Adidas Took an ‘Ethical Stance’ Over Yeezy. Can It Do the Same for Workers?

Click here to read the full article.

As Adidas continues to weigh its options over what to do with its $1.3 billion Yeezy stockpile, one prominent labor campaigner says the solution is obvious: sell the sneakers, then funnel some of the proceeds to the victims of wage theft in its supply chain.

Certainly, the sportswear juggernaut, which says that sustainability is “embedded” into its business practices, can neither burn nor landfill the items, said Ineke Zeldenrust, international coordinator at the Clean Clothes Campaign, the garment industry’s largest consortium of trade unions and labor organizations. But neither should it keep the profits from any sale because it “wouldn’t be ethical,” she said.

After all, the once-coveted sneakers became radioactive last October after Ye, the rap superstar formerly known as Kanye West, unleashed a slew of antisemitic remarks, provoking widespread outrage and prompting Adidas to terminate its decade-long partnership. The decision could drive Adidas into its first annual loss in more than three decades this year because of the considerable cost of writing off the formerly lucrative range. The hit to its operating bottom line could be at least 500 million euros, or $548 million.

Speaking at an earnings call in early March, Adidas CEO Bjørn Gulden said that the Stan Smith maker has received 500 offers to snap up the unsold cache. While taking this route “would not necessarily be the right thing to do,” one possibility is to “sell it with a small margin and give the margin away for different donations,” he said.

“I think the goal that we have is to do what damages us the least, and that we do something good,” Gulden said.

This “something good” could begin with compensating workers in Southeast Asia who have been fighting for lost wages during the height of the Covid-19 pandemic, said Zeldenrust, whose organization is part of the #PayYourWorkers campaign that has been leading Adidas protests worldwide. Activists claim that in Cambodia, the triple-stripe firm’s top-producing country, one Adidas contractor laid off 1,000 workers without paying them the $3.6 million they were owed in 2020, while another eight deprived more than 40,000 workers of $11.7 million during the April-May 2021 national lockdown. In Indonesia, they say, hundreds of PT Panarub employees who made World Cup gear received just half their wages between June and August 2020 as a result of decreased orders.

Adidas maintains that it “rejects” the allegations, telling Sourcing Journal that it has been committed to ensuring fair labor practices, fair wages and safe working conditions across its global supply chain throughout the pandemic. “We continued to uphold our standard manufacturing terms, including worker-rights protection,” a spokesperson said. “Ensuring business continuity and a functioning supply chain has kept workers in jobs.”

But Zeldenrust said that the cases in Cambodia and Indonesia are only the tip of the iceberg. “There’s no real way of knowing” how much damage the pandemic has wrought on Adidas workers industry-wide because “it would be quite complicated to calculate,” she said. “And, of course, Adidas would challenge it.”

What needs to happen, she said, is an agreement on how to conduct wage-theft estimates. Zeldenrust said that once brands and workers’ representatives can decide on a common methodology, the numbers “will roll out.” At the same time, negotiating over missing wages or severance on a factory-by-factory basis is a Herculean task. Rare victories such as the $8.3 million settlement workers in Thailand recently received from Clover Group and Victoria’s Secret after their factory abruptly shuttered in 2021 are hard-won, taking months, if not years. It’s for this reason that #PayYourWorkers and its supporters have been asking brands to enter into a legally binding agreement to contribute to a severance guarantee fund that provides timely relief. Because of the chronically low wages and poor social safety nets in garment-manufacturing countries, that sum is often all that prevents workers from falling into destitution.

“Instead of workers having to always wait and then maybe getting partial payment or no payment, there is prevention,” Zeldenrust said, noting that the fund will include an inspection and remedy mechanism for freedom of association. Its most innovative feature, in her opinion, is the varying premium that brands would pay depending on the sourcing destination’s strength of social protection. She compares it to auto insurance: the better things are, the less drivers have to shell out.

“So it gives an incentive to countries like Cambodia or Thailand to improve their own social security legislation,” she said. “And I think it will also give an incentive to companies to build really solid supply chains. Because the more solid their supply chains are, the fewer claims there will be [and] the cheaper it will be. And on the ground, we can stop wasting time on these campaigns.”

Adidas, Zeldenrust said, can be a leader in this movement. As she saw with the Accord on Fire and Building Safety in Bangladesh, it often takes just one or two brands to buy in before everyone else follows. Workers don’t want more charity, she said, referring to Gulden’s comment about earmarking Adidas’s Yeezy proceeds for donations. What they want is to get what they have worked for and are legally owed.

“Now is such an excellent moment for them to sit down with the unions that have made the proposal—there are about 40 of them—sign the agreement and use this money to get it out of the gate,” she said. With the 10th anniversary of the Bangladesh Accord coming up in May, what better time to serve as an example?

It’s unclear how many factories have been affected by the Adidas-Yeezy divorce. Zeldenrust said the information isn’t easy to gather and Adidas itself has declined to say. While there was a suggestion that the products could undergo a rebrand, the German company’s spokesperson said it continues to “evaluate options” and has no updates at this time.

Zeldenrust said that even if Adidas were to commit to the fund for five years, the majority of any eventual sale would remain intact for other causes.

“The issue with Adidas is that they’ve taken an ethical stance when it comes to their relationship with [Ye] but they haven’t been taking an ethical stance when it comes to workers in their supply chain,” she said.