How we engaged with a China-based sportswear company
Background
ANTA Sports Products Ltd (Anta) is a China-based sportswear company principally engaged in design, R&D, manufacturing, marketing and sales of professional sports products including footwear, apparel and accessories. The company has a diversified portfolio of brands, including Anta, Fila, Descente, Kolon Sport and recently acquired Jack Wolfskin. In 2022, the company’s supply chain rating was downgraded following accusations of employment in its supply chain associated with labour rights risks, which could threaten the company’s reputation and sales. Meanwhile, the company’s climate change strategy appeared limited, exposing the company to financial and reputational risks. In addition, a range of indicators suggested the board might need more diversity and independence to best address its business challenges.
We encouraged the company to implement a supplier heatmap and prioritise higher-risk suppliers for audit and consider alternative sources of supply where necessary.
Our engagement
In 2022, we met with Anta’s ESG team at its Hong Kong office and raised our concerns relating to its supply chain labour rights and lack of ambitious climate change strategy and concerns over board composition. We encouraged the company to improve its due diligence processes to reduce its risks of human and labour rights violations with reference to the Corporate Human Rights Benchmark (CHRB). We also called for transparency on possible human rights breaches and available remedies. Later, in an in-person meeting with the team once again in 2023, we encouraged the company to implement a supplier heatmap and prioritise higher-risk suppliers for audit and consider alternative sources of supply where necessary.
We also suggested that the company set science-based targets for Scope 1, 2, and 3 emissions in alignment with the Paris Agreement goals, ideally accredited by the science-based targets initiative (SBTi). In addition, we discussed how the company could develop its decarbonisation strategy under the national carbon neutrality target commitment.
On board effectiveness, we encouraged the separation of the combined chair and CEO roles to ensure more independent oversight of management by the board. We also noted the absence of any female directors in early 2021, sharing our preference for at least 20% gender diversity and explaining our concern at board independence below our typical policy guidance of above 30%. We noted that a sustainability committee was founded in late 2021 with the CFO as the chair, all independent directors and all the subsidiaries’ CEOs as the members. However, we recommended voting against directors in 2022 due to our dissatisfaction with overall board composition.
The board separated the chair and CEO roles in 2023, and it has progressively appointed female board members, with board gender diversity rising from zero in 2021 to 20% by 2024.
Changes at the company
In 2024 the company published details of its suppliers to demonstrate its supply chain transparency and traceability. The company adopted both an internal code of conduct (CoC auditing) and a range of external human rights evaluation standards to monitor suppliers. It published its supplier code of conduct in 2023 to better facilitate suppliers’ business behaviours to be in line with the company’s core ethical values, with nearly 40% of tier-one suppliers enrolled in the ESG audit programme and approximately 60% receiving ‘good or above’ ratings. It also adopted a « Procurement Contingency Plan » to mitigate supply chain risks, articulating actions it would take against child and forced labour violations. As of today, 100% of the tier-one suppliers are enrolled in the ESG audit programme.
In 2024, the company set targets to reduce operational GHG emissions (scope 1, 2) by 42% and Scope 3 intensity GHG emissions (per US$ value-added) by a little over 50% by 2030, vs. a 2022 baseline. These were later validated by the SBTi, indicating these are aligned with a 1.5°C trajectory.
While the 2023 ESG report lacked Scope 3 emissions data, the company assured us that these will be included in a future report and is aiming to achieve third party verification. The company included scope 3 emission data in recent 2024 published report.
On board effectiveness, the board separated the chair and CEO roles in 2023, and it has progressively appointed female board members, with board gender diversity rising from zero in 2021 to 20% by 2024, with 40% board independence, including fully independent audit, nomination and compensation committees.
