Adidas Ag · XETR:ADS
Adidas — adidas-Salomon — ESG Presentation (May 2003)
81 slides from Adidas's sustainability presentation, May 20, 2003
Slide 1: Fair Wage Study of Workers of adidas-Salomon's Business Partners in Indonesia
FAIR WAGE STUDY OF WORKERS OF ADIDAS- SALOMON’S BUSINESS PARTNERS IN INDONESIA Jakarta, May 20-21, 2003 LP3ES Institute for Social and Economic Research, Education and Information May 20, 2003 Fair Wage Study - LP3ES 1
Slide 2: Presentation Outline
Presentation Outline Methodology Profile of the factories and workers Income and Expenditure Fair Wage Formulation Management Perspectives May 20, 2003 Fair Wage Study - LP3ES 2
Slide 3: Methodology
METHODOLOGY May 20, 2003 Fair Wage Study - LP3ES 3
Slide 4: Objectives
Objectives To measure needs and wage requirements as a basis for understanding the fair wage conditions To develop a standard methodology to measure workers’ needs, irrespective of location or country. May 20, 2003 Fair Wage Study - LP3ES 4
Slide 5: Objectives
Objectives To assess the appropriateness of adidas- Salomon’s definition of a “fair wage” by comparing it to the study results. To assess the accuracy, reliability and usefulness of the published national and regional cost of living and consumer price indices in Indonesia and their relationship
Slide 6: Objectives
Objectives To recommend practical and workable solutions in wage-fixing mechanisms to help factory managers achieve a closer match between workers’ wages and benefits and the local cost of living. May 20, 2003 Fair Wage Study - LP3ES 6
Slide 7: Approach
Approach The study objectives Analysis and recommendations Group Survey results discussion Survey interview In-depth interviews Secondary data Survey form Group discussion May 20, 2003 Fair Wage Study - LP3ES 7
Slide 8: Activities
Activities Workers Survey Sample size: 1,140 workers 4 factories (1 footwear, 3 apparel) Face-to-face interviews: (85% at the factories) Focus group discussion (FGDs) 7 FGDs; 7-10 workers each May 20, 2003 Fair Wage Study - LP3ES 8
Slide 9: Activities
Activities Indepth interviews: Factory management Resource persons: business associations, manpower agencies May 20, 2003 Fair Wage Study - LP3ES 9
Slide 10: Factories and location
Factories and location 4 adidas business partners “A”, “B”, “C”, “D” Nominated by adidas Location: Tanjung Priok Cakung Tangerang Cikupa Cibinong May 20, 2003 Fair Wage Study - LP3ES 10
Slide 11: Number of Respondents by factory
Number of Respondents by factory Factory # of Respondents “A” 360 “B” 360 “C” 320 “D” 100 Total 1,140 May 20, 2003 Fair Wage Study - LP3ES 11
Slide 12: Limitations
Limitations Method used very much depends on respondent’s recollection of past expenditures Survey was conducted several weeks after Ramadan -> spend more Just before the 2002 government mandated minimum wage increase -> wage increase expectation May 20, 2003 Fair Wage Study - LP3ES 12
Slide 13: Limitations
Limitations Fail to obtain data on the loans held by individual respondents, however such data were investigated through FGDs and cooperatives Method employed in determining perceived needs relies on majority opinion Subjective measurement Affected by existing ownership May 20, 2003 Fair Wag
Slide 14: Limitations
Limitations Incomplete payroll data from factories due to privacy rights of workers honored May 20, 2003 Fair Wage Study - LP3ES 14
Slide 15: Profile of the factories and workers
Profile of the factories and workers May 20, 2003 Fair Wage Study - LP3ES 15
Slide 16: Description of factory A
Description of factory “A” Producing footwear Located in Tangerang More than 5000 workers, 90% female Provide non-cash benefits (transportation, meals, uniform, health clinic, sport and art performing activities) Developed workers cooperative May 20, 2003 Fair Wage Study - LP3ES 16
Slide 17: Description of factory B
Description of factory “B” Producing apparel Located in Tanjung Priok, Cakung, Cikupa (2), Tangerang More than 6000 workers, 80% female Workers Cooperative Limited non-cash benefits May 20, 2003 Fair Wage Study - LP3ES 17
Slide 18: Description of factory C
Description of factory “C” Producing apparel Located in Cakung, Tangerang More than 5000 workers, 80% female Workers cooperative Limited non-cash benefits May 20, 2003 Fair Wage Study - LP3ES 18
Slide 19: Description of factory D
Description of factory “D” Producing bags for local supply Factory: Cibinong 150 workers No workers cooperative Limited non-cash benefits May 20, 2003 Fair Wage Study - LP3ES 19
Slide 20: Demography of respondents
Demography of respondents 89% female 76% age between 20 – 29 years 36% finished junior high; 37% finished senior high 48% single; 38% married with children 85% with dependent 70% migrant May 20, 2003 Fair Wage Study - LP3ES 20
Slide 21: Income
Income May 20, 2003 Fair Wage Study - LP3ES 21
Slide 22: Fair Wage
Fair Wage Income from factory Income Other income Perceived needs Basic needs Expenditure Fair wage May 20, 2003 Fair Wage Study - LP3ES 22
Slide 23: Sources of Income
Sources of Income Income from Income from other factories sources Basic wage Additional jobs Overtime payment Spouse income Cash allowances Contribution from Non cash benefits others May 20, 2003 Fair Wage Study - LP3ES 23
Slide 24: Average total wages (Rp/month)
Average total wages (Rp/month) 1,200,000 Source: payroll data in each factory, Jan. – Dec. 2001 953,766 1,000,000 161,118 729,076 800,000 641,473 101,993 24,921 352,198 600,000 168,323 201,721 438,724 48,216 400,000 - 448,499 440,449 425,362 200,000 390,508 - A B C Basic wage Overtime Cash benefit M
Slide 25: Average monthly wage in factory A
Average monthly wage in factory “A” 1,200,000 1,000,000 800,000 600,000 400,000 200,000 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Benef i ts 17,025 16,727 20,284 19,978 29,155 29,062 29,019 28,898 29,140 29,010 26,068 29,375 Over ti me 30,530 127,101 171,355 137,386 247,042 204,457 44,683 6,
Slide 26: Average monthly wage in factory B
Average monthly wage in factory “B” 1,200,000 1,000,000 800,000 600,000 400,000 200,000 0 Jan Feb M ar A pr M ay Jun J ul A ug Sep Oc t Nov Dec B enef i t s 132, 592 161, 427 151, 387 164, 434 157, 353 164, 174 155, 821 165, 728 162, 238 175, 066 174, 324 171, 121 Ov er t i me 264, 322 346, 896 299,
Slide 27: Average monthly wage in factory C
Average monthly wage in factory “C” 1,200,000 1,000,000 800,000 600,000 400,000 200,000 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Benef i ts 72,929 80,932 103,451 97,910 100,908 94,897 106,836 121,775 115,995 114,240 121,222 90,549 Over ti me 207,651 106,408 129,642 115,939 118,710 101,809 1
Slide 28: Average monthly wage in factory D
Average monthly wage in factory “D” 1,200,000 1,000,000 800,000 600,000 400,000 200,000 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Benef i ts Over ti me 9,766 7,372 32,953 62,092 47,816 66,282 60,978 57,519 49,405 109,182 61,834 11,522 Wage 261,052 384,620 389,592 407,383 416,426 404,618 371,
Slide 29: Cash equivalent of non-cash benefits (Rp/month)
Cash equivalent of non-cash benefits (Rp/month) * Based on respondents’ opinion 202,567 74,067 49,987 31,192 A B C D May 20, 2003 Fair Wage Study - LP3ES 29
Slide 30: Other sources of income
Other sources of income No. Source of Income %1 Rp/month2 1 Worker’s additional jobs 4% 11,500 2 Spouse income 36% 199,434 3 Contribution from others 3% 12,996 Total 40% 224,5443 1 Percentage of respondents who have other sources of income (multiple responses) 2 Average of total respondents 3 Total
Slide 31: Monetary value of non cash benefits
Monetary value of non cash benefits respondent’s opinion average of those who received such benefits; based on Benefits A B C D N Rp/month N Rp/month N Rp/month N Rp/month Transportation 314 136,855 75 48,467 146 69,571 1 106,138 Meals 347 58,170 88 55,057 117 54,038 1 56,921 Housing 3 153,333 3 98,
Slide 32: Expenditure & Saving
Expenditure & Saving May 20, 2003 Fair Wage Study - LP3ES 32
Slide 33: Expenditure
Expenditure Expenditures are for household, including support to dependents Respondents were asked to recall their last expenditure Derived from Government standard Limitation Timing of the survey May 20, 2003 Fair Wage Study - LP3ES 33
Slide 34: Expenditure
Expenditure 155 expenditure items: Food (21) Education (11) Clothes (18) Transportation (6) Housing (41) Energy (4) Health and Water (2) amenities (26) Entertainment (5) Childcare (18) Social purpose (3) May 20, 2003 Fair Wage Study - LP3ES 34
Slide 35: Respondent's expenditure components
Respondent’s expenditure components Foods Clothes Housing Health and amenities Childcare Education Transportation & communication Energy Water Entertainment Social purpose 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% May 20, 2003 Fair Wage Study - LP3ES 35
Slide 36: Mean expenditure (Rp/month)
Mean expenditure (Rp/month) Foods 440,242 Clothes 85,528 Housing 171,138 Health and amenities 93,059 Childcare 25,710 Education 31,128 Transportation & communication 74,855 Energy 27,118 Water 8,887 Expenditure = Rp 1,090,427 Entertainment 44,755 Social purpose 88,007 May 20, 2003 Fair Wage Study -
Slide 37: Portion of each expenditure component
Portion of each expenditure component 8% 4% 1% Social purpose 2% Entertainment Water 7% 40% Energy 3% Transportation & communication Education 2% Childcare Health and amenities 9% Housing Clothes Foods 8% 16% May 20, 2003 Fair Wage Study - LP3ES 37
Slide 38: Savings
Savings Form % Rp/month1 Savings (at home 45% Rp 26,748 or bank) Arisan2 57% Rp 61,214 Buy gold/jewelry 27% Rp 7,903 Rp 102,830 1 Average of total respondents 2 Arisan is a regular, traditional social gathering whose members contribute to and take turns at getting an aggregate sum of money or goods.
Slide 39: Perceived Needs
Perceived Needs May 20, 2003 Fair Wage Study - LP3ES 39
Slide 40: Perceived Needs
Perceived Needs Derived from 155 expenditure items asked in the survey Subjective respondent’s opinion on level of urgency (3 options): should be fulfilled and cannot be delayed can be delayed not needed May 20, 2003 Fair Wage Study - LP3ES 40
Slide 41: Perceived Needs
Perceived Needs An item is categorized as a need based mode of opinion (the largest among the three) Example: 41% respondents said a bed is should be fulfilled and can not delayed -> need Opinion could be affected by current ownership May 20, 2003 Fair Wage Study - LP3ES 41
Slide 42: Number of items categorized as need and not needed
Number of items categorized as need and not needed # of Items # of Items No. Expenditure Category Categorized as Categorized as Needs Not Needed 1 Foods 12 9 2 Clothes 4 14 3 Housing 27 14 4 Health and amenities 16 10 5 Childcare 7 11 6 Education 6 5 7 Transportation & communication 2 4 8 Energy 2 2
Slide 43: Expenditure vs Perceived Needs
Expenditure vs Perceived Needs Foods 440,242 304,533 Housing 171,138 124,555 Health and amenities 93,059 71,068 Social purpose 88,007 86,472 Clothes 85,528 25,557 74,855 Expenditure Transportation & communication 50,360 Perceived need Entertainment 44,755 - Expenditure = Rp 1,090,427 Education 31,12
Slide 44: Income & expenditure
Income & expenditure May 20, 2003 Fair Wage Study - LP3ES 44
Slide 45: Wage, Income, Expenditure, Needs
Wage, Income, Expenditure, Needs Total wage includes Idul Fitri allowance and non cash benefits Total wage (with OT) 868,347 Total wage (without OT) 648,476 1,090,908 Total income 1,090,427 Actual expenditure * Perceived needs 721,103 * May contain some biases: wage increase expectation, Saving 102,
Slide 46: Wage, Income, Expenditure, Needs by factory
Wage, Income, Expenditure, Needs by factory 1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,000 - A B C D Total wage (with OT) Total wage (without OT) Total income Actual expenditure Perceived needs May 20, 2003 Fair Wage Study - LP3ES 46
Slide 47: Wage, Income, Expenditure, Needs by marital status
Wage, Income, Expenditure, Needs by marital status 1,600,000 1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,000 0 Single Married* without children Married* with children Total wages Income Actual expenditure Perceived needs May 20, 2003 Fair Wage Study - LP3ES 47
Slide 48: By marital status and dependent
Wage, Income, Expenditure, Needs by marital status and dependent 1,800,000 1,600,000 1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,000 - Single no dependent Single with dependents Married no dependent Married with dependents Total wages Income Actual expenditure Perceived need May 20, 20
Slide 49: By number of income earners
Wage, income, expenditure and needs by number of income earners 1,600,000 1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,000 0 Single income Double Income Total wage Income Actual expenditure Perceived needs May 20, 2003 Fair Wage Study - LP3ES 49
Slide 50: By number of dependents
Wage, income, expenditure and needs by number of dependents 1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,000 0 No Dependent One Dependent Two Dependents Three or more Dependents Total wage Total income Actual expenditure Perceived needs May 20, 2003 Fair Wage Study - LP3ES 50
Slide 51: Real total wages (Rp/month)
Real total wages (Rp/month) 600,000 Source: payroll data (1996 = 100) B 500,000 400,000 C 300,000 A 200,000 D 100,000 - 1999 2000 2001 2002 May 20, 2003 Fair Wage Study - LP3ES 51
Slide 52: Total wage vs poverty line
Total wage vs poverty line 1,200,000 Source: payroll data Total wage excludes non-cash benefits 1,000,000 800,000 600,000 400,000 200,000 - 1999 2000 2001 A B C D Jakarta poverty line WB poverty line May 20, 2003 Fair Wage Study - LP3ES 52
Slide 53: Real basic wages vs government minimum wage (Jakarta)
Real basic wages vs government minimum wage (Jakarta) 600,000 1996 = 100 500,000 400,000 A B 300,000 C Jakarta min.wage 200,000 100,000 - 1999 2000 2001 2002 May 20, 2003 Fair Wage Study - LP3ES 53
Slide 54: Real basic wages vs government minimum wage (Bogor)
Real basic wages vs government minimum wage (Bogor) 300,000 1996 = 100 250,000 200,000 150,000 100,000 50,000 - 2001 2002 D Bogor min.wage May 20, 2003 Fair Wage Study - LP3ES 54
Slide 55: Fair Wage
FAIR WAGE May 20, 2003 Fair Wage Study - LP3ES 55
Slide 56: Fair wage
Fair wage LP3ES were asked to compare the study results with other standards to measure fair wage Other standards: Workers Rights Consortium Household Livelihood Security Framework (HLSF) May 20, 2003 Fair Wage Study - LP3ES 56
Slide 57: Workers Rights Consortium
Workers Rights Consortium Living wage: “a fair and decent level of income that would enable workers to meet their basic needs” Basis: costs of basic needs of a family % of income to save May 20, 2003 Fair Wage Study - LP3ES 57
Slide 58: Workers Rights Consortium
Workers Rights Consortium Take-home wage (net wage) = [average family size/average number of adult wage-earners] * [cost of nutrition + clothing + healthcare + education + potable water + childcare + transportation + housing + energy + saving] May 20, 2003 Fair Wage Study - LP3ES 58
Slide 59: Household Livelihood Security Framework (HLSF) by O'Brien
Household Livelihood Security Framework (HLSF) by O’Brien SA8000 requires companies to provide compensation that allows workers to meet their basic needs with an additional 10% left over for discretionary spending. Net salary + basic benefits + other income = basic needs + 10% discretionary spen
Slide 60: Workers' Perception about Fair Wage
Workers’ Perception about Fair Wage FGD in factory “A” Fair wage is basic wage and cash benefits with overtime received from factory that can match workers’ basic needs and some discretionary. Specifically, fair wage equals minimum wage + Rp 50,000 + benefits without overtime + discretionary. May
Slide 61: Workers' Perception about Fair Wage
Workers’ Perception about Fair Wage FGD in factory “B” Fair wage is wages and benefits that could cover needs and other needs, namely for recreation, savings, and also cover dependents, including send money to parents or relative. Wage is without overtime. May 20, 2003 Fair Wage Study - LP3ES 61
Slide 62: Workers' Perception about Fair Wage
Workers’ Perception about Fair Wage FGD in factory “C” Fair wage is wages that can fulfill workers’ basic needs and of their dependents, and there is portion left for savings for future use. May 20, 2003 Fair Wage Study - LP3ES 62
Slide 63: Workers' Perception about Fair Wage
Workers’ Perception about Fair Wage FGD in factory “D” Fair wage is wages that can cover all current daily needs plus some left for savings. May 20, 2003 Fair Wage Study - LP3ES 63
Slide 64: Workers' Perception about Fair Wage
Workers’ Perception about Fair Wage Fair wage: Consists of wage and cash benefits Without overtime Should be enough to cover their basic needs Some portion left over for discretionary spending May 20, 2003 Fair Wage Study - LP3ES 64
Slide 65: Proposed Fair Wage Formula
Proposed Fair Wage Formula FAIR WAGE = BASIC NEEDS + DISCRETIONARY SPENDING + DEPENDENTS = exp. and DP for single worker + exp. and DP for dependent DP = discretionary spending May 20, 2003 Fair Wage Study - LP3ES 65
Slide 66: Proposed Fair Wage Formula
Proposed Fair Wage Formula Fair wage = [115% x basic needs] + [[15% x # of dependents] x 115% x basic needs] May 20, 2003 Fair Wage Study - LP3ES 66
Slide 67: Survey results
Survey results Basic needs = Rp 562,679 (for a single worker, based on the survey result) Fair wage for a worker without dependent (2002): = [115% x Rp 562,679] + [ 0 X 15% X 115% X Rp 562,679] = Rp 647,081 May 20, 2003 Fair Wage Study - LP3ES 67
Slide 68: Survey results
Survey results Fair wage for workers with one dependent (2002): = [115% x Rp 562,679] + [ 1 X 15% X 115% X Rp 562,679] = Rp 744,143 May 20, 2003 Fair Wage Study - LP3ES 68
Slide 69: Adidas Definition on Fair Wage
Adidas “Definition” on Fair Wage “The take-home pay and benefits received by a worker during a legal work week which allow the worker and their dependents to meet basic needs and save a certain portion for long-term planning and emergencies. Basic needs include food, housing, education, childcare, h
Slide 70: Comparison of results
Comparison of results Type of Study (SAI) wages Result WRC HLSF KHM Basic wage for a single 562,679 n.a. 525,087 535,0871 worker (Rp) Fair wage for a single 647,081 632,939 577,597 n.a. worker (Rp) Fair wage for an average 873,236 886,113 1,366,512 n.a. worker, incl. family (Rp) Average family size
Slide 71: Management Report
Management Report May 20, 2003 Fair Wage Study - LP3ES 71
Slide 72: Overview
Overview Evaluation of existing wage systems Compliance Competitiveness Equity/Workers’ perspective Practical solutions May 20, 2003 Fair Wage Study - LP3ES 72
Slide 73: Compliance
Compliance Toward minimum wage regulation: pay above minimum wage response it in positive way May 20, 2003 Fair Wage Study - LP3ES 73
Slide 74: Competitive Environment
Competitive Environment Competitors Local and international competitors INPUT Market FACTORS single/few buyer, Prices increase of adidas’ prices decreasing material, labour, business overhead partners Production cost •Output price setting •Ability to pay May 20, 2003 Fair Wage Study - LP3ES 74
Slide 75: Comparative Performance
Comparative Performance A good above average performance compared with : GDP per capita Official poverty line Average industrial wage May 20, 2003 Fair Wage Study - LP3ES 75
Slide 76: The factories' wages and average textile industry wage
The factories' wages and average textile industry wage 1,200,000 1,000,000 AverageTextile 800,000 A Rp 600,000 B C 400,000 D 200,000 - 1999 2000 2001 Year May 20, 2003 Fair Wage Study - LP3ES 76
Slide 77: Workers perspectives
Workers perspectives Current pay < workers’ expectation single family Gap between current total wage* and fair wage No. dependents A B C D 0 dependent 9% 5% -2% -29% 1 dependent -5% -7% -14% -39% 2 dependents -15% -18% -24% -46% 3 dependents -24% -26% -32% -52% * without overtime May 20, 2003 Fa
Slide 78: Strategic tensions
Strategic tensions Business constraints: Higher Input price increase, Workers’ limited market, Expectation competition adidas business partners Practical solutions May 20, 2003 Fair Wage Study - LP3ES 78
Slide 79: Practical Solutions
Practical Solutions Key strategic decisions •seeking operational Business excellence on business strategy processes, not only labour and physical/material cost HR ‘do more with less’: strategy more attention to worker’ voice, info sharing •Retain pay levels above minimum wage Pay •Retain pay levels
Slide 80: Additional slide: gap between total wage and fair wage
Additional slide Gap between total wage* (January 2002) and fair wage (December 2001) No. dependents A B C D 0 dependent 37% 41% 29% -6% 1 dependent 19% 24% 13% -20% 2 dependents 6% 9% 0% -28% 3 dependents -4% -1% -11% -36% * without overtime May 20, 2003 Fair Wage Study - LP3ES 80
Slide 81: Thank You
THANK YOU May 20, 2003 Fair Wage Study - LP3ES 81