Labour rights groups say they are preparing to file a complaint against Adidas for breaching OECD guidelines over the dismissal of workers from a former Indonesian shoe supplier – as the sporting goods giant continues to reject the accusations.
The long-running dispute goes back to July 2012, when 2,000 workers of PT Panarub Dwikarya Benoa (PDK or PDB), a former subcontractor to the Panarub Group, went on strike demanding the payment of the provincial sectoral wage, better working conditions and the right to freedom of association.
Go deeper with GlobalData
1,300 workers were dismissed by the factory – and five years on, 327 workers have still not received severance payment.
In October 2016, the 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 ILO standards.
It also called on the Indonesian government to hold a formal inquiry to reach a decision on the legality of the strike, based on which the appropriate level of compensation due to the workers can then be determined.
Clean Clothes Campaign (CCC) now says it is preparing to file a complaint against Adidas to the German National Contact Point at the Organization for Economic Cooperation and Development (OECD) for failing to assess the human rights risks in its supply chain and provide access to remedy for the 327 workers.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataIn its complaint, Clean Clothes Campaign urges Adidas to use its leverage over Panarub to secure severance for the former workers.
However, a spokesperson for Adidas told just-style: “We reject these accusations as Adidas AG had no business relationship with PT Panarub Dwikarya Benoa at the time of the strikes, in July 2012, or at any time thereafter, up until the factory closed in January 2014.”
The sporting goods brand also argues that over the years it has “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 PDB.”
Human rights due diligence
CCC, meanwhile, asserts Adidas has violated the OECD Guidelines for Multinational Enterprises as well as the UN Guiding Principles on Business and Human Rights, which state that companies need to assess their human rights risks, carry out human rights due diligence and, in the event of human rights abuses in their supply chain, mitigate and provide access to remedy to rights holders – in this case the PDK workers.
“Adidas was well informed about the labour rights violations in 2012 that eventually forced the workers to strike. The leading sportswear brand chose to instruct its supplier to no longer produce its shoes at the contested factory; an action that failed to prevent further rights abuses from happening.
“Other actions conducted by Adidas after the 1,300 workers were dismissed, did not result in effective pressure on Panarub to provide remedy to the workers. Nevertheless, Adidas shoes [were] produced at the PDK factory at the time the first union members [were] dismissed (February 2012) and until shortly before the strike. Furthermore Adidas continues to do business with Panarub Group, the mother company of PDK.”
In turn, Adidas asserts: “PDK was an independent business, located in Tangerang, which had been used as an overflow factory and subcontractor to PT Panarub, our main footwear supplier. During peak times, orders would flow to PDK.
“However, in January 2012, when the government announced a new minimum wage, we sent an advisory to all our suppliers requiring them to meet, in full, those new wage requirements. In our memo we made it clear that we would not accept regional waivers, which were being sought by many local suppliers and were being duly contested by trade unions through the courts.
“We were the only brand operating in Indonesia to stand with the trade union movement and to decline accepting waivers granted by regional governments. Although not illegal, the waivers offered by the regional governments breached our Workplace Standards, which call for minimum wages to be paid on time and in full.
“PT Panarub had not sought a waiver, but PDB had. Thus, by mutual agreement with PT Panarub, existing orders at PDB were completed, but no new orders were placed with the subcontractor. It is important to note that the waiver granted to PDB was not unlawful and it had been obtained with the consent of the plant’s majority union, SPN.”
The sportswear giant adds: “CCC claim that Adidas has failed to apply appropriate pressure on the Panarub Group – as the principal investor in the now closed PDB factory – to pay the claims demanded by the GSBI union. CCC are fully aware that it was only through Adidas’ active engagement with Panarub Group that the supplier undertook to engage with the union in 2016, long after they had concluded that the unions’ case had no legal merit.”
Japanese sporting goods group Mizuno has also come under fire for stalling a settlement, even though the factory was making products for the company throughout the period in question.
