Adidas’ 1-Euro-shoe

Last week in Wolfsburg, Adidas and noble peace price lauderate Muhammad Yunus again announced that Adidas will produce trainers for the poor for 1 Euro a pair as a social business (see also FAZ and Daily Telegraph in 2009). The idea is to produce a shoe in Bangladesh that does not fall apart after two months and that protects the poor from diseases that they normally get from running around without shoes. Yunus condition is that Adidas and its shareholders must not make any direct profits from the project.

Why should Adidas cooperate with Yunus? According to the recent Spiegel article, Maik Pflaum from the CCC criticized this cooperation for mainly pimping up Adidas’ reputation. One participant in Wolfsburg, whose company also cooperates with Yunus, told the Spiegel that the only profit his company makes is in the area of reputation. While Adidas says that they do not need such image polishing, Yunus admits this danger of greenwashing. However, he argues that the good large companies like Adidas can actually do, outweights the potential negative effects. Yunus intends to change the employees’ “spirit” of profit maximizing in large companies – simply put: if the people feel what good they can do, they will change.

Surely Yunus is a highly influencial personality, but I wonder how well this thinking works in a world of factual constraints and how much companies do really change if they see they can do good. My friends from economics always tell me, you cannot convince a company with arguments based on ethics. Companies can do good, but they primarily must make profits, even if not all must maximize them. I do not believe that a trainer can be produced for 1 Euro (well, maybe flipflops); so Adidas must somehow cross-subsidize the costs; hence, Adidas must convince its shareholders that it is worth while to support this project; why would an Adidas shareholder do that, if not for gaining more dividends, in the end? Here we are back at Milton Friedman. Also, such a project might confront Adidas with the need to explain, why we pay 200 Euros for a sneaker, while they can produce them for 1 Euro.

Kerstin Humberg, my colleague at the University of Cologne, who writes her PhD on Yunus and social business, also blogs about Yunus.

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