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Adidas to Source in Myanmar

Sporting goods retailer Adidas said it will start sourcing product from Myanmar as it endeavors to evolve its supply chain. There has been a buzz about Myanmar as an up and coming sourcing locale over the last year, but few brands have yet to foray into the country still working to develop its infrastructure and labor rights laws.

Adidas published its updated Global Factory List, which includes the names and locations of all factories that manufacture for the brand, and Myanmar made the list for the first time. The company will work with one factory there called Shyang Jhuo Yue Co. Ltd. in Yangon, the city’s commercial capital and the same city where Gap has been producing goods since last year.

Myanmar is making strides toward developing its economy and has been since it began transitioning to a democracy three years ago, but concerns over human rights issues like forced labor and child labor have kept many brands at bay. But as sanctions imposed on the country during its military rule were eased, some brands started to see Myanmar in a new low-cost labor light (on average, a garment worker in Myanmar makes $75 to $150 per month based on skill levels).

For Adidas, it took two years of what the company calls “extensive stakeholder engagement” before allowing any of its business partners to start sourcing in Myanmar. The retailer said it is committed to upholding the OECD Guidelines for Multinational Enterprises, which includes the need to support and ensure respect for human rights in the global supply chain.

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Adidas outlined specific guidance for its suppliers in Myanmar regarding land acquisition and industrial site development including mandatory safety checks if existing buildings are purchased, and seismic performance tests for all buildings as part of their structural evaluation.

The three takeaways from the move into Myanmar, according to Adidas are: First, be patient and invest time; secondly, it is not a one-time investment; and thirdly, it is clear that the government still has a lot of work to do to build the fundamentals, if worker rights are to be properly protected.

“If you want to build towards a successful outcome, you must take the time needed to open the necessary channels for stakeholder dialogue. It takes time to get the process right and to capture and understand local interests and perspectives,” the company wrote on its blog Tuesday.

“We need to continuously invest in resources in-country and on the ground, to engage regularly with government, to understand new laws and the rapidly developing administrative systems, as well as the numerous civil society groups and trade unions that are blossoming in the light of their new-found freedoms. The Labour Organization Law, for example, which was adopted in October 2011, has already led to the registration of over 400 basic-level trade unions across the country,” Adidas noted.

The absence of adequate labor laws continues to pose challenges and the frequency of labor-related disputes continues to rise in the country, according to Adidas.

In an effort to combat that, Adidas has called on its suppliers to employ a qualified industrial relations officer as part of a human resource function, it is working to familiarize the factory with its employment standards and the need to respect freedom of association, and it has translated its workplace standards into Burmese to ensure they are part of new employee training.

That aside, Adidas admits the government still has “a lot of work to do” to build the industry’s fundamentals.

There is no official minimum wage in the nation, though the Myanmar Ministry of Labor, Employment and Social Security in partnership with the Confederation of Trade Unions Myanmar said last month it would conduct a survey on setting an official minimum wage level for workers and gather suggestions from stakeholders. The wage study is expected to be complete by the end of February.

Adidas said in the absence of a set wage, it requires suppliers to set wages against the prevailing industry rate for export factories the same sector. And in the absence of a health and safety law—though one is presently being drafted—that sets limits for workers’ exposure to noise, chemicals, dust or vibration, Adidas is using its internal Health and Safety Standards that align with international best practice.

“As a company that runs its business operations in a sustainable way, we do acknowledge that sourcing in Myanmar presents challenges as well as opportunities,” Adidas said. “We are fully committed to improving social and environmental standards in the garment sector in Myanmar and we are taking this responsibility very seriously.”