mission statement 2

3 Brand power 3

II Adidas’s ethics issue: Sweatshops in Adidas’ Asian factories 5

1.How it started 5

2 Tradition of child labor in Indonesia 5

3 Disregarding human rights 6

3.1 Low wages in China 6

3.2 Environmental impact 6

4 The ignorance 7

4.1 Child labor in Indonesia 7

4.2 Low wage in China 7

5 Consequences 8

5.1 Child labor in Indonesia 8

5.2 Low wage in China 8

6 Reaction 9

6.1 People’s reactions 9

6.2 Adidas’ reactions 11

7 Adidas’ positive movements 13

7.1 Adidas Sustainability Program 13

7.2 Adidas Human Rights Program 14

7.3 Adidas Employee Development Program 14

III Conclusions 15

References 15

I Adidas introduction

1 History and Background story

Adidas (Adidas AG in full) is a German company that produces sporting products, athletic shoes, and apparel It was the biggest sportswear producer in Europe and the second biggest worldwide (after Nike) in the beginning of the twenty-first century Traditionally, Adidas products are identified by the three-stripe trademark, which remains an element in the company's newer "trefoil" and "mountain" logos

Adidas, called "adidas" by the corporation, is an abbreviation for Adolf ("Adi") Dassler, the brand's founder After World War I, the Dassler family started producing shoes Jesse Owens, the American track and field star, wore shoes that were reportedly

a gift from Adi Dassler during the 1936 Berlin Olympics Worldwide awareness of the Dassler brand expanded as a result of Owens' medal-winning achievements

Adidas had steady growth in the 1950s when players of association football (soccer) shifted to the company's lightweight, screw-in cleat shoes Subsequently, the business created a range of athletic products, launching soccer footballs in 1963 After four years, Adidas started making clothing Adidas was the most well-known brand of sporting shoes for a long time, but in the 1970s, competition from more recent companies like Nike grew

The scandal-plagued French businessman Bernard Tapie owned Adidas from 1990 to

1993, but he was unable to revive it Following the sale of the business, investors called for Robert Louis-Dreyfus to be chairman and CEO (1996) Adidas purchased the Salomon Group in 1997 while he was in charge Salomon owns the golf supply company TaylorMade, despite being most recognized for its winter sports

merchandise Renamed Adidas-Salomon AG, Adidas entered the retail space in 2001, taking a cue from Nike The business and Stella McCartney, the fashion designer, struck up a fruitful collaboration in 2004

Although Adidas retained the TaylorMade brand, it sold Salomon in 2005 Afterwards, Adidas acquired the Reebok company (2006), which was the owner of the Rockport shoe brand, and Five Ten (2011), an outdoor sports shoe manufacturer In 2017, Adidas sold TaylorMade

2 Mission statement

The Adidas mission statement is "to be the global leader in the sporting goods industry with brands built on a passion for sports and a sporting lifestyle.” The company is said

to be committed to continuously strengthening its brands and products to improve the company’s competitive position Some key points in this statement could be highlighted

● Promoting an Active Lifestyle

Adidas values living an active lifestyle highly It promotes sports participation by providing an extensive range of high-quality items that cater to a wide range of consumers

● Improving sport

The Adidas Group has a particularly sports-oriented mentality While Adidas does serve all of its customers' fitness demands, a large portion of its efforts are focused on the athletically inclined market, especially the younger demographic Adidas has a number of initiatives designed to help young people who want to be athletes develop their abilities and give them the finest tools and chances available

● Exceeding expectations

Adidas's R&D team puts in a lot of effort to continuously enhance its products and produce cutting-edge features that have never been seen in the marketplace Exceeding consumer and rival expectations is one of the company's constant aims

● Creating innovative products

Two of the most important aspects of the Adidas team are innovation and creativity They are renowned for developing cutting-edge technology to produce amazing goods Consider the Boost technology, which is currently what makes Adidas running shoes unique It significantly enhanced energy return with every step, making it an invaluable tool to help runners everywhere perform better in competition

● Core values

Adidas's remarkable success can be attributed, in large part, to its core values: performance, passion, integrity, and diversity Adidas has always applied these core values over the years in all facets of the company, and all business choices were only made after careful examination based on these principles

3 Brand power

● Association with top sports performers

Top athletes still choose adidas as their supplier, preserving the brand's power in relation to its true beginnings The Italian football team Roma is the newest addition to adidas' roster of celebrities and teams The agreement will go into effect in 2023, 29 years after the two parties initially worked together

● Flagship stores with leading-edge technology

The flagship stores of adidas are situated in major cities, including Rome, Mexico City, Berlin, Moscow, Dubai, Beijing, and Seoul Los Angeles, New York, Paris, Shanghai, and Tokyo are also added The brand's high-tech stores, which prominently feature the trademark three stripes and feature till-free shopping, sales assistants

equipped with tablets for quick stock checks and transactions, multi-screen product displays, and top sports action, are the physical evidence of their strategic technical goals and dedication to innovation and digital agility

The purchasing process is more than just a transaction; it is a component of

branding.The cutting-edge technology utilized in adidas product design and

production is reflected in the in-store technology as well

● Sustainability

Adidas received an overall ESG Evaluation score of 85 in 2021 after a comprehensive evaluation by rating agency S&P, ranking the company in the top ten in the S&P Global Rating Universe

● Revenue

In 2019, Adidas sold 541 million pairs of sneakers The business recorded €23.6 billion in total revenue, of which €13.52 billion came from the footwear segment Over the past few years, Adidas has witnessed a steady increase in its shoe sales; from

496 million in 2018 to 541 million in 2019

II Adidas’s ethics issue: Sweatshops in Adidas’ Asian factories

1 How it started

The impending testimony before the Parliament regarding the distressing labor

conditions within the factories supplying Adidas is poised to shed light on a disconcerting reality Representatives of workers from the Nikomax Gemilang and Tuntex factories, nestled in the heart of Jakarta, will unveil a distressing narrative of exploitation and hardship Shockingly, children as young as 15 were compelled to endure grueling 15-hour workdays, a relentless expectation to clock in at least 70 hours a week, and faced retribution for declining overtime Their meager

compensation, amounting to less than $60 a month, falls egregiously below the International Labour Organisation's prescribed living wage Moreover, these young laborers were penalized for seeking medical leave and subjected to illicit wage deductions as punishment for minor transgressions The testimony is poised to highlight the urgent need for systemic change and heightened accountability within global supply chains to curtail the flagrant exploitation and suffering of vulnerable workers

2 Tradition of child labor in Indonesia

Child labor has unfortunately been a longstanding issue in Indonesia, entrenched within certain societal and economic dynamics Despite the plan released by the Indonesian government in 2015 to eliminate child labor by 2022, the existence of underage individuals in the nation's factories and plantations remains a common occurrence, with only four years left until the set target Economic challenges, poverty, and limited access to education in certain regions often force families to depend on their children's labor to supplement household income

Child labor exists in Indonesia both in the export and domestic sector According to government statistics, over 2.3 million children were working in Indonesia in 2010 Of those aged 10-14, 61.6% were employed by the agricultural industry In sectors such

as palm oil production, a significant number of children are found working, largely due to unreasonably high harvesting quotas that lead laborers to involve their families, including children, to meet these demands The palm oil industry, a vital export for Indonesia, often turns a blind eye to child labor, creating an environment where families feel compelled to involve their children in meeting excessive work targets

Similarly, the tobacco industry sees extensive use of child labor Reports from organizations like the Rainforest Action Network and Human Rights Watch highlight the harmful impact on children's health and development due to exposure to toxins in tobacco fields The deeply ingrained culture of overlooking child labor issues in these industries presents a considerable obstacle to eradicating this practice, despite government initiatives to combat it The continuing prevalence of child labor in these vital sectors raises urgent concerns about the well-being and rights of these young workers, indicating the need for intensified efforts to enforce labor standards and protect the most vulnerable in Indonesia's workforce

3 Disregarding human rights

3.1 Low wages in China

In China, Adidas factory workers earn an average of $3.50 per hour, significantly less than the U.S average of $7.25 per hour However, this Chinese wage still surpasses the country's average worker income, which stands at $2.30 per hour Comparatively, Adidas warehouse workers in the U.S align with the national average, earning around

$33,733 annually The disparity in wages is evident across the industry, with Nike workers in different roles earning varying salaries, while Puma's factory workers earn between $255 to $283 per month, lower than minimum wages in certain parts of China

Factory conditions have also raised concerns A significant number of Puma's supplier factories have failed audits due to violations in work hours, pay, and employee health endangerment Despite the wage differences, Adidas workers in urban China earned twice as much as their counterparts within the company in 2014 Despite its lower revenue compared to Nike, Adidas demonstrates strength in innovation and consumer engagement, leading to a considerable increase in sales in China

The disparity in wages and working conditions between these major sportswear companies across different countries reflects the complexities within global supply chains While these companies vary in revenue and market strategies, there remains a necessity for greater transparency, adherence to labor standards, and the prioritization

of fair wages and safe working conditions for all employees across their global operations

3.2 Environmental impact

Adidas has been accused of using hazardous chemicals harmful to workers, customers, and the environment in their goods and manufacturing processes As a result of these emissions, global warming, harsh weather, and rising sea levels are more likely to occur It’s important to note that the production and dyeing procedures

at Adidas contribute to water contamination, which threatens ecosystems and populations that rely on clean water

Additionally, fabric scraps, packaging materials, and unsold stock all contribute to the garbage the brand produces when making sportswear Another major problem in the sportswear industry is the use of harmful chemicals in manufacturing Some environmentalists have accused the corporation of greenwashing, saying its sustainability activities are insufficient to address its overall environmental effect

4 The ignorance

4.1 Child labor in Indonesia

Child labor is a serious problem in Indonesia, and Adidas has been criticized for its role in perpetuating the problem

One of the main criticisms of Adidas is that it is ignorant of the extent of child labor in its supply chain Adidas has denied that it is ignorant of the problem of child labor in its supply chain The company says that it has a team of auditors who regularly visit its suppliers to ensure that they are complying with the code of conduct However,

some critics argue that Adidas' audits are not effective and that the company is not doing enough to prevent child labor in its supply chain

Another criticism of Adidas is that it is not doing enough to support children who have been forced to work in its supply chain Adidas says that it has a program to help children who have been forced to work go to school and receive vocational training However, some critics argue that this program is not adequate and that Adidas needs

to do more to help these children

4.2 Low wage in China

Adidas has been criticized for its ignorance of the problem of low wages in its supply chain in China The company has a code of conduct that sets minimum standards for wages and working conditions, but it has been accused of not doing enough to monitor its suppliers and ensure that they are complying with the code

Adidas has denied that it is ignorant of the problem of low wages in its supply chain in China However, some critics argue that Adidas' audits are not effective and that the company is not doing enough to prevent low wages in its supply chain

Another criticism of Adidas is that it is not doing enough to support workers who are paid low wages in its supply chain Adidas says that it has a program to help workers who are paid low wages improve their skills and find better jobs However, some critics argue that this program is not adequate and that Adidas needs to do more to help these workers

In addition to the above, here are some other ways in which Adidas can address the issue of low wages in its supply chain in China:

● Adidas can work with its suppliers to develop and implement plans to raise wages to a living level

● Adidas can provide financial and technical assistance to its suppliers to help them improve their working conditions and meet the code of conduct

● Adidas can increase transparency in its supply chain and make it easier for workers to report violations of the code of conduct

● Adidas can work with other stakeholders, such as the Chinese government and labor unions, to develop industry-wide standards for wages and working conditions

By taking these steps, Adidas can help to ensure that its workers in China are paid a living wage and are able to work in safe and decent conditions

5 Consequences

5.1 Child labor in Indonesia

Because of low wages for children, Adidas exploited this to increase child labor Children experience physical injuries as well as insanity Moreover, firm also suffers from unexpected consequences:

 Children's lack of education: The market for goods made using child labor only serves to feed the vicious cycle of exploitation, which in turn generates more child labor and slavery

 Bad for children’s health and wellbeing, robs them of their independence and access to an education: Encouraging child labor exacerbates the issue by feeding the child trafficking industry on the illicit market

 Damage to brand reputation: Adidas is a global brand with a reputation for high-quality products and ethical business practices However, its association with child labor has damaged its reputation and led to consumer boycotts and protests

 Legal liability: Adidas could face legal liability in Indonesia and other countries if it is found to be using child labor

 Reduced productivity: Child laborers are often less productive and more likely

to make mistakes than adults This can lead to reduced productivity and increased costs for Adidas

 Increased costs of compliance: Adidas has to invest in additional monitoring and compliance measures to ensure that its suppliers are not using child labor This increases the cost of doing business for Adidas

 Social costs: Child labor is a serious social problem that can lead to a number

of negative consequences for children, including poverty, illiteracy, and health problems Adidas has a responsibility to address this problem in its supply chain

 Perpetuation of the poverty cycle: Child labor is often a symptom of poverty Children who are forced to work instead of going to school are more likely to remain poor as adults Adidas has a responsibility to break the poverty cycle and help children in its supply chain reach their full potential

Overall, the consequences of child labor in Indonesia for Adidas are serious and far-reaching Adidas has a responsibility to take action to address this problem and protect children in its supply chain