Adidas Economic Audit

1. Executive Summary: The Architecture of Entrenchment

This forensic audit evaluates the economic footprint of Adidas AG (hereinafter “Adidas” or “the Group”) within the State of Israel and the Occupied Palestinian Territories (OPT). The primary objective is to map the corporation’s “Economic Complicity” by auditing its supply chain, direct investments, operational presence, and brand associations against the framework of the UN Guiding Principles on Business and Human Rights (UNGPs) and international humanitarian law.

The investigation synthesizes financial filings from fiscal years 2022-2024, Israeli corporate registry data, civil society documentation, and supply chain disclosures. Contrary to a narrative of withdrawal suggested by the 2018 termination of the Israel Football Association (IFA) sponsorship, the forensic evidence reveals a trajectory of strategic entrenchment. Rather than disengaging, Adidas has consolidated its corporate control, deepened its reliance on settlement-linked manufacturing partners, and pivoted its branding strategy toward high-value, politically insulated cultural assets.

Key Forensic Findings

1. Corporate Consolidation (The “Buy-In”): In a definitive signal of market commitment, Adidas AG acquired the remaining 15% non-controlling interest in its subsidiary, Adidas Israel Ltd., on January 31, 2024.¹ This transaction, executed amidst heightened regional conflict, transitioned the local entity to a wholly-owned subsidiary, effectively doubling down on its exposure to the Israeli economy.
2. The Supply Chain Nexus (Delta Galil): Adidas utilizes Delta Galil Industries—a firm listed in the UN Database of companies involved in settlement business—as a global licensee and distributor.² This partnership integrates the settlement industrial complex (specifically facilities in Barkan and Ma’ale Adumim) into Adidas’s global value chain, with forensic traces of “Made in Israel” products appearing in international markets.⁴
3. Shadow Sponsorship and Sports-Washing: Following the 2018 IFA divestment, Adidas pivoted to the Tel Aviv Marathon (2025) and renewed retail relationships with Maccabi Tel Aviv.⁵ These partnerships, particularly with the marathon sponsored by settlement-financier Bank Leumi, constitute a sophisticated form of “sports-washing”—utilizing the “White City” narrative to normalize operations while bypassing direct political critique.
4. Technological Extraction: Through Hydra Ventures and partnerships with HYPE Sports Innovation, Adidas actively scouts and invests in the Israeli sports-tech ecosystem.⁷ This pipeline extracts dual-use technologies (surveillance-adjacent analytics and biometrics) from the “Silicon Wadi,” integrating them into Adidas’s global R&D stack.

Compliance Rating: Tier 2 – Active Economic Enabler.

The audit concludes that Adidas maintains a High Level of Economic Complicity. The corporation generates tax revenue for the State of Israel, legitimizes settlement-based industries through licensing, and leverages the region’s technological sector, creating a reciprocal economic loop that sustains the status quo of the occupation.

2. Corporate Governance and Financial Consolidation

To understand the depth of Adidas’s complicity, one must analyze the legal and financial structures it employs to operate within the territory. Unlike brands that rely solely on third-party distributors, Adidas maintains a heavy, direct corporate footprint, which has recently been fortified.

2.1. The Subsidiary: Adidas Israel Ltd.

Adidas operates via a dedicated subsidiary, Adidas Israel Ltd. (Registration No. 513404244), headquartered at 8 HaMelacha Street, Holon.⁹ This location places the company’s operational nerve center in the Tel Aviv metropolitan industrial district, embedding it within the municipal tax base of the central state.

2.1.1. The 2024 Minority Buyout

A critical event in the company’s timeline occurred in early 2024. Between 2022 and 2023, Adidas AG held an 85% controlling interest in Adidas Israel Ltd., with the remaining 15% held by local non-controlling interests (likely historical distribution partners or local management).¹¹

The 2024 Annual Report discloses a material change:

“The remaining non-controlling interest of 15% of adidas Israel Ltd., were acquired on January 31, 2024.” ¹

Forensic Implication: This acquisition is not merely a bookkeeping adjustment; it is a strategic maneuver. By deploying capital to acquire 100% equity, Adidas AG has:

• Eliminated Local Checks: Removed any minority shareholder friction, allowing for streamlined decision-making dictated directly from Herzogenaurach, Germany.
• Signaled Resilience: Executing this buyout during the first quarter of 2024—a period of intense military conflict and economic instability in Israel—signals to the market and the Israeli government that Adidas views the territory as a core, long-term asset, impervious to geopolitical volatility.
• Consolidated Profits: All future profits generated from the Israeli market now flow directly to the parent company, tightening the economic integration between Adidas AG and the Israeli economy.

Table 1: Ownership Evolution of Adidas Israel Ltd. (2022-2024)

Source: Adidas AG Consolidated Financial Statements, Notes to Non-Controlling Interests.¹

2.2. Financial Materiality and Tax Contribution

While Adidas aggregates its financial data by region (EMEA), the specific disclosures regarding “Subsidiaries with Non-Controlling Interests” prior to the buyout allow for a forensic reconstruction of the Israeli subsidiary’s scale.

In 2023, the combined net sales for subsidiaries with non-controlling interests (comprising predominantly Agron Inc. in the USA and Adidas Israel Ltd.) totaled €669 million, with a net income of €61 million.¹¹ Even if the Israeli subsidiary accounts for a fraction of this (e.g., 10-15%), it represents a substantial revenue engine, likely generating tens of millions of Euros annually.

Economic Direct Contribution:

• Corporate Tax: Adidas Israel Ltd. is subject to the Israeli corporate tax rate (23%). Based on estimated revenues, the company is a significant contributor to the Israeli treasury, funding general state expenditures including military and settlement infrastructure.
• Municipal Taxes (Arnona): The company operates a network of flagship stores (e.g., Jerusalem Mamilla, Dizengoff Center, Azrieli Mall).¹² These properties incur high municipal taxes paid to local councils, including the Jerusalem Municipality, which orchestrates the Judaization of East Jerusalem.
• Judicial Fees: A review of legal databases shows Adidas Israel Ltd. is a frequent litigant, prosecuting small claims and labor disputes (e.g., Gernkial v. Adidas Israel Ltd., Badiya v. Adidas Israel Ltd.).¹³ This active use of the court system involves the payment of state fees and affirms the company’s recognition of and submission to Israeli sovereignty, including over contested jurisdictions.

3. The Supply Chain Nexus: Delta Galil Industries

The most acute vector of “Economic Complicity” is Adidas’s strategic partnership with Delta Galil Industries Ltd. (TASE: DELT). This relationship transcends a standard buyer-supplier arrangement, constituting a deep integration of the Adidas brand into a supply chain rooted in the occupation.

3.1. The Partner Profile: Delta Galil

Delta Galil is an Israeli textile giant with a documented history of operating in illegal settlements.

• Settlement Operations: The Who Profits Research Center has documented Delta Galil’s operation of warehouses in the Barkan Industrial Zone (West Bank) and retail branches in Ma’ale Adumim, Pisgat Ze’ev, and Ramot.¹⁴
• UN Database Inclusion: Delta Galil is listed in the UN OHCHR database of business enterprises involved in certain activities relating to settlements in the Occupied Palestinian Territory.³ This listing specifically flags the company for the “supply of equipment and materials facilitating the construction and the expansion of settlements and the wall” and “use of natural resources, in particular water and land.”

3.2. The Global Licensing Agreement (2021)

In June 2021, Adidas signed a global licensing agreement with Delta Galil. This deal empowered Delta Galil to design, manufacture, and distribute Adidas-branded products, specifically men’s and women’s underwear, under the “Badge of Sport” and “Originals” labels.²

Forensic Analysis of the Agreement:

• Scope: The agreement covers global markets including APAC, EMEA, Latin America, and North America.² This means that Adidas underwear sold in London, New York, or Berlin is likely managed, produced, or sourced by a settlement-complicit firm.
• Technology Transfer: The partnership involves the use of proprietary technologies like “Refibra” and “Tencel”.¹⁵ This technology transfer enhances Delta Galil’s competitive advantage, increasing its profitability and, by extension, its tax contributions to the Israeli state and settlement municipalities.
• Revenue Flow: Delta Galil pays royalties to Adidas AG. Conversely, Adidas facilitates Delta Galil’s global revenue generation. This reciprocal financial relationship directly links Adidas’s bottom line to the financial health of a company sustaining the settlement enterprise.

3.3. Manufacturing Origins and Labeling

While Delta Galil operates factories in Egypt, Bulgaria, and Thailand ¹⁶, it retains significant production and logistical capabilities within Israel.

• “Made in Israel” Evidence: Forensic review of secondary markets and product listings identifies Adidas-branded products, such as sliding shorts and compression gear, explicitly labeled “Made in Israel”.⁴
• The Barkan Connection: The documented existence of Delta Galil warehouses in the Barkan Industrial Zone ¹⁴ raises the high probability that Adidas goods—even if manufactured elsewhere—may pass through settlement logistics hubs for packaging, finishing, or distribution. This “laundering” of goods through settlement infrastructure makes the Adidas supply chain complicit in the normalization of the occupation.

Table 2: Risk Analysis of Adidas-Delta Galil Partnership

4. Brand Positioning and Sports-Washing Mechanisms

Adidas’s marketing strategy in Israel has evolved from direct institutional sponsorship to more subtle, culturally embedded “sports-washing.” This shift appears calculated to mitigate political backlash while maintaining market dominance.

4.1. The IFA Divestment (2018): A Strategic Pivot

In 2018, Adidas terminated its sponsorship of the Israel Football Association (IFA) following a campaign by 130 Palestinian sports clubs and the BDS movement.¹⁷ The campaign highlighted the IFA’s inclusion of six clubs located in illegal settlements (e.g., Ariel, Ma’ale Adumim).

• The “Neutrality” Defense: Adidas officially claimed the decision was “not politically motivated” and stemmed from the expiration of the contract.¹⁹ However, the timing suggests a risk-mitigation strategy to avoid inclusion in the emerging UN database, effectively passing the reputational liability to Puma (and later Erreà/Reebok).²⁰

4.2. The Tel Aviv Marathon (2025): The New Frontier

With the IFA relationship severed, Adidas has aggressively moved to sponsor the Tel Aviv Marathon, a premier cultural event.

• The “TLV” Shoe: For the 2025 marathon, Adidas released a specialized shoe: the “Adizero Boston 12 x TLV Marathon”.⁵ This product features design elements inspired by the “White City” architecture and Tel Aviv coastline.
• Bank Leumi Partnership: The marathon is title-sponsored by Bank Leumi, a financial institution heavily sanctioned by human rights groups for financing settlement construction.⁵ By co-sponsoring this event, Adidas aligns its brand with the primary financiers of the occupation, engaging in a “joint venture” of image normalization.
• Sports-Washing Analysis: The sponsorship promotes Tel Aviv as a liberal, cosmopolitan hub, obscuring the reality of the conflict just miles away. This creates a “sanitized” entry point for the brand, allowing it to profit from the Israeli market without the direct stigma of the settlement football clubs.

4.3. The “Shadow” Retail of Maccabi Tel Aviv

Despite reports that Maccabi Tel Aviv took its kit manufacturing “in-house” after breaking with Adidas ²², current product listings on the Adidas Israel website show a “Maccabi Tel Aviv training shirt 25/26”.⁶

• Forensic Insight: This suggests a “Shadow Sponsorship” or a high-level retail supply agreement. While not the “Official Kit Sponsor” on the jersey chest, Adidas continues to profit from the club’s merchandise sales. Maccabi Tel Aviv is a cultural icon of Israeli nationalism; continuing to supply and co-brand with them demonstrates a refusal to fully disengage from the state’s primary sporting institutions.

4.4. The Bella Hadid Controversy (2024)

In July 2024, Adidas removed Palestinian-American model Bella Hadid from a campaign for the SL72 shoe (referencing the 1972 Munich Olympics) after the Israeli government and pro-Israel groups criticized her involvement.²³

• Implication: The swift removal of Hadid, followed by an apology to “partners” (implicitly the Israeli lobby), demonstrates a corporate hierarchy where sensitivity to Israeli political pressure outweighs the company’s stated commitments to diversity and inclusion. It signals that Palestinian identity is viewed as a “brand risk” to be mitigated, further aligning the corporation with the Israeli state narrative.

5. Innovation and Venture Capital: The Hydra Ventures Operations

Adidas’s economic footprint extends into the high-tech sector, specifically through Hydra Ventures, its corporate venture capital (CVC) arm. This engagement extracts value from the Israeli “Silicon Wadi,” often leveraging technologies developed within the military-industrial complex.

5.1. The HYPE Capital Connection

Hydra Ventures and former Adidas executives (including former CMO Bernd Wahler) have been instrumental in the establishment and funding of HYPE Sports Innovation and HYPE Capital, a $75 million fund focused on sports tech.⁷

• The “Adidas Family” Legacy: The fund is backed by the Adi Dassler International Family Office, creating a direct lineage connection between the founding family of Adidas and Israeli tech investment.²⁵

5.2. Portfolio Analysis and Dual-Use Technology

Adidas scouting delegations, organized by Jerusalem Venture Partners (JVP), have targeted startups in AI, big data, and computer vision.²⁶ The technologies targeted—often branded as “Fan Engagement” or “Smart Stadiums”—frequently rely on surveillance capabilities (facial recognition, crowd tracking) that have dual-use applications in the military occupation.

Specific Investments and Targets:

• Tokabot: A digital engagement platform invested in by HYPE Capital.⁸
• Playsight: A video analytics company using high-resolution cameras for automated officiating and broadcasting.⁸ While marketed for sports, the underlying computer vision technology parallels surveillance systems used to monitor Palestinian populations.
• Zone7 / PlayerMaker: Performance analytics companies that aggregate biometric data.

The Economic Loop: By investing in these startups, Adidas provides the capital and validation necessary for them to scale. This bolsters the Israeli tech ecosystem, which acts as a strategic buffer for the Israeli economy against boycott efforts. The “innovation extraction” model allows Adidas to profit from the R&D generated by a militarized society while presenting it as harmless “sports tech.”

6. Financial Analysis of Economic Complicity

A forensic reconstruction of the financial flows highlights the material nature of Adidas’s involvement.

6.1. Revenue and Balance Sheet Impact

• Revenue Estimates: Based on the €669 million aggregate revenue for non-controlling interest subsidiaries in 2023 ¹¹, and adjusting for the size of the Israeli market relative to the US (Agron Inc.), Adidas Israel likely generates between €50 million and €80 million annually.
• Asset Entrenchment: The 2024 balance sheet shows increased “Goodwill” and “Intangible Assets” associated with the full acquisition of the Israeli subsidiary. This represents a “sunk cost” that incentivizes Adidas to protect the Israeli market against political disruption.

6.2. The Tax Multiplier

Every shekel of profit generated by Adidas Israel Ltd. is taxed by the State of Israel.

• Corporate Tax: ~23% of net income funds the state budget.
• VAT: A 17% Value Added Tax is collected on every Adidas product sold in Israel, directly transferring wealth from consumers to the state treasury.
• Real Estate Taxes: The prime real estate occupied by Adidas stores (e.g., in the Azrieli Center) generates massive municipal tax revenues for Tel Aviv and Jerusalem, funding urban development that often comes at the expense of Palestinian development.

6.3. The Delta Galil Royalty Stream

The licensing model with Delta Galil creates an “Invisible Revenue Stream.” Adidas does not need to physically manufacture in a settlement to profit from it. By collecting royalties from Delta Galil, Adidas is effectively taking a cut of profits generated by a company that exploits settlement resources. This is profit-sharing with the occupation.

7. Operational & Reputational Risk Assessment

7.1. Legal Compliance Risks

• OECD Guidelines: The partnership with Delta Galil likely violates the OECD Guidelines for Multinational Enterprises, which require enhanced due diligence in conflict-affected areas. Adidas has failed to mitigate the risk of its supply chain extending into illegal settlements.
• International Law: The transfer of manufacturing and economic benefit to entities operating in settlements (Barkan) contravenes the spirit of UN Security Council Resolution 2334.

7.2. The “Recidivism” of Sports-Washing

The pattern of behavior—dropping the IFA but picking up the Tel Aviv Marathon and Maccabi retail—demonstrates a cynical approach to corporate responsibility. This “recidivism” increases the risk of intensified boycott campaigns, as activists realize that symbolic divestments (like the IFA) did not alter the underlying economic relationship.

7.3. Employee and Cultural Friction

Interviews with Thibault Durand, General Manager of Adidas Israel, highlight a disconnect between corporate “diversity” rhetoric and the reality on the ground.²⁷ While promoting “inclusion,” the company operates in a market defined by systemic exclusion (the permit regime, settlement expansion). This internal contradiction poses a morale and retention risk, as well as a PR risk when executives are pressed on the incongruity of their positions.

8. Conclusion: A Verdict of Deep Complicity

Based on the forensic synthesis of financial data, supply chain mapping, and strategic analysis, this audit classifies Adidas AG as a Tier 2 Active Economic Enabler of the Israeli occupation economy.

The 2018 divestment from the Israel Football Association was a successful diversion, creating a mirage of disengagement. Under the surface, Adidas has:

1. Consolidated Control: Buying 100% of its Israeli subsidiary in 2024.
2. Outsourced to Complicity: Licensing its brand to UN-blacklisted Delta Galil, thereby integrating settlement infrastructure into its global supply chain.
3. Normalized the Brand: Using the Tel Aviv Marathon and “TLV” specific products to embed the brand into the Zionist narrative while silencing Palestinian voices (Bella Hadid).
4. Invested in the Complex: Funding the Israeli sports-tech ecosystem through Hydra Ventures/HYPE.

Final Assessment: Adidas does not merely “do business” in Israel; it is structurally woven into the economy that sustains the occupation. Its operations generate tax revenue for the state, legitimacy for settlement companies, and capital for the tech sector, making it economically complicit in the maintenance of the status quo.

Works cited

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