Adidas faces complaint for breaching OECD guidelines in Indonesia

London - Sportswear giant Adidas AG reported another year of strong sales and growth, as it remains firmly on track to achieve “quality growth” for 2018 following its FY17 financial report. However, against this strong performance comes growing concerns that Adidas has failed to assess its human rights risks in its global supply chain, as the Clean Clothes Campaign (CCC) prepares to file a complaint against the sportswear company for breaching OECD guidelines in Indonesia.

The CCC, the garment industry’s largest alliance of labour unions and non-governmental organisations, is set to file a complaint against Adidas to the German National Contact Point of the OECD for failing to provide access to remedy for 327 workers from their Indonesian footwear supplier Panarub. The case stems back to July 2012, when 2,000 workers of PT Panarub Dwikarya (PDK), part of the Panarub Group, went on strike to demand better working conditions, the right to freedom o association as well as to be paid the provincial sectoral wage. However, on July 23, 2012, 1,300 workers who participated in the strike for improved working conditions and wages were dismissed by the factory. Now, more than five years later, 327 workers have yet to receive their severance pay.

Adidas accused of failing to provide access to remedy for 327 factory workers in Indonesia

Back in October 2016, the International Labour Organisation (ILO) Committee on Freedom of Association concluded in its interim report that the dismissal of the PDK workers was unjustified and an abuse of the workers fundamental right to freedom of association, according to its standards. In its complaint, the CCC calls on Adidas to use its leverage over Panarub and urge them to pay their former workers their rightful severance payment. The NGO argues that Adidas is directly connected to the workers’ rights abuse through its business relationship with Panarub and in turn, has contributed to it by condoning the refusal of its supplier to provide severance pay to the former PDK workers.

“In the last five years Adidas has insufficiently used its leverage over one of its main shoe suppliers Panarub to provide workers with severance payments,” says Mirjam van Heugten from Clean Clothes Campaign in a statement. “As a direct consequence of this, workers have been evicted from their homes or had their children drop out of school because they could not pay the school fees anymore. One woman died after she could not afford her medication anymore due to her debts. Adidas has the leverage to make sure the women get what is legally owed to them, and their struggle can stop.”

The CCC states that Adidas has violated the OECD Guidelines for Multinational Enterprises, as well as the UN Guiding Principles on Business and Humans Rights that states companies need to assess their human rights tricks, carry out human rights due diligence and in the event of human rights abuses in their supply chain, mitigates and provide access to remedy to those affected - in this case, the former PDK workers. The NGO stressed that Adidas was informed about the labour rights violations in 2012 that eventually led the workers to strike that summer.

At the time the German sportswear brand instructed its supplier to halt the production of its footwear at the aforementioned factory - a decision which failed to stop further human rights abuses from taking place. Other measures taken by Adidas after the 1,300 workers were unfairly dismissed did not result in Panarub in offering remedy to its former workers. However, Adidas footwear was produced at the PDK factory when the first union members were dismissed (February 2012) up until shortly before the strike. In addition, Adidas continues to do business with Panarub Group, the parent company of PDK.

Adidas previously issued an open letter in response to the Clean Clothes Campaign plight severance payment for the former PDK workers. In the open letter, Adidas noted that it was disappointed that recent negotiations, instituted by the Indonesian government, had not reached a “successful conclusion” as the amount of compensation offered was insufficient. The sportswear giant also stressed that it had not neglected its responsibility to address human rights violations, claiming they have “stepped outside the normal boundaries of what would be expected of any buyer to help resolve this case – given the fact that we held no active or ongoing relationship with PDK.”

Homepage photo: Clean Clothes Campaign
Photo 1: Adidas