University President Mary Sue Coleman expressed concern over the treatment of terminated employees at a former Adidas contractor in Indonesia in a letter sent to two Adidas America, Inc. executives on Sept. 21.
At the heart of the issue is the ongoing treatment of the former employees of P.T. Kizone, one of Adidas’ former suppliers. The Indonesia-based company closed in April 2011 when its owner fled the country after the company’s sudden bankruptcy.
More than 2,700 workers never received compensation from the company. Nike and one of its suppliers contributed $1.5 million to the severance payments for employees, but Adidas has not contributed directly to the fund. Still, Adidas says it has offered food vouchers and job placement services to the former employees.
The University’s eight-year partnership with Adidas began in 2007 after its deal with Nike expired, and is set to provide the University with $60 million over the life of the agreement. Though Coleman did not directly threaten to sever ties between the company and the University in the Sept. 21 letter, she did request that Adidas provide assistance and reparations to the former employees of the P.T. Kizone factory and also submit monthly reports to the University about the progress of arbitration over the issue.
“I hope that Adidas will fully appreciate the importance the University places on ensuring that the workers who have been involved in manufacturing license products receive the assistance they require and have earned,” Coleman wrote in the letter.
Coleman’s letter was addressed to Patrik Nilsson, the president of Adidas America and Gregg Nebel, the head of the company’s Social and Environmental Affairs department. Coleman wrote that she acted in response to the recommendation of the University’s Advisory Committee on Labor Standards and Human Rights, which oversees the responsible use and reproduction of the University’s copyrighted logo.
“Adidas has acted laudably in seeking and locating re-employment for former P.T. Kizone workers and in pursuing improved enforcement of labor laws, and the University appreciates these efforts,” Coleman wrote. “However, it remains the committee’s considered view that the company’s response to the P.T. Kizone situation is inadequate. I accept the committee’s assessment.”
Adidas spokeswoman Lauren Lamkin acknowledged that the company responded to Coleman’s letter last week, but declined to release the reply letter. But the company did say in a general statement that the workers’ well-being is a concern for Adidas.
“Importantly, we are making headway in leading industry efforts to develop sustainable business solutions that address the systemic root cause of unethical factory closures around the globe, and protecting workers impacted by them,” the statement said.
The apparel company said it works with governments, industry groups and other companies to investigate poor labor conditions in factories it contracts for manufacturing.
“We work with hundreds of factories in our supply chain every year to ensure fair, healthy and safe working conditions,” the company said. “We measure factories’ performance, as well as our efficacy in resolving these issues.”
In the statement, Adidas announced that it has called for a summit of manufacturers, financing institutions, insurance experts and other firms in partnership with the Global Forum for Sustainable Supply Chains, an industry advocacy group, to form a private insurance fund for workers affected by the factory closures and lack of compensation. The forum is scheduled to take place in Switzerland later this month.
Adidas claims the use of an insurance fund, which the company is calling a “provident fund,” will provide relief in countries that require severance pay by law, but don’t ensure employers have sufficient funds to fulfill severance obligations.
In addition to a job placement program and a $250,000 food aid program that Adidas said it has provided for the former employees of P.T. Kizone, the company announced in the statement that it would pledge an additional $275,000 in humanitarian aid.
“As a company, we are sympathetic to the plight of workers impacted by the unethical closure of the P.T. Kizone factory in Indonesia,” the statement said. “Although the Adidas Group had no business relationship with the factory for nearly six months prior to its closure, we are the leaders in the industry and, accordingly, the Adidas Group has directly dedicated more towards the former P.T. Kizone workers than any other brand.”
In March, University students met with Nebel to discuss the controversy, asking the executive to leave after 30 minutes of intense questioning.
At the time, Nebel said the meeting made no progress in finding a solution to concerns with the company’s handling of the dispute.
“That wasn’t very respectful to just make me dismissed like that, and that is a little disconcerting,” Nebel said.
The University’s chapter of United Students against Sweatshops released a letter on Monday praising Coleman’s recognition of the issue with Adidas, but also criticizing her for not going far enough in “targeting the true problem.”
“As we have seen from past groundbreaking campaigns against Nike and Russell Athletic, apparel brands only respond to universities making credible threats of contract loss if they fail to remediate their code of conduct violations,” the letter stated. “Given this reality, we call on you to put Adidas on notice, and if the company fails to pay the legally mandated severance within the contractual remediation period, then the University should terminate its $60 million contract with Adidas.”
The letter also stated that USAS took issue with the services that Adidas has offered to the former P.T. Kizone employees, writing that the food vouchers were a cheaper way of getting out of paying the actual severance pay owed to the workers.
Public Policy senior Michael Guisinger, a member of USAS, said although the organization was pleased to see Coleman recognizing the problem, they were dissatisfied that Coleman did not directly threaten the partnership.
“We’re not entirely satisfied,” Guisigner said. “It does not threaten actually severing the contract. What we wanted was for the University to say, ‘If you don’t do something about this, we’re going to have to end ties with you.’ There’s none of that in the letter.”
In September, a representative of USAS presented the group’s case before the University’s Board of Regents at the board’s month meeting.
The University of Wisconsin and Cornell University have previously expressed their concerns about Adidas’ conduct in the P.T. Kizone case. Earlier this year, the University of Wisconsin-Madison sued Adidas, alleging it was not in compliance with its contract with the university. The case is still under review.