Germany’s Adidas And Global Climate Change

The #2 global sportswear company Adidas finding new and innovative ways to battle the impact of the fashion industry on the global climate change

The apparel industry accounts for roughly 10% of total global carbon emissions and remains the second largest industrial polluter, second only to oil. As a billion-dollar industry, fashion has a direct impact on the environment. The processing of raw materials required for textiles and the vast amounts of water used (2,700 liters per single t-shirt) contributes to the emission of greenhouse gasses which are causing climate change. The arrival of fast fashion and the massive increase in number of clothes that we are buying (and quickly discarding) means that this impact is only getting greater. Adidas, the number two global sportswear brand, is trying to new find new ways to reduce its impact on global climate change and be a frontrunner in the global fashion retail industry and make an impact beyond its own supply chain. To give an idea of Adidas sheer size and impact on the global climate; in 2015, Adidas’ 55,555 own employees and those in the more than 1,000 independent factories produced 301 million shoes, 364 million units of sports apparel and 101 million sporting goods in 160 countries generating €16.9 ($18.8) billion in revenues and €1.5 ($1.6) billion in EBITDA.

 

Adidas has reacted and put climate change and Adidas’ influence on the global environment on its agenda. Adidas uses a three-fold approach in addressing the impacts of climate change a) in its own operation, b) in the entire supply chain and c) in collaborating with policy makers and industry alliances to mitigate the impact of the industry as a whole on the global climate. While most initiatives focus on reducing carbon dioxide emissions in the supply chain through reduction in energy consumption and moving towards clean and green energy, they also include changes in employee travel planning (i.e. reducing global air travel in exchange for more environment-friendly options) and choosing carbon emission reducing ways of transport within its entire logistic chain.

 

In its effort to not only reduce its negative impact in line with newly designed standards, Adidas has begun to try and think outside the box to make a long-term impact on the way clothing companies think about environmental damage. One of these examples includes Adidas finding a new way to dye its clothing using no water at all, instead of only looking to reduce its water use or find water recycling options. Given the high use of water in the production of apparel, improved water consumption is one of Adidas main goals going forward: by 2020, Adidas aims to save 50% at its material suppliers, 35% at its own sites and 20% at their strategic partners compared to current levels. Other examples include the presentation of a shoe made entirely of yarns and filaments reclaimed and recycled from ocean waste and illegal deep-sea gillnets (in collaboration with Parley; see picture), the goal to use 100% recycled cotton by 2018 or a three-year research program started in 2015 to develop soccer cleats that can be repeatedly recycled, use no chemical adhesives and create no waste.

 

In order to communicate progress and challenges, Adidas has begun to publish an annual Sustainability Progress Report. The report goes beyond the mere impact on climate and incorporates developments around worker and employee safety, happiness and empowerment.

Adidas has made an impressive effort in putting climate change on its internal and external agenda and done a great job in communicating its progress and challenges in an open and trustworthy way.

 

While the first positive effects are visible, Adidas will need to take even more responsibility for its entire supply chain going forward and force strategic partners and suppliers to adhere to its high internal standards in terms of water use and energy consumption.  While Adidas has started to consult material producers and manufacturing partners to shift to energy and water saving production processes, it will need to create strict guidelines and set binding targets in the future and exclude non-performing partners to not only to improve carbon emission and water use metrics but also serve as an industry leader. In addition, Adidas should double down on its mission to interact with industry groups and legislatures to mitigate the industry’s effects on climate change and – in its own interests – create a level playing field for the entire industry. Adidas has co-founded and joined several groups (such as the Sustainable Apparel Coalition, UN Climate Neutral Now Initiative and the Business for Innovative Climate and Energy Policy. While these efforts are great and should be valued, going forward, Adidas should focus on influencing policy makers by showing what is possible in terms of sustainable retail manufacturing and create awareness of the progress and challenges in the general public to increase pressure on law makers.

 

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Sources:

 

  • Adidas AG, “Annual Report 2015” (http://www.adidas-group.com/media/filer_public/e9/73/e973acf3-f889-43e5-b3c0-bc870d53b964/2015_gb_en.pdf)

 

 

 

 

 

 

 

 

 

 

 

 

 

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3 thoughts on “Germany’s Adidas And Global Climate Change

  1. Paul-

    Thanks so much for sharing this wonderful post on Adidas’ impact on the environment and what they’re doing to improve their environmental impact and reduce their contribution to climate change. In thinking about Adidas’ goals to reduce water consumption by 50% at suppliers and 20% at strategic partners, I was reminded of our IKEA case from Friday. Namely, some of the pros of ambitious target setting was that it was low-risk and aimed at bringing the overall level of consumption down (vs. finding alternate ways of consuming). However, such target setting leaves Adidas with relatively little control – they’re ultimately at the mercy of their suppliers to meet their goals. I wonder if vertical integration could instead be a means of reducing environmental impact. While it’s certainly higher risk, it could help improve margins and gives Adidas full control over the steps to reduce environmental impact. This, in tandem with their attempts to find alternative methods to dying that require less water, can be very powerful.

    You opened with the notion of “fast fashion” as a category in which we consume and discard quickly. This made me think that there are ways to reduce impact by encouraging reuse (so not every unit consumed equates to a unit produced). I wonder if there is an opportunity for Adidas to create a apparel and equipment recycling program and potentially reuse materials in markets that would value a discount price for secondhand goods.

    Finally, I wonder if there is any impact from reduced precipitation in many parts of the world on Adidas. How do they now collect their water for us in the process? Will the rising price of water be an additional impetus for water consumption reduction?

    Thanks again for sharing Paul, it’s a great analysis.

  2. I did not realize just how damaging the apparel industry is on the environment and find it particularly interesting that it is second only to oil. It is clear from Paul’s post that Adidas struggles with many of the same issues that we learned IKEA struggles from – namely the damage that over consumption of its product can have on the environment as well as the burden to not only improve its own practices but also those of its suppliers. I am surprised, however, that Adidas does not highlight the financial benefits that it, itself, can gain from promoting greater energy efficiency. There are a number of apparel companies that have been created in the last 5-10 years – Reformation, Everlane, etc. that highlight its efficiency both to differentiate its brand and to lower material costs. I would be curious to understand what economic benefits Adidas itself can gain from this debate.

  3. Thank you for this insightful post.

    Similar to Ronnie I was very intrigued by how an apparel company thinks about the environmental damage resulting from people’s tendency to purchase and discard clothing at a very fast pace. Especially lower price range companies like H&M, Forever21 and Primark (to name a few) are clearly benefitting from this trend and to some extent Adidas is likely to benefit as well. Therefore, I think it is likely a difficult analysis from Adidas’ perspective to think about how a sustainability program encouraging their customers to stop throwing away and buying new clothes may interfere with their objective of maximising customer lifetime value. I like Ronnie’s idea of the apparel and equipment recycling program and think that if positioned well this could actually lead to a competitive advantage for Adidas.

    I thought it was very interesting to hear how Adidas is experimenting with dying their jerseys completely without water – it takes true innovation to have a real impact in the long term. Adidas could analyse what some of their competitors are doing in this space. During our marketing class on Nike we learnt that Nike introduced jerseys made entirely from recycled polyester made up from eight recycled plastic bottles each, for the 2010 World Cup. Whilst the jerseys themselves were not a great success, I think it was a thought provoking step in the right direction. Adidas has a lot of leverage in its supply chain, which they can use to ensure environmental sustainability along the entire chain. At the same time, I think Adidas also holds a lot of responsibility beyond the confines of their own operation to educate consumers about the importance of climate change (for example through their partnership with the FIFA as official World Cup sponsors).

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