Evaluating a company's impact (the case of Adidas)

This week’s read time: 3 minutes

You are reading Green Digest Impact, a weekly newsletter that provides in-depth analyses of companies’ environmental and social impact.

OUR APPROACH

Central to our narrative is the principle of double-materiality, which recognizes that a company's impact is twofold: it affects both the environment and society at large, and in turn, these external factors influence the company's financial and operational performance.

While traditional ESG assessments focus on the latter, we aim to examine companies' direct impacts on these factors. In pursuit of this, we introduce a unique scoring system that quantifies a company's impact.

The insights and analyses presented in Green Digest Impact are brought to you by a partnership between Green Digest and Impaakt, a Swiss-based impact data provider. Contact Impaakt here to explore how they can assist you.

TOGETHER WITH ECONOMIST IMPACT

Economist Impact’s 10th anniversary Sustainability Week will empower businesses to go beyond “reduce and reuse” and accelerate their sustainability strategies. With more than 200 speakers and over 1,500 in-person attendees, the event will present original insights and practical solutions focusing across all industries, driving action on sustainability. Meet the most influential speakers and experts who will deliver discussions on achieving net zero by 2050, with sessions for challenging sectors, technology, agriculture, supply chains, and more. Register for the event today at this link.

Exclusive for Green Digest readers: Enjoy 20% off with the code GD-SW/MP20

THIS WEEK’S COMPANY

Adidas

This week we dive deep into Adidas’ environmental and social impact.

Adidas is the largest sportswear manufacturer in Europe. For nearly 75 years, the company has been a leading designer, developer, and marketer of athletic footwear, apparel, and accessories, becoming a household name worldwide.

Some interesting facts:

• Adidas was founded in 1949 by Adolf "Adi" Dassler, following a split with his brother Rudolf, who later founded Puma.

• The iconic Three Stripes that define Adidas sneakers were initially introduced for functional purposes - stability - rather than aesthetic appeal.

COMPANY’S IMPACT

Adidas’ overall impact score

Adidas has a general impact score of +0.54 (on a scale from -5 to +5). Its impact is spread across 10 UN Sustainable Development Goals (SDGs) and 11 topics, split between positive and negative analyses.

In the socio-economic sphere,

as the second-largest player in the global sportswear market, Adidas commands a 15.4% share of the athletic footwear industry. For decades, Adidas has shaped sports culture and physical activity by delivering cutting-edge footwear, apparel, and accessories, fostering a community of athletes and fitness enthusiasts. The company’s products are designed to empower self-expression, confidence, and inclusivity, ensuring that customers feel both comfortable and inspired.

Adidas operates in over 50 countries, with a global workforce of 59,000+ employees, and produces approximately 756 million pieces of apparel, footwear, and accessories annually (2023). This extensive reach contributes significantly to economic growth, providing employment opportunities and supporting industries worldwide. Adidas’ commitment to inclusivity and self-expression is evident in product innovations like the TechFit Period Proof tights, sports hijabs, and female-specific running shoes.

However, Adidas faces challenges related to labor practices. Despite being recognized for eliminating forced labor, the company scored 55/100 in the KnowTheChain benchmark, which identified allegations of forced labor in its supply chains, including reported links to Uyghur forced labor in China. The company has also encountered labor issues in Myanmar, including physical abuse and insufficient wages, affecting over 7,800 workers at a factory that produces for Adidas. As of reports from 2022, workers were earning a meager $2.27 daily wage, which falls short of supporting basic needs amid rising living costs, underscoring the urgency of addressing these labor issues. Adidas also fuels excessive buying through constant product releases, aggressive discounting, and exclusive membership incentives.

Environmentally,

Adidas has an annual carbon footprint of over 6 million tonnes of CO₂ equivalent, comparable to the annual electricity usage of over 1.2 million homes. Additionally, Adidas consumes around 230,000 m³ of water annually and generates 26,382 tonnes of waste per year, although it has achieved an 89% diversion rate for administrative offices and distribution centers. Moreover, the company produced an estimated 500,000 tonnes of product end-of-life waste in 2023. The production of its products relies on large quantities of raw materials, including polyester, rubber, cotton, and leather, totaling an estimated 330,000 tonnes annually and requiring an estimated 200,000 hectares of land. This material sourcing has significant environmental implications, with the company facing allegations of contributing to Amazon deforestation. 

_{*The impact score is current as of January 2025 and may be subject to changes as it is continuously updated.
**You can find details about the scoring methodology here and the information sources here.}

ESG VS IMPACT SCORE

What is Adidas’ ESG rating?

For comparison, Adidas has an AAA rating in MSCI's ESG evaluation.

However, ESG Ratings from MSCI ESG Research are designed to measure a company’s resilience to financially material ESG risks and they provide a window into one facet of risk to financial performance. They measure how effectively companies manage ESG risks, not their impact on these factors.

SCORES BY SDG

Adidas’ impact scores by SDG

Positively (and by weight), the company scores the highest in Good Health and Well-being SDG (+3.55), followed by Reduced Inequalities (+2.12) and No Poverty (+0.34).

Negatively, the company scores the worst in Responsible Consumption and Production SDG (-2.53), followed by Decent Work and Economic Growth (-0.80) and Climate Action (-2.89).

*the analysis takes into account the weight of the SDGs

Adidas' impact on SDGs 8 and 10 is multifaceted. On SDG 8 - Decent Work and Economic Growth, the company contributes positively by providing economic and social stability to over 59,000 employees worldwide. However, on the negative side, its supply chain has faced allegations of forced labor and low wages.

On SDG 10 - Reduced Inequalities, the company promotes diversity and inclusivity by offering products that cater to diverse individuals' needs. However, its US workforce lacks representation, with underrepresented groups making up a share that falls below the industry average.

CONCLUSION

Materiality Map & Final Words

So, Adidas’ key social and environmental impact lies in …

its role as a global leader in the sportswear industry, shaping athletic culture and self-expression while driving economic growth through its vast operations. By making sports and active lifestyles more accessible, Adidas has had a significant influence on fitness culture worldwide, inspiring millions to engage in physical activity. The company employs over 59,000 people and supports industries worldwide, with a strong commitment to inclusivity through product innovations like period-proof activewear, sports hijabs, and women-specific designs.

However, Adidas faces scrutiny over labor practices, including allegations of forced labor in its supply chain and inadequate wages for workers in Myanmar and China. Additionally, its aggressive product cycles contribute to overconsumption and waste. Environmentally, the company’s operations generate a substantial carbon footprint, significant water usage, and large volumes of textile waste, raising concerns about its material sourcing.

So, Adidas’ overall impact score of +0.54 reflects its role in shaping health, fitness, fashion, and lifestyle by promoting active living and self-expression while grappling with challenges in labor rights and sustainability.

If you’d like to delve deeper into Adidas’ impact, you can explore it here.

If you'd like to learn more about the scoring methodology, you can do so here.

Do you have a specific company you'd like us to cover? Send your suggestions to [email protected]

PARTNER WITH US

Increase your brand awareness and visibility by reaching the right audience and target market. Showcase your company, solutions, services, products, reports, surveys, events, or other content in front of our highly targeted audience of +4,000 Sustainability & ESG professionals. Contact us at [email protected] if you think we can partner in some way.