Adidas Group - Sustainability and Corporate Social Responsibility - Assignment Example

SUSTAINABILITY AND CORPORATE SOCIAL RESPONSIBILITY al Affiliation Sustainability and Corporate Social Responsibility Introduction The obligation of a company to accept responsibility of its effects on the environment and society is known as corporate social responsibility. These efforts are not limited to the requirements by the regulators and environmental conservation activists. Sometimes it is referred to as corporate citizenship and can involve short-term expenditures that have no profit to the company but promote social development and environment conservation (Idowu & Louche 2011). Companies are powerful in the society and a country’s economy. They manage valuable assets and have a lot of money that can be used for social investments and activities. Large companies are dedicating real time and cash to programs geared towards environmental sustainability, alternative clean sources of energy and a variety of social welfare projects that benefit customers, employees and the community at large. The corporate social responsibility is a self-regulatory mechanism that has been incorporated in modern businesses. Critics suggest that corporate social responsibility diverts the attention of businesses from economic duty, while the proponents claim that companies benefit in terms of profit in the long run. However, research has indicated that corporate social responsibility has had a neutral effect on financial outcomes (Kao 2010). The management and coordination of social, environmental and financial obligations such that there is responsible, ethical and progressive success is referred to as corporate sustainability. Environmental, social and economic expectations are regarded as the major cornerstones of sustainability. Traditionally corporate cultures, social and environmental issues were considered to interfere with financial objectives. However, this has evolved over time and today there is harmony among the four. In order to invest wisely in a certain corporation, it is critical to analyze the corporate social responsibility and sustainability of the business (Kao 2010). Let us consider the case of a multi-national corporation known as Adidas. This corporation creates and produces sporting equipment’s like shoes and jerseys. It is the multinational for the Adidas Corporation and it is based in Bavaria, Germany. (Borowski 2013) By holding, it means the company owns other companies’ major stock and does not produce the goods or services, instead, its role is to own shares of other companies to form a group. The Adidas Group comprises of the following companies; Reebok sportswear, Adidas Golf that consists Ashworth, Rockport and a certain percentage of Bayern Munich football club (Borowski 2013). In addition to sports equipment, Adidas produces bags, watches, shirts, and several goods used in sports (Borowski 2013). The Company is the biggest in the industry in Europe and only second to Nike globally. The company was started by Adolf the son of Dassler in 1949 following a family dispute at the Dassler brothers shoe factory Company with his senior brother Rudolf who had earlier begun Puma, a corporate competitor of Adidas. Up to this date, the two companies have their offices at Bavaria, Germany. Adidas products have three bars that are parallel and a similar emblem is featured into the company’s current official logo. However, the ownership of the company has changed overtime. (Adidas-group.com 2015) Economic Performance According to the financial statements of the company at the end of the year 2013, the balance sheet reflected a (0.4%) change in its assets. This was a decrease in the value of its assets from 13049.12 million US dollars in the year 2012 to 12990.88 million US dollars in 2013. However, the current assets increased from 2737.28 million US dollars in the year 2012 to 2892.96 million US dollars by the end of 2013 that was a 5.7% increase. The negative change is due to depreciation of long term assets that is common among businesses. However, there is an increase in the current assets and it is a plus to any potential investor. (Adidas-group.com 2015) The capital expenditure was 536.48 million US dollars at the end of 2013 compared to 486.08 million US dollars in the year 2012. This was a 10.4% increase in expenditure in the 2013 financial year. (Adidas-group.com 2015) Shareholders’ equity was 6147.68 million US dollars in 2013 financial year compared to 5940.48 million US dollars in the same year of 2012 that reflected a 3.5% increase. (Adidas-group.com 2015) The profit earned by the shareholders at the end of 2013 was 4.49 US dollars per share of common stock compared to 4.23 US dollars in 2012. The basic earnings and diluted earnings was the same in that year. Though there is no positive change in profits, an investor would rather receive the same amount rather than to experience a loss. (Adidas-group.com 2015) At the culmination of 2013 financial year, the company had issued 209,216,186 ordinary shares which was the same Number issued in 2012. The value of the shares appreciated in 2013 financial year from 75.41 US dollars in 2012 to 103.64 US dollars translating to a 37.6% increase. This shows that there is high demand for the company’s shares that in turn indicate investors’ confidence. (Adidas-group.com 2015) The shareholders received a dividend of 1.68 US dollars at the end of 2013 financial year compared to 1.51 US dollars in 2012, an 11.1% increase. (Adidas-group.com 2015) The net cash produced from operating activities was 710.08 million US dollars compared to 1055.04 million US dollars in 2012 and this reflected a 32.7% decrease. This may be caused by decreased sales and increased operating costs. (Adidas-group.com 2015) Return on investment in that year was 14.3% compared to 9.9% in the 2012 financial year .There was a 4.4pp increase that indicates the company’s growth and that there is no problem with the company. (Adidas-group.com 2015) In all the above scenarios of the 2013 financial year, the performance of Adidas was quite above the average of the sports clothing industry .In fact, in the global industry performance of that year, Adidas came second after the other sporting giant Nike. This has been the course for years and that makes the company a worthwhile investment opportunity for any potential investor. The figures in the books are consistent and with little if any to worry about. Corporate Social Responsibility The company’s objective and means are based on the Group’s important aspect of Integrity. Focus is placed on sincerity, accountability, ethics and fairness to all. The values have been visualized via several initiatives. These include: 1. The on progress support from the Adidas brand via the corporate volunteering initiatives taken care of by the Adidas fund. 2. The Reebok‘s track record supports human rights groups globally. 3. The long standing Taylor-made Adidas Golf program supports golf charities. The initiatives are encompassed on three critical pillars; community engagement, employee involvement and corporate support based on cultural traditions, economic parameters and social factors. (Borowski 2013) Adidas is focused to impact the lives of its employees, factory staff and the society within their business locations all over the world. Enhancing the staff interest system is among their agenda to better their performance. A commitment has been made to structure a monitoring tool to ensure quality products are delivered all over and safely. The company has invested in creativity and innovation in order to come up with better methods of production that are efficient through use of sustainable materials and use of technology. On environmental matters, Adidas is determined to reduce environmental pollution in their operations and even the suppliers’ factories. It aims to lower energy usage through product output at particular suppliers. In addition, the company projects to offer remedies for proper chemical handling globally and create a green design policy for upcoming buildings at suppliers. Through partnership with important players and collaboration with partners, the industry has kept on improving (Borowski 2013). There are two broad aspects of social and environmental performance that the company seems to be particularly focused on improving and they are; the impact along the supply chain and the effect on environment. Impact on environment can be sub-classified to the following; innovation, design, marketing, development, sourcing, own operations, sales, use and disposal. On the other hand, the environmental impact can also be sub-categorized. Firstly, sustainable use of resources through water conservation, proper use of material and energy conservation. The control of emissions such as water discharge, waste products and air pollutants comes in second place. In addition, the proper handling of poisonous and dangerous chemicals such that they do not contaminate soils and underground water completes the three sub-categories (Borowski 2013). Chemical remains on Adidas clothing sold to consumers globally were once accused of polluting the environment especially the water structures. The print, dye and polyester fabric used by the clothing factories pollutes the waters in areas near the factories. Water pollution threatens the aquatic life, public health and the area’s biodiversity. The use of chemicals associated to hormonal disturbance has also been reported. Nonylphenols and per fluorinated chemicals were found in waters used for human consumption. According to laboratory experts, the chemical which is used to make materials stain and stick resistant can cause hormonal imbalance even at low concentrations. However, Adidas distanced itself from some of the allegation and but were the companies mentioned are close associates, the company affirmed its commitment to ensure public safety and environment protection (Adidas-group.com 2015). Adidas monitors the social, economic and environmental responsibility of organizations within its supply chain. This can be evident from the fact that they appreciate feedback from stakeholders and international monitoring agencies, non-governmental organizations and analysts from socially responsible investment. The organizations carry out detailed analysis of the business social and environmental programs through review of documents and interviewing employees and management. The company has been globally acknowledged for its sustainable programs. This feature can only be achieved if the company keeps in check all the organizations within the supply chain in order to deliver quality products and services (Adidas-group.com 2015). With competition rife in the global market, Adidas has perceived both threats and opportunities in the social and environmental performance. Competitors are focusing on initiatives that will benefit the society like sponsoring the less fortunate and even community service. They have also invested in production and supply methods that will have minimal environmental degradation. However, Adidas has not been left behind rather it has been motivated to offer the best quality and be a global leader in the sporting industry. They have opted for better employment terms, performance appraisals and safety to the employees. Adidas is focusing on delivering variety to consumers and set up a durable relationship between consumers and their brand. There is the threat of competition from cheaper foreign markets that has resulted to price wars. Besides, there is the opportunity of expanding to new markets and widening the customer base (Adidas-group.com 2015). The Adidas Group is committed to be a global leader in goods related to the sporting industry with brands based on the love of sports and a lifestyle of sports. The quality and image of the products is key embracing creativity and diversity. The Group is determined to be socially and environmentally responsible. They seek to understand the need of the society, put the structures in place to meet them and accomplish their objective. The company touches the life of people both as their employees and even as consumers. It is important to acknowledge these practices through the corporate social responsibility report as they help in a peaceful coexistence. Understanding the values and challenges of the society help company’s fulfilling their social responsibility as well as their financial objective. When the society witnesses the impact of a corporate then they appreciate their products better. (Adidas-group.com 2015) There are number factors that appear to be motivating Adidas to produce detailed sustainability performance reports (Adidas-group.com 2015). These include; 1. The commitment to protect the environment. 2. Vision to be a global and effective leader in supply chain management. 3. The development to ethical investment. 4. Setting the standard for public sustainability reporting. 5. Provide guidelines on how to protect t the environment. 6. Saving resources and widening the stakeholder engagement initiative. 7. Reaching new levels via supplier disclosure and product sustainability. 8. Propagating positive changes in the industry. 9. Solving the wage challenge. 10. Keep on the progress and setting the standard. In conclusion, based on the financial report and the social responsibility of the Adidas Group, the performance of the company is impressive. The capability of the company to remain financially promising and at the same fulfilling the corporate social responsibility makes it a sustainable business. Such a report presented to a potential investor convinces them to put their money, time and effort in the business. Reference list Adidas-group.com, 2015. Sustainability Reports. [online] Available at: http://www.adidas-group.com/en/sustainability/reporting-policies-and-data/sustainability-reports/#/2013/ [Accessed 9 May 2015]. Borowski, A. 2013. Adidas marketing strategy - an overview. [S.l.], Grin Verlag. Bottom of Form Bottom of Form Idowu, S. O., & Louche, C. 2011. Theory and practice of corporate social responsibility. Heidelberg, Springer. Kao, R. W. Y. 2010. Sustainable economy corporate, social and environmental responsibility. Singapore, World Scientific. http://public.eblib.com/choice/publicfullrecord.aspx?p=731282. Top of Form Top of Form Read More