November 29, 2020

Transformers Foundation wants to make the denim industry more ethical

6 min read

Transformers Foundation, a non-profit organization co-founded by Andrew Olah, CEO of Olah Inc, with other denim market insiders, aims to provide suppliers with a platform on industry threats and solutions. It has just published its first white paper: “Ending Unethical Brand and Retailer Behavior: The Denim Supply Chain Speaks Up.”

Although the foundation was created at the beginning of 2020 and planned to focus its first annual report and recommendations on environmental issues, it decided to focus on different topics. As the Covid-19 crisis happened, it has exposed deep cracks existing in the supply chain since during the pandemic it allowed brands, retailers, and importers to walk away from their contracts with suppliers without almost any consequence.

The report explains how suppliers in the denim supply chain have spoken up about their experience, ethical business practices, and what they need from brands, retailers, and importers to create a quality product while providing fair and safe working conditions for their workers.

“More than just enforcing contracts, we hope to build ethics and care into an industry that right now seems to have very little of either,” said the Transformers Foundation. “We are not saying that all denim mills and jeans factories are perfect examples of ethical behavior. But what has become clear is that even the best suppliers and factories in the world cannot operate, much less pay their employees fairly and provide a safe working environment, in these conditions, we must transform the denim industry to share profits and risks fairly across the supply chain.”

Andrew Olah, co-founder, Transformers Foundation

Photo: Transformers Foundation

Andrew Olah, co-founder, Transformers Foundation

The aim of the report is to inspire the entire denim industry to collaborate on creating a system of fair business relationship codes and offer actionable steps and solutions for all stakeholders that can help build an equitable and ethical denim and jeans industry for the future.

Marzia Lanfranchi, intelligence director of Transformers Foundation, and Alden Wicker, freelance a journalist who covers the fashion industry and supply chain, wrote the report that features in-depth interviews with executives representing a diverse cross-section of the denim supply chain, including laundries, mills, and cut-and-sew factories in 14 countries.

The Transformers Foundation sent a survey to 79 leading denim suppliers and jeans factories. Many declined to respond out of fear that their participation–even anonymously–would lead to retaliation from the brands, retailers and importers with whom they work. However, they received 25 responses, representing a cross-section of the supply chain.

The suppliers who responded showed how they care about their employees, their product and their reputation. Still, it is striking that even the leading denim suppliers with the longest relationships with brands faced significant financial damage from brand, retailer and importer behavior: Many in the supply chain decided to cancel and delay orders, postponed payments and extend payment terms, with no possibility for negotiation or discussion.

Several customers  such as brands, retailers and importers refused to pay for goods even after they were delivered to the retailer or the next supplier in the chain. One brand tried to lengthen payment terms from 45 to 90 days, impose a discount of 15%, as well as delay payments into a months-long repayment schedule.

Jeans rail

Photo: Transformers Foundation

Jeans rail

Along with it, it wasn’t all bad as some suppliers also gave examples of helpful behavior. For instance, several customers, including Nudie, Denham, Mother, Amiri, Armani, Uniqlo, Zara (Inditex), Diesel and Citizens of Humanity were cited as honoring their contracts and paying on time. However, it has also been noted, that in some cases, brands behave differently toward different suppliers so this should not be an indication of ethical behavior across the board.

Other customers, instead, committed to taking orders as originally scheduled, even though stores were closed. Asos and Ahlers worked with suppliers to change the order instead of canceling it. After putting some orders on hold, Levi Strauss planned collaboratively with a mill on how to restart the production. It also extended a financing program to suppliers so they will be less affected by cash flow issues. Mango assured a mill that whatever was produced it would take, and offered to pay in advance.

The survey has also tried to analyze what commonalities are there between brands that canceled orders and those who came upon the table with solutions. The only factor that some suppliers recognized was that independent, like, for instance, privately-owned brands, tended to act more reasonably. A few said that it came down to a company’s core culture, which tends to atrophy once a company grows large and goes public.

Despite differences, fair behaviors mostly depended upon one’s good will and responsibility. As Mostafiz Uddin, owner of Bangladeshi mill Denim Expert, told The Daily Star newspaper: “We have a situation in which the suppliers, and hence the garment workers, have to rely on the voluntary benevolence of large companies that are accountable to no one except money. This is untenable. We surely need to have some say in our own destiny; our survival cannot be in the lap of the gods.”

The survey collected a series of advice while mentioning insiders’ experience that could help suppliers avoid and face eventual similar situations. For instance, companies should right their size capacity to avoid the risk of overexposure. They should also diversify their client base including privately owned brands. They should cultivate long-term relationships with brand and retailers, open local offices in their main markets and work with international expert managers.

Why did the market reach such a situation? Many insiders’ behavior was the logical conclusion of a two-decade run of consolidation of power into the hands of multinational retailers, growing overcapacity in denim and jeans manufacturing, a colonialist attitude from buyers toward suppliers and a lack of legal or moral accountability in the industry.

To support the industry and help it facing unethical behaviors, Transformers Foundation has launched a call to action that can help all parts involved in it sharing risks and responsibilities through a series of clear actions each one can take–be them suppliers, importers, brands, denim lovers and consumers to name some categories involved. All of them are called to pursue principles of transparency, fairness toward workers, suppliers and partners.

“The supply chain now has the opportunity to work together to make changes they could never make alone,” said Andrew Olah, Transformers Foundation founder. “This report is just a first step that identifies and illuminates the many problems that are fixable with collaboration and shared intentions not only from factories and mills, but from NGOs, governments, brands, retailers, importers, and the people who love to wear denim.”

Another aim of  the Transformers Foundation is to be committed to creating a new, strong structure that will provide protection and shelter to the denim industry against future global and regional shocks.

“As different suppliers are operating in different countries regulated by uneven legislation and government support, and not all suppliers have their priorities in the right place, the Foundation is confident that the jeans and denim suppliers mentioned in its report are some of most ethical and forward-thinking insiders in the industry,” states a passage of the survey. “We would like to emphasize that the Board of Trustees and Board of Directors for Transformers Foundation are expected to abide by the same ethical principles that we are asking brands, retailers, and importers to abide by. And if we find that they are not, they will no longer be a part of the organization.”

Transformers Foundation’s founding members are: Cannon Michael, president/CEO, Bowles Farming Company; Alberto Candiani, global manager, Candiani Denim; Mostafiz Uddin, managing director, Denim Expert Ltd; Ali Abdullah, managing director, Diamond Denim by Sapphire; Michael Kininmonth, project manager, and Tricia Carey, director of global business development, Lenzing Group; Andrew Olah, CEO, Olah Inc.; Stafford Lau, managing director, Prosperity Textile; Wolfgang Schuman, managing director, The Rudolf Group; Sanjeev Bahl, founder and chief executive, Saitex International; Danielle Statham, co-owner, Sundown Pastoral Co; Alice Tonello, marketing and R&D manager, Tonello.

Its board of directors are: Alberto De Conti, head of fashion division; The Rudolf Group; Miguel Sanchez, technology leader, Kingpins Show; Robin Cornelius, founder, Product DNA.

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