Why won’t Adidas pay-up in Indonesia?

Adidas workers protest in Indonesia. Photo with permission from People & Planet.

Sportswear giant Adidas is fighting workers and campaigners who claim it owes a whopping $1.8 million to 2,800 former workers in Indonesia.

In 2011, the owner of the PT Kizone factory – which makes goods for Adidas as well as Nike and Dallas Cowboys – fled the country, leaving large debts and severance pay to workers outstanding. An Indonesian court ruled that the workers were owed $3.4 million in total.

Struggling to feed their families and pay rent, the workers called on their union, DPC, to fight for their money. Both Nike and Dallas Cowboys agreed with the union to pay their share, but Adidas are holding out.

Since then a coalition of Clean Clothes Campaign, People & Planet, United Students Against Sweatshops, War on Want and Labour Behind the Label have launched a campaign in support of the workers’ demands. 

Over the first weekend of December 2012, protesters hit the streets, gathering outside ‘Badidas’ stores in 20 cities across Britain and the US. Workers themselves protested in November outside Adidas’ offices in Jakarta, while another group crashed Adidas’ speech at a sustainable business event in London on 28 November.

Some 50,000 petition signatures and thousands of angry messages on the Adidas Originals Facebook page have caused further damage to the brand. And now, embarrassingly and expensively for Adidas, US universities have cut contracts worth well over $10 million.

So why are Adidas taking such a hit to avoid paying out pennies? The reason given by Adidas CEO Frank Henke ‘We do not agree… that a licensor [ie. Adidas] is obliged to remedy labour non-compliances by assuming the legal responsibilities of its contracted suppliers.’

Henke’s answer suggests that Adidas is not prepared to accept responsibility for the payment of workers in their supply chains, which is how much of their business is carried out.

But campaigners counter that the workers have been making millions for Adidas over the last ten years. Somebody has to pay for this. Should it be Adidas, who paid £100 million ($161 million) just to sponsor the Olympics, or workers who make pennies per hour?

Adidas knows what’s at stake if they pay up – it’s the thin end of the wedge for their business practices, and that’s why sometimes $1.8 million is worth a whole lot more.

To find out more about the campaign go to the People & Planet website.

Jim Cranshaw is a corporate power campaigner at People & Planet.