Business Ethics (M1-18163)

Faculty: Saadia Syed Ali

"Involvement of Adidas in Unethical Business

Activities"
A Research report by Mohammed Basim Ahmed(33787) & Zaid Ahmed(34125)
Introduction:

“Adidas'', the German corporation that we know today is one of the pioneers in the
manufacturing of athletic goods, mainly shoes and apparel. Established in 1949 by Adolf
Dassler, the company became very famous in 1954 after the victory of the German team in
the World Cup, an event known as the “miracle of Berlin”.

Today, it is operating in over 160 countries catering to a massive international market

through an extensive supply chain. Having a name in the world and despite being the
hottest seller of sports apparel, there have been several controversies about the company
that it has been involved in some unethical business activities that include exploitation of
employees, consumers and animal rights, which are discussed in this report.

1- Labor Exploitation
Labor exploitation has been a significant dark side of Adidas, particularly in its supply chain,
which frequently includes facilities in underdeveloped countries. Some of these factories
have been labeled “sweatshops,” a derogatory term for the inhumane working conditions
and excessively long hours.

Also child labor is one of the most upsetting allegations against Adidas. Such activity is
exploitation of business ethics as well as human rights. Additionally, there have yet to be
any reported efforts by Adidas to provide a decent wage to its employees.

Some workers in supplier factories have complained that their pay is too low to allow them
to provide adequately for themselves and their families. This means the factory workers
(mainly women) who spend all day creating $100 shoes are underpaid1.
Activewear for Adidas were made in two factories using child labour, forced overtime and
sexual harassment. Representatives of workers in two Indonesian factories2 supplying the
German company,told Euro MPs that in the Nikomas Gemilang and Tuntex factories, in the
Indonesian capital of Jakarta, children as young as 14 were:

1 https://climaterealtalk.org/the-dark-side-of-adidas/
2 https://www.oxfam.org.au/what-we-do/economic-inequality/workers-rights/adidas/inside-adidas-indonesian-factories/
- Made to work 15-hour days;

-Expected to do at least 70 hours a week and punished for refusing to do overtime;

-Paid less than $60 a month, rates below the International Labour Organisation's demand
for a living wage;

- Penalized for taking leave during medical difficulties and had illegal deductions taken from
wages as punishments for minor misdemeanors.

2- Prohibition on Forming Trade Unions

People have also accused that some Adidas factories have made it hard for workers to
form unions or participate in collective bargaining. This makes it harder for workers to
share their concerns and improve working conditions.

Through its union-busting and wage- theft tactics, in April 2020, the management at the
Hulu Garment Factory in Cambodia3 tricked some 1,020 workers to resign from their jobs,
thereby losing their severance pay that they were entitled to.

Another case was reported at the Pou Chen Myanmar factory, where 26 workers including
union leaders were fired in October 2022.

A 2009 report by Oxfam Hong Kong and CSR Asia brings this issue to light. It states Yue
Yuen (that produces one sixth of all sports shoes made in the world for major sportswear
brands including Nike, Adidas and Puma). is failing to adopt sound corporate social
responsibility (CSR) policies and practices. The report is the first attempt to provide a
summary of how 43 companies listed on Hong Kong’s Hang Seng Index weigh up on their
CSR policies and practices. Yue Yuen rated only 22 out of 100 and was classified as a
“laggard”,which means making slow progress.

4- Racism Scandals

3 https://cleanclothes.org/news/2023/adidas-profits-blunder-ignores-rights-violations-on-international-womens-day
Adidas is also involved in a racism scandal after its workers exposed the company’s racial
discrimination.This unethical exploitation is not suitable at all for a company having
thousands of employees.

In her letter4 addressed to Adidas North America president Zion Armstrong, Julia Bond, a
black employee at Adidas, labeled the company’s policy as ‘shameful’ and demanded the
leadership to “diversify representation” in the firm’s upper ranks, alleging racial and ethnic
disparities.

Speaking on behalf of African-Americans, Asians, Hispanics and other minorities, the letter
called on the company to “issue a public apology for the racism and discrimination that they
have openly enabled and perpetuated across the brand.”

Earlier, in July 2019, a new crop of Adidas minority employees namely Asian and LGBTQ
staffers came forward to detail new claims of being disenfranchised at the brand. “The
people who are rising at the company are white males,” said one employee, who identified
as both Asian and LGBTQ. “I have requested mentorship meetings with senior leaders at
the brand — whom I’ve often seen having these kinds of meetings with young white males
in the cafeteria — but my meetings always end up being canceled.” Meanwhile, black
employees brought to light more claims of facing discrimination at work, describing
instances that left them “sad” and “defeated.

3- Insufficient Sustainability Efforts

Adidas has been accused of using chemicals harmful to workers, consumers, and the
environment, in their goods and manufacturing processes. Some environmentalists have
accused the corporation of greenwashing, saying its sustainability activities are insufficient
to address its overall environmental effect.

4 https://qz.com/1864724/adidas-employee-demands-company-apologize-for-racist-work-culture
Recently, Adidas launched its next generation Stan Smith sneakers, promoting it as “100%
iconic” and “50% recycled” with a “end plastic waste” logo, as part of its commitment to
using only recycled polyester by 2024.

This attempt was sabotaged by a consumer complaint that gave rise to much huff and puff
in early 2021, after which the French advertising watchdog Autorité de Régulation
Professionnelle de la Publicité (ARPP)5 investigated the matter. The jury found that the
advertisement was vague and disregarded ARPP rules, which require advertising messages
to be accurate and presented in a non-misleading way.

Adidas Response

Adidas refuted the claims made by the jury and the complainant in response to a letter
sent by APRR informing them of the complaint made against it. Overall, it noted that it
meets the requirements regarding clarity and truthfulness of the ad. Concerning the claim
“50% recycled”, Adidas asserted that the ad does not claim that the shoe, itself, is
recyclable- only the upper is made from 50% recycled material.

5- Violation Of Animal Rights

According to a survey conducted by ‘Ethical Consumer’6, Adidas received a ‘worst rating for
Animal Rights’. The company has been criticized for not treating animals well. Individuals
are stressed over how the organization gets materials for its items like shoes and coats.
They use feathers from birds, most probably by live-plucking them! This has triggered many
animal rights organizations to raise their voice against it.

Making cowhide, particularly on enormous homesteads, can be genuinely awful for

creatures. Individuals who care about creatures say that Adidas may be getting materials
from organizations that mistreat creatures or mischief the climate.

5 https://retailbum.com/2021/legal/french-watchdog-criticizes-adidas-for-misleading-recycled-stan-smith-sneakers/
6 https://www.ethicalconsumer.org/company-profile/adidas-ag
The organization expressed in a reaction "We offer various items that don't utilize creature
fixings or creature side-effects". Notwithstanding, Adidas sold items produced using or
containing cowhide, fleece and down/feathers.

Adidas claims that since it is against the law to sell kangaroo calfskin items in California, it
doesn't convey them in its stores. Then again, certain individuals guarantee Adidas is
unscrupulous about where it sources its materials and the way that its items are produced.

Assuming the organization's activities add to environmental damage, it could be considered

morally egocentrism.

Roughly, thirty basic entitlements disturbed business within Adidas' lead store in New York
City as a component of a worldwide work to urge the athletic apparel monster to quit
utilizing kangaroo skin in its soccer spikes.

Details uncover that Adidas is the biggest end client of kangaroo skin7 for the production of
soccer spikes. While 'Nike' and 'Puma' have promised to phase out their kangaroo leather
shoes, the assertions from Adidas authorities can only be called evasive.

A protest was launched by the “New Yorkers for Spotless, Reasonable, and Safe Streets”
(NYCLASS) and an animal rights activist group "TheirTurn'' that runs a worldwide mission to
propel tennis shoe makers to supplant "k-leather" with cruelty free materials.

6- Corruption And Bribery Scandals:

Another unethical practice of Adidas that received backlash is the brand’s involvement in
corruption and bribery scandals. In 2017, the FBI in the United States revealed a vast
corruption plot in college basketball involving several major apparel corporations, including
Adidas. Reportedly, executives and staff of Adidas paid bribes to high school basketball

players and their families to influence them to enroll at universities that Adidas sponsored.

Adidas executives allegedly used $250,000 in company funds to bribe high school
basketball players to play at certain colleges. Reuters/Stefanie Loos An Adidas executive
and two other people affiliated with the company were arrested following an FBI

7 https://themessenger.com/business/adidas-faces-animal-rights-protests-over-use-of-kangaroo-leather
investigation into college basketball bribes.The money was supposed to buy their loyalty to

the brand and control any future support deals they made as professionals.

According to Due Care Theory, it extends to educating employees and stakeholders about
their roles and responsibilities in maintaining information security. Training programs and
awareness campaigns are essential components of Due Care.

Recommendations for Crackdown on Unethical Practices

1. The company should treat all of its employees equally, regardless of their position in
the organization.
2. There should be no biases or unjustness with any of its workers. It should develop a
culture that values the experience, well-being, and performance of its
employees.Just like the UK retailer Mark & Spencer and Volvo, the Swedish
automaker, Adidas, too should make its employees' well being and satisfaction a
priority in its company agenda. It must establish a team under the Human Resource

that takes appropriate action to minimize risks for the employees and incorporates

‘inclusivity’ and ‘diversity’ in its hiring processes.

3. It should also give a part of its revenue into the charity as a part of Corporate Social
Responsibility (CSR). These include workers' rights paying excessively high wages to
executives, while failing to pay garment workers in the supply chain enough to cover
even basic needs.

4. Due to the negative impacts globally, it should also take measures to adapt to
practices in its supply chain that cause minimal damage to the ecosystem and
environment.

5. Avoid corruption and bribery, as it affects the reputation of the company and also
the stakeholders won't be happy with it.
Key Learnings

The key learning from this is that a company's success is not solely measured by financial
performance but also by its commitment to equality, employee well-being, ethical
practices, social responsibility, and environmental sustainability. Embracing a holistic
approach that values people, fosters inclusivity, and considers the broader impact on
society and the environment contributes to long-term success and positive reputation.