adidas Group

This week, the adidas Group published its updated Global Factory List, a list of all factories which manufacture products for the adidas Group. The list, which mirrors the evolution of our supply chain, includes a country making its first appearance: Myanmar.

General considerations

Myanmar (Burma) is a newly developing country, one which is undergoing positive political change, but also one that has a legacy of human rights abuses including the use of forced labour, child labour and the like. With the lifting of international trade sanctions against Burma, we asked ourselves a simple question: “If we want to do business in Myanmar, should we do more in our assurance process?” The answer was: “Yes, we need to set the bar higher”. That led to a lengthy process of examining and strengthening our policies and approaches to ensure that, from the outset, we were protecting the rights and interests of local stakeholders in Myanmar, as well our reputation as an industry leader in sustainability.

 

What we did

The adidas Group is committed to upholding the OECD Guidelines for Multinational Enterprises, including the need to support and ensure the respect for human rights in our global supply chain.

 With this goal in mind, it took us two years of extensive stakeholder engagement before we allowed any of our business partners (suppliers) to start sourcing in Myanmar.

As a result of this engagement, we have developed specific guidance for our suppliers on land acquisition and development of industrial sites. This says, for instance, that: To better understand the specificities of the country, its laws and main issues, we engaged directly with civil society groups, international human rights organisations, the International Labour Organization (ILO), local trade associations and the Myanmar government, including the Ministry of Labour. We are currently working closely with the ILO’s office in Yangon and the Myanmar Garment Manufacturing Association on ways to lift the overall standards in the garment sector.

• If land needs to be acquired for the construction of a factory, social impact assessments and community level consultation with those currently occupying and owning the land need to be carried out.
• If existing buildings are purchased, or leased, building safety checks are mandatory.
• All newly
  constructed buildings must be accompanied by structural engineering certificates issued by credible independent engineering firms.
• And all buildings have to undergo seismic performance tests, as part of their structural evaluation.

Our team also carried out our normal due diligence work, such as verifying labour, safety and environmental conditions at the prospective factory site. This is done through audits.

 

What have we learned? 

First, be patient and invest time. If you want to build towards a successful outcome, you must take the time needed to open the necessary channels for stakeholder dialogue. It takes time to get the process right and to capture and understand local interests and perspectives.

Secondly, it is not a one-time investment. We need to continuously invest in resources in-country and on the ground, to engage regularly with government, to understand new laws and the rapidly developing administrative systems, as well as the numerous civil society groups and trade unions that are blossoming in the light of their new-found freedoms. The Labour Organization Law, for example, which was adopted in October 2011, has already led to the registration of over 400 basic-level trade unions across the country.

With opportunities, there are also challenges. The frequency of labour disputes continues to rise in the country. In anticipation of this:

• We have called on our suppliers to employ a qualified industrial relations officer, as part of the Human Resource Management function.
• We are running capacity-building programmes to familiarise the factories with our Employment Standards and the need to respect freedom of association.
• We have translated our Workplace Standards into Burmese to ensure that suppliers are incorporating them into their induction training for new employees. It is not possible for workers to exercise their rights if they are not aware of them.

Thirdly, it is clear that the government still has a lot of work to do to build the fundamentals, if worker rights are to be properly protected.

In the absence of an official minimum wage for Myanmar, we require our suppliers to set wages against the prevailing industry wage for export factories in our sector. In a similar way, in the absence of specific environmental laws, we apply international best practice. We have called on the Myanmar government to update their regulations, to match our strict standards.

 

The way forward 

We have offered feedback to the ILO where we feel the current legislation is lacking and where the new laws need to be better understood by employers, unions and workers. One simple step the government could take would be to consolidate the many dispersed sources of law into a single publication for industry. That would help the workers, their representatives and the factory management.

A new health and safety law is being drafted. It is very much needed. Currently there are no limits set for workers’ exposure to noise, chemicals, dust or vibration. Until national requirements are in place, we are requiring our suppliers to meet in full the adidas Group’s Health and Safety Standards, which follow international norms and best practice. A safe workplace is also a human right.

As a company that runs its business operations in a sustainable way, we do acknowledge that sourcing in Myanmar presents challenges as well as opportunities.

We are fully committed to improving social and environmental standards in the garment sector in Myanmar and we are taking this responsibility very seriously.

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