Citius, Altius, Fortius Faster, Higher, Stronger? Corporate Social Responsibility in the Sporting Goods Industry

2012 Cambridge Business & Economics Conference

ISBN : 9780974211428

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 Josephs University

Erivan K. Haub School of Business

5600 City Avenue

Philadelphia, PA 19131

rsherman@sju.edu

2012 Cambridge Business & Economics Conference (CBEC)

Cambridge, England - June 27-28, 2012Academic departments to which paper pertains: ManagementKey Words: Sustainability Reporting; Triple Bottom Line Reporting; Corporate Social Responsibility

ABSTRACTAs 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 companys responses, as well as their collaborative efforts.INTRODUCTIONFor 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 womens player but often injured Sharapova renewed her sponsorship agreement with Nike by eight years for $70 million (Rossingh, 2010). World record holding sprinter Bolts 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 Nikes labor initiatives at a National Press Club lunch in 1998, Knight noted how some critics had demonized the company.

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, Nikes 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 environment, and in society. Quite clearly, the challenge of telling the companys 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 companys 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 CountsAdidas and Puma share a common heritage and a fascinating story of sibling rivalry. In 1924, Adolf and Rudi Dassler began manufacturing shoes as the Gebrder 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 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 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). 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 companys baseline environmental criteria (adidas, 2012b: 3).NIKE Just Do ItIt 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 Paternos most trusted coaches. Throughout the 1990s, the companys reaction was to scoff at critics. In his now infamous remarks at Nikes 1997 shareholder meeting, Phil Knight argued that working conditions had improved so dramatically during the 25 years Nike had outsourced the 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, Nikes 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). 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 Knights 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. Its 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 Associations 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 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 Nikes 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 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 PUMAs 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 Pumas Executive Board, as well as to Zochen Zeitz, the Chief Sustainability Officer of Pumas 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 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); Pumas provide outstanding applications of this model.

While integrating financial, environmental, and social performance into one report certainly sends the message that these aspects of a companys 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 industrys 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 its supply chain to be 145 million (Puma, 2011b). [See Appendix B for the details of this analysis.]

Mirroring Nikes 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 natures 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 PUMAs 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 Pumas 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 Pumas development of environmental financial statements. However, unlike Grays suggestion for shadow accounting (Gray, 2002) which would actually be used to adjust reported earnings, these costs, which will not affect PUMAs net earnings, will serve as an initial metric for the company when aiming to mitigate the footprint of PUMAs operations and all supply chain levels (Puma, 2011b). As Pumas 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 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 Associations Sustainable Compliance Initiative (FLA -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 SACs 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). 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 dont measure it, you cant manage it, this paper would argue that if you cant report it, then you cant manage it; and, if you cant manage it, then you cant 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 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 Indonesias 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 products life cycle. Pumas development and 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 companys 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; Nikes Just Do It; Pumas 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.REFERENCESAccounting for Sustainability [A4S] (2010). Connected reporting. Accessed 25 May 2012, [available at http://www.accountingforsustainability.org/about-us/project-history].

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adidasNikePuma

Revenue (in millions) 13,344$20,862 3,009

Net Income (in millions) 671$2,133 230.10

Total Assets (in millions) 11,380$14,988 2,582

Employees46,82437,51510,836

First Sustainability Report200020012002

Year Covered by Last Report2011FY 2010-112011

# of Reports Issued1257

GRI Reporting LevelCB

External VerificationNoneReview by Stakeholder PanelLimited Assurance by PwC

Chief Sustainability OfficerNone Named Global Director of Social & Environmental AffairsHannah Jones Vice President of Sustainable Business & InnovationJochen Zeitz Chief Sustainability Officer of the PPR Group

Subcontractor Factories1,2321,034540

Factory Audits1,5011,169382

Appendix B: PUMAs Environmental Profit & Loss Account

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 implementationof 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

June 27-28, 2012

Cambridge, UK2