Adidas' CSR Essay: Analysis Of Financial, Social, And Environmental Performance.

Financial/Economic performance

Discuss about the Corporate Social Responsibility Report.

The research conducted by the previous scholars reflect that the business often tends to reach towards its sustainability the moment it tends to create a balance between its financial, social and environmental performance. In the similar context, Basu and Das (2016) mentioned that the CSR (Corporate Social Responsibility) had become the important aspects that end to lead the enterprises to experience positive financial rewards. The finance is the major aspect that tracks on the monetary transaction of the business. Moreover, several firms are initiating the recycling approach to improving the environmental system. The current study attempts to analyse the efforts taken by Adidas to maintain proper operational balance in the segments like financial, social and environmental.

Company	ADIDAS
Particulars	2014	2013	2012
A. Profitability Analysis
Return on Equity (ROE)	9%	14%	10%
Return on Assets (ROA)	4%	7%	4%
Gross Profit Margin	48%	49%	48%
Net Profit Margin	3%	6%	4%

Table1: Profitability Analysis

The Return on Equity (ROE) measures that the rate of return by the Adidas on the capital which is invested by the shareholders. According to the view of Pilbeam (2010), the profitability analysis indicates a sustainable position of the firm by calculating the amount of generated profit margin from the investments.  After analysing the three years data (FY2012, FY2013, FY2014) of Adidas, it has been identified that the firm has increased its net profit margin from 4% (FY 2012) to 6% (FY 2013).  The ROE of Adidas has also been increased to 14% in FY 2013 (www.adidas.co.in, 2016). Comparing to this, 2014 was not as effective for the chosen firm as the ROE has been decreased to 9% (FY 2014) rather than FY 2013 AND FY 2014. Adding to this, FY 2012 AND FY 2013 reflects the efficiency of the chosen firm to utilise the assets and produce profits. However, in 2014, Return an Asset (ROA) value of Adidas has been declined to 48% (FY 2014) from 49% (FY 2013). Hence, the net profit margin of the firm has been decreased to 3% in FY 2014 (www.adidas.co.in, 2016).

B. Asset Efficiency Analysis
Asset Turnover Ratio	1.17	1.22	1.28
Debtor Turnover Ratio	7.47	7.85	8.82
Stock Turnover Ratio	3.01	2.73	3.13

Table2: Asset Efficiency Analysis

In the opinion of Pilbeam (2010), the asset turnover ratio measures the efficiency of an organisation of using its assets while generating the sales revenue to the firm. The comparison of asset turnover ratio between the FY (2012, 2013 and 2014) of Adidas indicates that it is fluctuating in nature. It has been observed that Adidas was efficient in using the assets to generate the sales income in 2012 as it was 1.28. But the report shows that the value is gradually decreasing to 1.22 (FY 2013) and 1.17 (FY 2014) (www.adidas.co.in, 2016). The debtor turnover ratio has been decreased to 7.47 from 8.82 starting from FY 2012 to FY 2014. Thus, it could be deduced that Adidas is unable in paying the debts compared to the previous year.

Asset Efficiency Analysis

Liquidity analysis	2014	2013	2012
Current Ratio	1.68	1.45	1.57
Quick Ratio	1.10	0.89	1.00

Table3: Liquidity Analysis

According to Dewi (2014), both the current ratio and the quick ratio help the company to understand its existing liquidity condition. The statistics of the FY 2012 indicated that Adidas has managed to maintain its current ratio to the margin of 1.57. In the similar year, the quick ratio margin is maintained to 1.00. Considering the opinion of French and Strachan (2015), an inference can be drawn that the brand that had maintained to keep the ratio standards above the margin 1, is ion a decent liquidity condition. Moreover, in the FY 2013, the current ratio of Adidas has decreased to the range of 1.45 and simultaneously, the quick ratio margin has dropped to 0.89 (www.adidas-group.com, 2016). In the particular year, the short-term payable condition of the enterprise is relatively weak. Therefore, an inference can be drawn from the above table that Adidas was not in a proper condition of paying its short-term obligations. However, in the FY 2014, Adidas has made a real comeback with its current ratio of 1.68 and a quick ratio of the brand is 1.10 (www.adidas-group.com, 2016).  From the previous figure, it can be perceived that Adidas has managed to improve its short-term payable condition, where it has sufficient liquid cash to pay off its liabilities.

The architectural considerations of Adidas are highly lucrative, which increases the safety standards for the employees. In the similar instance, Dewi (2014) mentioned that the quality of the buildings had created a significant impact on the productivity and the safety of the workers within the working environment. The buildings are constructed with all structural load capacity, fire preventions, physical stability and the general security measures. The management of the Adidas is proficient enough to provide the workers training aspects regarding the fire safety.  The workers are made aware of the alarm activation methods. Furthermore, the employees are trained in the technique of using the fire extinguisher for an accidental purpose. According to Bullock and Peacock, 2012), the chemical materials often present a physical hazard on the health standards of the employees. The management of the specific enterprise has management to maintain a chemical storage data sheet to track on the chemical usage actions acutely. The chemical storage room has been constructed as the secondary containment system, where the floor is entirely sealed with the impermeable coatings. Houlbrook (2013) claimed that the volume capacity of the secondary containment is kept below 10% of the entire chemical amount. A dedicated room is kept for the oxidised chemical elements to avoid the accidental occurrence.

Liquidity Analysis

In the background of the similar context, French and Strachan (2015) mentioned that Adidas hardly work for a separate society and the stakeholders express a legitimate interest in the format Adidas runs its business operations. The management of Adidas prefers getting involved with the stakeholders in several ways. Ch and Zimmerli (2007) determined that the management has conducted a dedicated event ‘stakeholders dialogues’, which involves the workers, NGOs, suppliers and the union representatives.  The brand also response to the enquiries arises from the customers and the medias. I n the year 2010, the enterprise has managed to pursue different long-standing engagement programs like the International Worker Right Consortium in several regions like the USA, Bangladesh and Cambodia. Brennan (2010) suggested that the Adidas has engaged the Ministry of Foreign Affairs in Germany to reduce the Child labour activities.

In the year 2010, Adidas has sponsored FIFA World Cup in the South Africa, which increased the concerns with several international stakeholders who had expressed the concerns over the labour rights in the football sector (Clarke, 2013). Finally, Adidas has offered with an International Labour Rights Forum enclosed with the perspectives on the research and supporting information (www.adidas.co.in, 2016). The specific effort has involved the pay rights of the working serving the stitching centres and factories. 

The community engagement program entrenched within the group sustainability strategy "Sports needs space" that includes three strategic priorities. According to the opinion of Saltelli et al. (2008), the group empower the people for improving the health by inspiring the organisational action. Adding to this, the Adidas Fund volunteering programmes is the other important community and employee involvement programme to influence the entire society. The group has worked with local and global social service organisations and NGOs to improve the corporate culture (Thorne et al. 2015). At the group level, the firm supports the supplier’s community to promote a sustainable development practice within the industry. Furthermore, the partnership strategy has helped the brand to attain a respective position in the target market. Adidas has some strategic partnership and collaborations with the most creative designers and studios such as Jeremy Scott, Nigo, Yohji Yamamoto and Stella Mccartney etc. (www.adidas.co.in, 2016). The management of the group has tried to establish a long-term partnership with the most dynamic retailers such as department stores, sporting goods chains, e-tailers and the franchisees in order to achieve the profitable market share growth.

Adidas Initiative

The Adidas group has established an Integrated Management System (IMS) policy to manage the operational process in a safe, healthy, and environmentally responsible manner (www.adidas.co.in, 2016). According to the opinion of Jochem (2011), The Energy management system of the chosen firm includes all its brand’s function, sites and location. The Better Cotton Initiative (BCI) commitment adopted by Adidas aims to reduce the water consumption and pesticides use in the cotton farming (Germir, 2015). This major initiative has assisted the firm to take care of the society and community for the long term sustainability. 

Workplace Health and Safety

In the framework of the existing subject matter, Dewi (2014) determined that the management of the enterprise has management to introduce various precautionary measures in its logistics actions to limit the waste disposal actions. During the time of the trading action, various oil spillage actions take place. Therefore, the management has instructed the control department to have a thorough investigation of the ships through which the trading of the product lines would take place (www.adidas-group.com, 2016). The control unit takes the initiatives of conducting a thorough checkup of the ships before the trading actions. Therefore, the oil spillage percentages can b easily reduced. On the other hand, the product lines of the brand are shoes. During the logistics action, several products get damaged due to improper product handling (www.adidas.co.in, 2016). The specific shoes get to receive a relative rejection. Therefore, the production team recycles on the waste raw materials that were left out during the manufacturing process and repaired the rejected products with the similar waste materials.

French and Strachan (2015) figured out that Adidas has launched several shoe collection from the recycled plastics. To coincide with the summit of the Paris climate, Adidas has already executed the world’s first shoe produced out of yarns and the filaments that have been recycled from the ocean waste with its joint partner Parley. The particular set of the product has been designed in the 3-D-printed ocean plastic shoe midsole, but the management was unclear about the fact whether the products could be manufactured on a larger scale or not. Dewi (2014) stated that the shoe had been majorly transferred to the United Nations. Since, the region works under the turning old gillnets, therefore, it has been an easy task to convert the plastics into the fibre. The conversion often helps to make use of the performance shoes.

As per the annual report of the firm, Adidas has a strategic market position with the loyal customers of 20 to 29-year-old age group of athletes and sports passionate person. Presently, the organisation is focused on targeting and expanding its brand name with the younger athletes of 14 to 19-year-old age group (Saltelli et al. 2008 ). Adding to this, it has been speculated that the BCI commitment (Better Cotton Initiative) approved by the firm, helps to achieve the target of 100% sustainable cotton by 2018 (www.adidas.co.in, 2016). As per the sustainability report, Adidas has committed to reducing the annual carbon emission by 3% within 2020. The firm has another target to minimise the amount of waste going to landfill by 50% within 2010(website).

Engage with stakeholders

Adidas group is recognised as an international leader in the sporting goods industry offering a broad portfolio of footwear, apparel for the sports. Considering the words of Thorne et al. (2015) the organisation has employed more than 50,000 staffs across the globe and generated sales of € 16.9 billion in 2015. According to the report of Global 100 Index, the Adidas Group got the third (3^rd) rank amongst the top most 100 sustainable corporations in the world. In the addition, the firm created a series of videos to promote its ‘First Never Follows’ campaign for celebrating the ambassadors (www.adidas.co.in, 2016). This promotional activity is also for the latest boots, the ‘Mercury Pack’. As per the sustainability report of Adidas, the firm has increased use of the sustainable cotton and recycled polyester. Moreover, it is the third consecutive year that Adidas is included in the Top 10 of the Global 100 Index (www.adidas.co.in, 2016).

Conclusion:

The primary assertion of the study indicates a corporate social responsibility report on Adidas. While conducting the study, the annual report of the firm has been analysed to understand the sustainable position of the firm. It has been observed that Adidas lost the profit margin in 2014 and the asset efficiency ratio has also been declined. Thus, the brand has adopted several essential steps to establishing a potential market position. Adding to this, it has been found that the brand is consecutively got the place in the Top 10 of the Global 100 Index for the highly efficient environmental value. Still, the brand is trying to adopt more policies to mitigate the issues and preserve a long-term market value across the world. Moreover, the Better Cotton Initiative (BCI) commitment could be one of the suitable strategic initiatives for the brand to uphold a sustainable market position.

References:

Adidas-Group (2014) Available at: https://www.adidas-group.com/media/filer_public/2b/2f/2b2fd619-5444-4ee8-9c07-baa878d658c4/2014_gb_en.pdf (Accessed: 21 September 2016).

Adidas (2016) Available at: https://www.adidas.co.in/ (Accessed: 21 September 2016).

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