Explanatory note with regard to the ICN-adidas case before the Dutch NCP

The Dutch National Contact Point (NCP) for the OECD Guidelines for Multinational Enterprises recently concluded with regard to the production of footballs in India, that 'adidas encourages its suppliers to operate in a socially responsible manner'. It was also noted on this case however that 'there has not yet been external monitoring, verfication and disclosure by FLA [Fair Labor Association] that corroborates adidas own monitoring'.

This explanatory note both refers to and comments upon the Joint Statement by the NCP, adidas and ICN as well as overview of information and opinions of both sides published by the NCP (further called: 'background document'). See URL's of these below. This note is however is not meant to be a full description or evaluation of both content and procedure regarding this case.

Cause and context
In June 2000 ICN published its report 'The Dark Side of Football - Child and adult labour in India's football industry and the role of FIFA'. This report was based on field research in November 1999 and April 2000, building on more elaborate research in 1998 by the National Labour Institute. The report provided evidence that the Indian football industry in and around Jalandhar and Batala, including adidas' supplier Mayor & Company (noted as Z in the NCP's report) violated the OECD Guidelines for Multinational Companies on several accounts: local legal minimum wages, child labour, freedom to organize and the right to collective bargaining and adequate health and safety standards. The report was sent to adidas but adidas never reacted to the report. Despite numerous requests no comment on the reports' content was received either from the Sports Goods Foundation of India Foundation (SGFI: representing a large part of the India sporting goods industry) or the the World Federation of Sporting Goods Industry (WFSGI). Right after its publication FIFA wrote to ICN saying 'this appears to be a comprehensive report' and promised further study and follow-up. Nothing further was heard from FIFA. Only after ICN filed a case on adidas with the Dutch NCP we received an older reaction of the SGFI to our report of which adidas claimed that this had been send to us before, which was not the case. The reaction by the SGFI also did not deal with many of the issues raised in the report as was explained in a rejoinder to adidas and the NCP.

In July 2001 ICN decided to put the case of adidas before the Dutch NCP, but it lasted till March 2002 before the NCP organised a meeting between adidas and ICN. Adidas informed us that football production by their Indian supplier Mayor & Co was concentrated in two factories with 400 employees in total, that the OECD Guidelines were adhered to and that this was monitored by their own inspectors. During ICN's visit to Mayor in April 2000 there was only one factory with around 150 employees partly producing for adidas, while Mayor & Co. were also sub-contracting large-scale production to households in the town of Batala under conditions violating a number of OECD Guidelines (see Dark side of Football).
Looking back it now seems that adidas has been in the process of shifting its production to factories in 2000 and 2001 improving labour conditions to at least minimum standards with regard to wages, health and safety and absence of child labour. As adidas did not react to 'The Dark Side of Football' information was lacking on this process, while also no additional information was received from our local partner organisation in India.

Remaining questions
Even though sufficient positive evidence that adidas violates the OECD Guidelines could not be given for reasons stated above, a number of questions still remain which have to be taken up by ICN after the procedure:

  • The minimum wages paid according to adidas (Rs. 96 a day) are only a little above the daily minimum wage of Rs. 82 for unskilled labourers and do - according to adidas' own answer - not seem to include secondary benefits which workers are entitled to under the Factory Act (page 4 background document).
  • While adidas cannot be held responsible itself for the non-existence of trade unions, their answers on unionisation and workers representation are often evasive or even lacking. For example no answer is given to the questions about the mandate and functioning of the workers council that adidas claims are functioning in Mayor's factories (page 6)
  • Adidas hardly answers questions about the management system of Mayor & Company (page 8), which would be relevant to assess the possibility that Mayor is using double standards
  • The statement that the reports SGS, which implements the FIFA-supported external monitoring for most of the Indian football industry on child labour and (limited on) health and safety, are public it is not correct. We have not been able to get any report. Shortcomings of SGS-monitoring are also described in the recent report 'Labour standards in the Sports Goods Industry in India with special reference to child labour'.
  • According to adidas (page 13 of background document) 'the concerns raised by ICN are based on a report published 5 years ago. The share of the informal economy in football stitching in India has declined considerably since then as 90% of production is now within the monitored programme.' This is far from the truth. First, the concerns raised by ICN are based on reports from 1998 and 2000. Second, the monitoring programme referred to mainly related to child labour in home-based and small-units based production which come under the informal and not the formal sector. Third, both local/national laws and the OECD Guidelines are being violated on a large scale as is evident from the 2002 report ' Labour Standards in the Sports etc.
  • While adidas first seemed to imply that Fair Labor Association had done the external monitoring of their supplier's football production in India ('The FLA monitors our global supply chain SOE systems, including our work in India'), they later admitted (after we verified their statement with FLA) that no actual monitoring in India had taken place.
  • The statement by adidas that FIFA together with 'the industry' (represented by the WFSGI) will communicate the facts 'about the significant progress that has been made in India. Pakistan and China' as soon as possible - within 3 months it was said in March 2002 - has not materialised.
ICN will use the agreement with adidas and the NCP on transparency, disclosure, verification and strengthening of communication (see page 2 of Joint Statement) as well as the willingness of the NCP to step in when communication breaks down to get more information on these issues.

Finally, despite shortcomings, also with regard to presenting hard enough evidence from our side, we feel that this NCP procedure has been worthwhile:

  • to 'compel' adidas to react to evidence being presented and to present their own evidence;
  • as a stepping stone for further communication in the future (ICN was already invited to adidas' stakeholders meeting on its latest social and environmental report);
  • as part of the ongoing efforts by the Clean Clothes Campaign and the Global March Against Child Labour to put pressure on FIFA and World Federation of Sporting Goods Industry (WFSGI) to implement their codes of conduct and establish an independent system of monitoring, verification and disclosure.
  • to test out the NCP procedure (an evaluation from our side will come later);
  • as a learning experience for ourselves how to use the NCP procedure (also more about this later).
Your comments on both this explanatory note, the Joint Statement and background document would be appreciated.

Utrecht, 23 December 2002

Gerard Oonk
Co-ordinator India Committee of the Netherlands

Landelijke India Werkgroep - 23 december 2002