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Citius, Altius, Fortius – Faster, Higher, Stronger?
Corporate Social Responsibility in the Sporting Goods Industry
W. Richard Sherman, J.D., LL.M., C.P.A.
Professor of Accounting
Saint Joseph’s University
Erivan K. Haub School of Business
5600 City Avenue
Philadelphia, PA 19131
rsherman@sju.edu
Conference for which the paper is submitted:
2012 Cambridge Business & Economics Conference (CBEC)
Cambridge, England - June 27-28, 2012
Academic departments to which paper pertains: Management
Key Words: Sustainability Reporting; Triple Bottom Line Reporting;
Corporate Social Responsibility
ABSTRACT
As in most industries, the global sporting goods and apparel industry is marked by
intense competition. In an Olympic year, companies want nothing more than to have
athletes who wear their brand to run faster, jump higher, and be stronger. Yet despite this
intense competition for market share, the leading companies in the sporting goods
industry have shown a remarkable willingness to cooperate with one another to address
challenges to their corporate citizenship. This paper looks at the corporate social
responsibility issues confronting the industry, the individual company’s responses, as
well as their collaborative efforts.
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INTRODUCTION
For those passionate about sports, the first image that comes to mind when adidas,
Nike, or Puma is mentioned may be a footballer scoring the winning goal, a tennis player
at match-point, or a runner crossing the finish line. Athletes are often identified with and
by the shoes and apparel they wear – David Beckham & adidas; Maria Sharapova &
Nike; Usain Bolt & Puma - to name just a few. Of course, sporting goods companies
realize this and spend millions of dollars per year to promote that association through
sponsorship of athletic events and the endorsement of their brands by athletes. With
three years remaining on his existing deal with adidas, Beckham signed a lifetime
contract in 2003, worth an estimated at $160.8 million (Boston.com, 2005). In 2010, the
former #1 ranked women’s player but often injured Sharapova renewed her sponsorship
agreement with Nike by eight years for $70 million (Rossingh, 2010). World record
holding sprinter Bolt’s contract with Puma is the largest in track & field history,
comparable to Real Madrid football star Cristiano Ronaldo's four-year contract with
Nike, worth US $32.5 million (£21 million) (Kessel, 2010).
However, a second image which may flash to mind when adidas, Nike, or Puma,
is mentioned is one of the poorly paid and ill-treated worker in the Asian factories with
which these companies subcontract the manufacture of their shoes and apparel. In
particular, Nike has been singled out for its use of alleged sweatshops (Beder, 2002;
Keady, 2012; Porter & Kramer, 2006). Prefacing his speech about Nike’s labor initiatives
at a National Press Club lunch in 1998, Knight noted how some critics had demonized the
company.
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It's been said that Nike has single-handedly lowered the
human rights standards for the sole purpose of maximizing
profits. And Nike products have become synonymous with
slave wages, forced overtime, and arbitrary abuse. One
columnist said, "Nike represents not only everything that's
wrong with sports but everything that's wrong with the
world" (Knight, 1998).
Indeed, the conditions in these factories and how companies manage their supply chain
continue to present the most pressing challenge to corporate citizenship for the industry.
There is another elephant in the room – how to compete in an environment of
limited and diminishing resources. Hannah Jones, Nike’s Vice President of Sustainable
Business & Innovation, sounds the alarm:
We stand teetering between the old and the new. And I
believe that this next decade will be the test for all of us.
Not because of what might be, but because of what is. At
Nike, we have long said that things we have taken for free
will become the new gold -- water, waste, carbon. We
believe we have entered the era of climate adaptation where
we are no longer contemplating the potential, but beginning
to grapple with the consequences (Brettman, 2012).
This paper looks at the sustainability initiatives by the three largest companies in
the global sporting goods industry – adidas (Sales €13,344 million), Nike (Sales $20,862
million for FY11), and Puma (Sales €3,009 million) - as they attempt to meet their
corporate social responsibilities. While each company has a unique response, they have
also shown a remarkable willingness to cooperate with one another to address challenges
to their corporate citizenship.
All companies struggle to tell their stories, to communicate the good - and
sometimes the bad - they do in the marketplace, in the community, to and for the
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environment, and in society. Quite clearly, the challenge of telling the company’s story
has not been met by conventional financial reporting practices. Triple bottom-line (TBL)
reporting, a term coined by John Elkington in his 1997 book Cannibals with Forks: the
Triple Bottom Line of 21st Century Business, aims to remedy this shortcoming by
explicitly considering not only the economic performance of a firm but also the
company’s environmental and social performance as well. Adidas, Nike, and Puma have
embraced the TBL (also known as People, Profit, and Planet or 3P reporting) and have
been recognized for the quality of their reports. This paper relies heavily on those
reports.
ADIDAS – “In the Real World Performance Counts”
Adidas and Puma share a common heritage and a fascinating story of sibling
rivalry. In 1924, Adolf and Rudi Dassler began manufacturing shoes as the Gebrüder
Dassler Schuhfabrik (Dassler Brothers Shoe Factory). Perhaps their most famous
“endorser” was the American sprinter Jesse Owens who won four gold medals at the
1936 Olympic Games in Berlin wearing Dassler spiked shoes. After World War II, the
brothers split bitterly with Adolf (Adi) going off his separate way to create adidas; Rudi
formed his own company which would eventually become Puma. Although located in the
same small Bavarian town of Herzogenaurach, the companies and their employees
maintained a fierce rivalry along the lines of the legendary feud between the Hatfields
and McCoys. Only recently has this relationship begun to thaw. Noteworthy enough to be
included in its 2010 Annual Report, Puma highlights the “historic handshake between
adidas and PUMA heard around the world” – a one day soccer tournament held in
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Herzogenaurach with 192 adults and children playing in mixed teams of adidas and Puma
employees (Puma, 2011: 68). At least, now the families and their respective companies
speak to one another.
Adidas, which also sells products under the Reebok, Rockport, CCM Hockey, and
TaylorMade brands, has been recognized for its sustainability reporting and performance
by numerous organizations. The company is included in the Dow Jones Sustainability
(DJSI), the FTSE4Good, STOXX® Global ESG Leaders indices, and has been named
among the Global 100 Most Sustainable Corporations, and is recognized as the Industry
Leader in the DJSI (adidas, 2012a). As reflected in its reporting, adidas embraces a
balanced view of the importance of its various stakeholders. In short, it has adopted the
Triple Bottom Line (TBL).
We are striving to be the global leader in the sporting goods
industry and this demands that we return strong financial
results. But leadership is not only about results, it is also
about how success is achieved. It is about striking the
balance between business needs and social and
environmental demands. Balancing these interests requires
strong commitment, strategic direction, efficient and
careful execution, as well as regular reflection on the
progress made (adidas, 2012b: 6).
As is true for almost all companies in the sporting goods industry, adidas
outsources over 95% of production to independent third-party suppliers, primarily located
in Asia. The reason is simple – lower production costs. In 2011, adidas worked with
more than 1,200 independent suppliers in 63 countries. Of all factories, 67% are located
in the Asia Pacific region, 20% in the Americas and 13% in Europe, Middle East and
Africa (EMEA). 28% of production is in Chinese factories (adidas, 2012b: 43). To
monitor the labor standards in its supply chain, adidas developed a system of key
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performance indicators (KPI) which ranks its subcontractors’ performance along a scale
of 1C (lowest) to 5C (highest). The company requires a minimum ranking of 2C for a
supplier to maintain its active status. In 2011, through aggressive efforts to improve the
performance of its lowest ranked suppliers, adidas was able to reduce factories at the 1C
level from 19% to 8%. Under its strategic plan (called Route 2015), adidas has set a goal
of having 60% of its direct suppliers at the 3C level or higher (currently at 39%) by 2015
(adidas, 2012b: 51). New subcontractors (China leading the way with India second) are
subject to initial assessments. Of the 476 new applicants in 2011, 20.7% were rejected by
adidas as not meeting the threshold under its KPI system.
In addition to the audits conducted by its own Social & Environmental Affairs
(SEA) unit (1,401 in 2011), adidas has had more than 280 Independent External
Monitoring (IEM) audits performed as part of its membership in the Fair Labor
Association (adidas, 2012b: 51).
Following a practice initiated by Nike as early as 2005, adidas “published a
complete list of the names and addresses of the factories producing adidas clothes, shoes
and equipment for the London 2012 Olympic Games. The list also shows the status of
worker or trade union representation and whether there is a Collective Bargaining
Agreement in place at the individual facility” (adidas, 2012b: 4).
Although management of its supply chain remains the greatest challenge to its
corporate social responsibility, adidas has adopted a proactive approach towards
environmental stewardship as well. In 2008, it launched its Green Company Initiative
which measures the environmental footprint of its operations. One goal is to become a
zero emissions company (adidas, 2012b: 56).
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In 2011, the company implemented EMeReT (Environmental Metrics Reporting
Tool) to better enable it to track its environmental impact and that of its suppliers (adidas,
2012c). Adidas continues to pursue ISO 14001 certification of its major sites. As do Nike
and Puma, adidas is constantly looking to find ways to optimize the environmentally
friendly production of its footwear and apparel. About 90% of all adidas Olympic articles
have some sustainable content. In 2011, 65% of adidas athletic footwear met the
company’s baseline environmental criteria (adidas, 2012b: 3).
NIKE – “Just Do It”
It started with a handshake between two visionary
Oregonians - Bowerman and his University of Oregon
runner Phil Knight. They and the people they hired evolved
and grew the company that became Nike from a U.S.-based
footwear distributor to a global marketer of athletic
footwear, apparel and equipment that is unrivaled in the
world (Nike, 2012a).
In the sporting goods industry, Nike (which also sells its products under the
Converse, Umbro, Cole Haan, Jordan, and Hurley brands) is the Big Dog on the block.
Not surprisingly, in this role, Nike takes a lot of hits from various critics ranging from its
use of low-cost Asian subcontractors who manufacturer its shoes and apparel, to its
continued sponsorship of controversial athletes like Kobe Bryant and Tiger Woods, to its
support for and subsequent eulogy by its outspoken co-founder Phil Knight of Joe
Paterno in light of the child abuse allegations against one of Paterno’s most trusted
coaches.
Throughout the 1990s, the company’s reaction was to scoff at critics. In his now
infamous remarks at Nike’s 1997 shareholder meeting, Phil Knight argued that working
conditions had improved so dramatically during the 25 years Nike had outsourced the
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production of its shoes that “if a shoe worker in Korea or Taiwan had gone to sleep in the
shoe factory there ten years ago and wakened in a shoe factory in Indonesia or Vietnam
today, would have thought that he or she had died and gone to heaven” (Knight, 1997).
Somewhere along the line, Nike finally got the message and responded. In 2001,
the company formed a Corporate Responsibility (CR) Committee as part of its Board of
Directors to oversee the environmental impact, sustainability, and labor issues of its
major business decisions. (Nike, 2012: 15). After arguing for over a decade that
disclosure of the locations of its subcontracting factories would be a competitive
disadvantage, Nike released this information in 2005, marking the first time this was ever
done by anyone in the industry (Nike, 2012: 32). As Hannah Jones, Nike’s Vice President
for Sustainable Business & Innovation, notes, “This moment also marked us taking a
non-competitive business risk that changed the system” (Albanese, 2012: 2).
It certainly changed the way the investment community viewed Nike. Included in
the Calvert Social Index, the Dow Jones Sustainability Indexes (DJSI), Domini 400
Social Index, KLD Catholic Values 400 Index, KLD Broad Market Social Index, KLD
Large Cap Social Index, KLD Large-Mid Cap Social Index, KLD Global Sustainability
Index, KLD North America Sustainability Index and KLD Select Social Index, and the
FTSE4Good Index, Nike has been recognized as one of the Global 100 Most Sustainable
Corporations in the World, included on the 100 Best Corporate Citizens list, ranked as
one of the World's Most Ethical Companies each year from 2007 to 2009 in an analysis
by Ethisphere, and named in the top 10 of Newsweek's 2009 first annual Green Rankings
(Nike, 2012b). Its sustainability reports (first issued in 2001) have been recognized by
Ceres-ACCA as the best in North America (Ceres, 2011).
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Despite the turnaround in public perception, Nike still faces the challenge of
managing its supply chain in a socially responsible way. As noted earlier, adidas has
developed its KPI system to rate the performance of its suppliers. Nike has a variety of
indices that perform the same function. Remembering the fall-out from Phil Knight’s
“died and gone to heaven” remark, the company has gone to great lengths to create
metrics to define “what ‘good’ looks like for factories that supply to Nike.” The results
are complex indices for Materials Sustainability, Sourcing & Manufacturing
Sustainability, Manufacturing, and Considered Design (Nike, 2012:40).
Creating metrics and standards is one thing; making sure they are being followed
is another. “Auditing is the first step toward working to improve factories that may meet
minimum compliance standards but have opportunities to improve their sustainability
performance. It’s also the first step toward eliminating from our supply base those
factories with serious, recurring violations” (Nike, 2012: 31). During FY09, fewer than
half of the factories with which Nike subcontracted were audited; by the end of FY11,
80% were. Of the 1,169 audits conducted in FY11, 59% were by third parties (Nike,
2012: 42). Pursuant to its membership the Fair Factories Clearinghouse (FFC), Nike
shared 39% of its audit results in order to promote transparency throughout the industry.
It is also one of 16 companies whose labor compliance program is accredited by the Fair
Labor Association’s Sustainable Compliance Initiative.
Nike has taken a systems approach to the problem of limited resources and the
devastating environment impact that business operations can have. Key to this approach
is the use of the innovative concept of Considered Design, which evaluates the
environment footprint of a product during its entire life cycle from development through
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production to end-of-life recycling. The ultimate goal of a “Considered” product is to
create a fully closed loop in which the original design uses the fewest possible materials
which can then be recycled into a new product.
Just as Nike’s disclosure of the location, names, and other information about its
subcontractor factories may have seemed counterintuitive, its support of the open
sourcing of its audit and design tools and its integral role in the creation of the Green
Xchange platform, a system for licensing patents related to sustainability and other
socially desirable goals at a very low transaction cost, may also seem peculiar in an
intensely competitive environment. Hannah Jones sees this in a different way:
For sure it will demand our collective leadership. For sure,
each of our roles is going to be challenged. Perhaps
campaigners will need to selectively put down their swords
and join forces with business. Perhaps business will have to
work together in ways that competitors have never done
before. Perhaps we will start sharing intellectual capital and
sustainability in an effort to push this thing faster forward.
Perhaps we will have to agree to unite around a single
unifying message that combines all of us together. Perhaps
we will have to think how we pool talent and resources.
Perhaps we'll have to define winning in a different way
(Brettman, 2012).
PUMA – “Back on the Attack”
Although it publishes its own annual reports and is traded on the Xetra, London,
and Frankfurt stock exchanges under its own name, Puma does not have the same
autonomy which adidas and Nike enjoy. Its majority shareholder is the French Luxury
Group PPR, which also owns the Gucci and Yves Saint Laurent brands. Given this
association, it is not at all surprising that Puma does not see itself so much as being in the
sporting goods business but rather as a “lifestyle” company, selling products under the
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Puma, Tretorn, and Cobra Golf brand-names. However, just as adidas and Nike have
done, Puma embraces the concept of the triple bottom line.
PUMA as a leading company within the Sportlifestyle
industry has the opportunity and the responsibility to
contribute to a better world for the generations to come.
Through our programs PUMA.Safe (focusing on
environmental and social issues), PUMA.Peace (supporting
global peace) and PUMA.Creative (supporting artists and
creative organizations), we are making our contribution to
build – for ourselves and our stakeholders – a more
sustainable future. Sustainability has become an integral
part of PUMA’s business strategy and is essential
to the PUMA DNA (Puma, 2012: 15).
Puma has been recognized as a socially responsible company as reflected in its inclusion
in both the Dow Jones Sustainability Index (since2006) and the FTSE4Good (since
2005).
As is the norm in the industry, Puma outsources most of its production of its
footwear and apparel, with 90% taking place in Asia (39% in China; 21% in Vietnam)
(Puma, 2012: 43; 129). This creates the common problem faced by adidas, Nike, and
Puma - evaluating the working conditions at these independent factories which operate in
32 different countries (Puma, 2012: 129). To do this, Puma created World Cat, Ltd., to
serve as its procurement agent. It is within World Cat, Ltd., that the PUMA.Safe program
is housed, and it is under the PUMA.Safe program that environmental and social audits
have been conducted since 1999, with reporting directly to Reiner Seiz, a member of
Puma’s Executive Board, as well as to Zochen Zeitz, the Chief Sustainability Officer of
Puma’s parent PPR (Puma, 2012: 15).
Adidas has its KPI system; Nike has its indices; Puma has developed its own
Sustainability Scorecard and S-Index that assign grades to its subcontractor factories. The
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frequency with which a factory is audited depends on the grade received on the
Sustainability Scorecard – once every two years for “A” factories; annually for “B+”
factories; down to every 2-6 months for Grades “C” or “D” (Puma, 2012: 45). Overall,
audits resulted in 53% of the factories received an “A” or “B+” rating (Puma, 2012: 46).
As is readily apparent, the approaches which adidas, Nike, and Puma take to
responsibly manage their supply chains are remarkably similar. What sets Puma apart
from the other two companies is its novel approach to reporting, particularly in regards to
its environmental impact. While they have clearly adopted the Triple Bottom Line
philosophy, there is no connection between how, where, or when adidas and Nike report
their financial bottom line and the reporting of their companies’ environmental and social
impact. In other words, they report financial and non-financial information separately and
at different times. While this is the predominant approach used by most companies in
most industries throughout the world, the Prince of Wales’ Accounting for Sustainability
(A4S) Project has been advocating the necessity for “connected” reporting of financial,
environmental, and social performance for years (A4S, 2010). Indeed, the International
Integrated Reporting Committee (IIRC) was formed in 2010 with the specific goal of
creating a globally accepted framework for accounting for sustainability “which brings
together financial, environmental, social and governance information in a clear, concise,
consistent and comparable format - put briefly, in an ‘integrated’ format” (IIRC, 2010).
The so-called One Report, further developed by Harvard professor Bob Eccles
and Grant Thornton partner Mike Krzus (2010), is the approach which Puma has used for
both its 2010 Annual Report and its 2011 Clever Little Report (Puma, 2011; 2012);
Puma’s provide outstanding applications of this model.
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While integrating financial, environmental, and social performance into one
report certainly sends the message that these aspects of a company’s operations are
interrelated and need to be considered holistically, it does not overcome a glaring
weakness in how companies “account” for these impacts. Rob Gray (2002; 2003) has
been arguing for years that it is this non-accounting that has led, or at least, facilitated the
problems we now face.
Accounting is the score-keeper. The 'score' takes no
account of environmental matters and so, as a result,
neither does 'economic ' decision-making. Given the
importance of accounting information and the way in which
we account it seems inevitable therefore that 'economic '
decisions must be environmentally malign. The
environmental crisis is an inevitable result of the way we
accountants do what we do. Accounting bears a serious
responsibility for the growing level of environmental
devastation (Gray et al., 1993: 22).
Puma has tackled this issue head on with the development and release of the
industry’s “environmental income statement” – the E P&L.
While nature is much more to us humans than a mere
business, the E P&L seeks to answer the seemingly simple
question: How much would our planet ask to be paid for
the services it provides to PUMA if it was a business? And
how much would it charge to clean up the ‘footprint’
through pollution and damage that PUMA leaves behind?
(Puma, 2012: 37)
Using a sophisticated methodology created in partnership with
PricewaterhouseCoopers and Trucost, Puma released its first E P&L in 2010, in which it
calculated the environmental impact for the key areas of greenhouse gas emissions
(GHG), water use, land use, air pollution and waste, generated through the operations and
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its supply chain to be € 145 million (Puma, 2011b). [See Appendix B for the details of
this analysis.]
Mirroring Nike’s Jones call to arms in addressing the environment crisis, PPR
Chief Sustainability Officer Jochen Koch believes this “Environmental Profit and Loss
Account has been indispensible for us to realize the immense value of nature’s services
that are currently being taken for granted but without which companies could not sustain
themselves . . . The results of the PUMA E P&L underpin the urgency for a paradigm
shift in the way we all currently do business and I have been pleased to also see that the
release of PUMA’s first results has generated widespread interest among governments,
corporations, NGOs and academics” (Puma, 2011b).
The results of the E P&L also reveal an interesting and important interrelationship
between the social and environment consequences of managing Puma’s supply chain.
Puma found that only 6% of its environmental impact was caused by its core operations
in 2010; it was its supply chain that was responsible for 94% or € 137 million (Puma,
2011b).
The E P&L is only the first stage of Puma’s development of environmental
financial statements. However, unlike Gray’s suggestion for “shadow accounting” (Gray,
2002) which would actually be used to adjust reported earnings, “these costs, which will
not affect PUMA’s net earnings, will serve as an initial metric for the company when
aiming to mitigate the footprint of PUMA’s operations and all supply chain levels”
(Puma, 2011b). As Puma’s initiative evolves, it will further include the impact of its
social performance (Stage 2) and indirect economic consequences (e.g. job creation and
tax contributions) of its business (Puma, 2011c). Once completed, Puma will have
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implemented its own brand of “sustainable stakeholder accounting” advocated by
Sherman (2002; 2003; 2010) by attaching monetary values to environmental and social
consequences of its operations, thereby, facilitating stakeholders’ ability to adjust both
the profit & loss and the balance sheet (assets, liabilities, and equity accounts) to reflect
the specific impact of interest to them.
COLLABORATION
Obviously, Adidas, Nike, and Puma are competitors. They are fighting intensely
for revenue, brand loyalty, market share, and recognition. Yet within this competition,
they have seen the importance, indeed the necessity, to cooperate in addressing the
common problems they face.
Collaboration is essential. Nike is a large company by most
standards, but our ability to influence meaningful change at
the systemic level has limitations. It is absolutely crucial
that we work with other players to prompt real, sustainable
system change.
We embrace partnerships and open-source collaboration.
We have proactively shared our sustainable design tools to
help create an industry standard and continue to look for
ways to scale innovations at Nike and across our industry.
And we work with global players including the United
Nations Global Compact initiative to support its principles
and to report our carbon data to the Carbon Disclosure
Project (Nike, 2012: 4).
To go beyond merely addressing the symptoms of the
problems, we realized that we had to actively collaborate
with others, including governments, NGOs, activists and,
yes, our long-time competitors (Nike, 2012: 49).
This collaboration has taken many forms. Most often, the companies share
information and ideas as members of the same organizations. Adidas and Nike worked to
develop and test the Fair Labor Association’s Sustainable Compliance Initiative (FLA -
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SC I) which identifies a common set of monitoring questions for subcontracting factories
they share (adidas, 2012c: 14). Along similar lines, the Fair Factories Clearinghouse
(FFC) provides a common compliance monitoring platform, enabling each company to
collaborate on activities in shared factories. As noted previously, pursuant to its
membership the Fair Factories Clearinghouse (FFC), Nike shared 39 percent of its audit
results in order to promote transparency throughout the industry.
All three companies are Founding Circle Members of the Sustainable Apparel
Coalition (SAC), an industry-wide group of leading apparel and footwear brands,
retailers, manufacturers, NGOs, academic experts and the U.S. Environmental Protection
Agency, representing an estimated 30% of global apparel and footwear sales (SAC,
2012). To further the SAC’s objective of reducing the environmental and social impacts
of apparel and footwear products around the world, Nike has made its Materials
Sustainability Index and Environmental Apparel Design Tool available publicly, through
the SAC, to help any apparel designer quickly make design decisions that would reduce
the environmental impact of their products (Nike, 2012: 29).
In another example of collaboration among competitors, adidas, Nike, Puma and
other companies in the sporting goods & apparel industry released a joint roadmap
towards zero discharge of hazardous chemicals (ZDHC) in the supply chain by 2020 for
public consultation. [See Appendix C for this response.] The roadmap included specific
commitments and timelines and sets a new standard of environmental performance for
the global apparel and footwear industry (Adidas, 2012:10).
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CONCLUSION
Companies in the sporting goods and apparel industry are engaged in a battle
where success has traditionally been measured by revenue, profit, market share – and
even the number of Olympic medals won by the athletes who wear their shoes. However,
the playing field is changing, and along with this change is how success is measured.
Consumers nowadays increasingly expect companies to do
more than just consider social and environmental issues.
They want the products they buy to be the best, helping
them be the best they can be. But they also want to buy
these products from companies that are at the leading edge
in terms of making a difference to the world at large
(adidas, 2012: 7).
This paper has explored the ways in which the industry leaders - adidas, Nike, and
Puma - have responded to the challenges presented to their corporate citizenship. It has
relied heavily on reports issued by the companies themselves. [See Appendix A for a
summary of the characteristics of the companies and their reporting.] Some may question
the significance of focusing on these communications. Indeed, the skeptic may believe
that reporting is little more than self-serving product of corporate public relations
departments. However, extending the common management maxim, “if you don’t
measure it, you can’t manage it,” this paper would argue that if you can’t report it, then
you can’t manage it; and, if you can’t manage it, then you can’t change it. In this sense,
reporting is a necessary precondition for change to a more sustainable future by forcing
organizations to measure and communicate many more dimensions of their impact on the
world than the traditional financial reporting practices would.
The working conditions in the factories with which the companies have
subcontracted to make their shoes and apparel and the wages which these “independent”
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factories pay their employees will continue to be the most important challenges to
corporate social responsibility. As individual entities, Adidas, Nike, and Puma take
similar approaches to responsibly manage their supply chain. These approaches involve
setting standards, grading or rating the subcontractors’ compliance with those standards,
and periodic auditing to further test for compliance. However, their individual efforts are
not the only responses they make.
It also leads to collaborative working. We recognise that
many of the issues we face cannot be solved by the adidas
Group alone and working with other actors in our industry
helps drive lasting change. So for example, the adidas
Group acted as the lead party in a supplier-brand caucus
formed in 2010 to engage with Indonesia’s trade union
movement. Its aim was to develop a basic framework for
the exercise of trade union rights in the workplace. An
agreement was finally reached and signed in Jakarta in June
2011. The protocol is recognised as a landmark
achievement in Indonesian labour rights. When Greenpeace
launched its Detox Campaign calling for an end of
discharge of hazardous chemicals in the textile industry, we
worked with a coalition of other brands to develop a joint
roadmap towards the zero discharge of hazardous
chemicals by 2020. (adidas, 2012: 4).
The second major issue facing adidas, Nike, and Puma is the environmental
impact which their operations have. This is not unique to the sporting goods industry.
Indeed, although the impact may be greater (e.g. extractive industries) or lesser, the
concern for increasingly limited resources is common to all companies in all industries.
Yet, it is in responding to this common challenge that the sporting goods companies have
differentiated themselves. Each company has its own “green” initiative, using
environmentally preferred materials, less toxic adhesives, with more recycling. Nike has
taken this a step further with its Considered Design approach which considers the
environmental impact at each stage of a product’s life cycle. Puma’s development and
June 27-28, 2012
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2012 Cambridge Business & Economics Conference
ISBN : 9780974211428
release of its environmental profit & loss account represents a dramatic contribution to
the conversation. As Alan McGill, partner, Sustainability and Climate Change, PwC,
observes:
These values are enough to make any business pay
attention. The PUMA E P&L offers a real insight into the
environmental consequences of commercial decisions and
at the same time highlights potential commercial
consequences of the environmental realities unfolding
around the world. This will make many companies consider
how they can apply similar analysis in their own
organisations. Companies – big and small – are now reliant
on global supply chains, making their environmental
footprint much larger than many realise. Assigning
economic values to the environmental impact of a
company’s operations enables a business to tackle vital
questions now, not just about environmental impacts, but
business risk, costs savings and finding new ways to
become more effective. Without measuring them, the
impacts cannot be managed, or reduced (Puma, 2011b).
Perhaps the most surprising aspect of responses made by the three largest
companies in the sporting goods industry is the remarkable willingness which they have
shown to cooperate with one another to address challenges to their corporate citizenship.
In an industry dominated by catch phrases – adidas’ “In the Real World Performance
Counts”; Nike’s “Just Do It”; Puma’s “Back on the Attack” – perhaps the best lesson
learned is we are all in this together. Citius, Altius, Fortius – Faster, Higher, Stronger?
Yes, but only if we work together.
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2012 Cambridge Business & Economics Conference
ISBN : 9780974211428
REFERENCES
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Adidas (2012b). Performance counts – Sustainability progress report 2011. Accessed 25
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formance_Analysis.pdf].
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Elkington, J. (1997). Cannibals with forks: the triple bottom line of the 21st century
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Gray, R.H. (1992). Accounting and environmentalism: an exploration of the challenge of
gently accounting for accountability, transparency, and sustainability. Accounting
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2012 Cambridge Business & Economics Conference
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Gray, R., Bebbington J., & Walters, D. (1993). Accounting for the environment.
Princeton: Markus Wiener Publishers.
Kessel, A. (2010). Usain Bolt signs biggest athletics sponsorship deal ever with Puma.
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IIRC (2010). Integrated reporting. Accessed 25 May 2012, [available at
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Keady, J. (2012). An open reponse to Nike’s Hannah Jones – Jim Keady breaks down
Nike’s PR spin on wages. Accessed 25 May 2012, [available at
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Nike (2012c). Sustainable business performance summary FY 10-11. Accessed 25 May
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PUMA (2011c). PUMA’s environmental profit and loss account three-stage development
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Appendix A: Company Characteristics
adidas
€ 13,344
Revenue (in millions)
€ 671
Net Income (in millions)
€ 11,380
Total Assets (in millions)
46,824
Employees
ISBN : 9780974211428
Nike
$20,862
$2,133
$14,988
37,515
Puma
€ 3,009
€ 230.10
€ 2,582
10,836
First Sustainability Report
Year Covered by Last
Report
# of Reports Issued
GRI Reporting Level
2000
2001
2002
2011
FY 2010-11
2011
12
C
External Verification
None
5
B
Review by
Stakeholder
Panel
7
A+
Limited
Assurance by
PwC
Chief Sustainability Officer
Subcontractor Factories
Factory Audits
June 27-28, 2012
Cambridge, UK
None Named
Hannah Jones Jochen Zeitz
Global
Vice President
Chief
Director of
of Sustainable Sustainability
Social &
Business &
Officer of the
Environmental
Innovation
PPR Group
Affairs
1,232
540
1,034
1,501
1,169
382
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2012 Cambridge Business & Economics Conference
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Appendix B: PUMA’s Environmental Profit & Loss Account
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Appendix C: Greenpeace Detox Campaign
March 19th, 2012
On March 15th 2012, Greenpeace wrote to brands and notified them that another Detox
publication will be launched soon. While the letter does not indicate further details about
the content of the report, Greenpeace has requested brands to commit and announce a full
elimination schedule and implementation of a full ban of APEs (alkylphenol
ethoxylates). On March 16 the following response was sent to Greenpeace.
‘In November of 2011, acting with a deep sense of commitment and urgency, the
undersigned brands established the Joint Roadmap toward ‘zero discharge of hazardous
chemicals by 2020’. We all recognize that industry collaboration at all levels is needed
for us to achieve our challenging goal. To help build the critical mass needed to affect
change in our industry, the signatory brands have accepted G-Star into the Joint Roadmap
Collaboration. We are also actively recruiting other brands, consultants, NGOs, advisors,
and industry players to participate with and guide us on this journey. At this point in time
and to build further leverage in the industry it is crucial to enlarge the group of brands
and for this purpose the Joint Roadmap sets a clear framework for commitments.
With regard to your inquiry about APEOs, we wish to inform you that all brands have
already or will very shortly communicate to our respective suppliers the need to source
APEO free chemical preparations.
In April 2012, we will be posting our first Joint Roadmap status update. In this update,
we will describe the progress we have made and the state of the collaborative projects.
We hope that you will continue to support the engagement with other brands at the same
level playing field with the purpose of achieving critical mass for this endeavor.
Kind regards,
adidas Group, C&A, G-Star, H&M, Li-Ning, Nike, and Puma
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