Building A Just Denim Supply Chain Through Commercial Compliance
The global supply chain connecting the denim industry is vast and complicated, but there is a serious imbalance of power that has contributed to more and more instances of unethical business practices in how brands, retailers, and importers (BRIs) engage with their suppliers. During the pandemic, we saw an escalation in this sort of unethical behavior — such as canceled orders or requests for price reductions after products were already in work — and, frankly, we have not seen it recede as business and daily life returned to normal. In some cases, it’s worsened.
There are several causes of the power imbalance. It is partly due to more supply than demand in the system. Equally significant is the lack of a standardized and effective commercial compliance agreement for our industry.
To help fix the power imbalance, the Ethical Denim Council (EDC), a non-profit, was founded in 2022, following research by the Transformers Foundation in 2020 and the creation of the Eight Ethical Principles. Its mission is to address unethical behavior in the denim industry and restore commercial compliance.
Our Initiatives
The Ethical Denim Council has two approaches to restoring Commercial Compliance to the industry:
The Council
The EDC assists members of the denim supply negotiate with BRIs when they believe unethical behavior has occurred and when EDC believes the case has merit.
The Council’s perspective is based on the Eight Ethical Principles, a code of conduct regarding B2B purchasing practices for all members of the jeans and denim supply chain which has wide acceptance in the supply chain.
In the event buyers do not agree to arbitration, the Council will hear cases and pass judgment on whether the BRIs’ behavior was ethical or unethical. Unethical behavior judgments will be published on the Ethical Council website.
Business practices vary from company to company. By reviewing allegations of unethical behavior, attempting to mediate disputes, collecting buyer and supplier data, and adding visibility into business practices, everyone can be forewarned about potential problems and establish better protocol across the supply chain.
Non-Cancellation Commercial Compliance Clause
While various types of unethical behavior can occur in the industry, we are currently focused on mitigating one of those. That is, lowering the occurrence of last-minute cancellations without properly compensating suppliers.
This practice is not new and was in fact industry standard just a few decades ago. However, the denim industry, and the fashion industry as a whole, is now ripe with exploitative practices that weaken the denim supply chain.
These initiatives of the Ethical Denim Council will help to restore the power balance in denim and jeans purchasing and it will lead to a healthier and stronger partnership between brands and their suppliers throughout the industry.
Responsible Purchasing Practices
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Transparency of intent and action in business dealings. Never mislead or deceive suppliers by misrepresentations, overstatements, partial truths, selective omissions, or any other means.
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Care, compassion, and kindness. Seek to accomplish business objectives and financial results in a manner that causes the least harm and the greatest positive good for all parties. Treat suppliers as they wish to be treated themselves.
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Behave in a trustworthy manner by providing relevant information and correcting misinformation with forthrightness. Make every reasonable effort to fulfill the letter and spirit of contracts and other commitments, and resist technocratic or legalistic interpretations of agreements as an effort to justify non-compliance or abdication of responsibility.
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Fidelity and friendship to suppliers and related parties. Make every reasonable effort to resolve issues and continue long-term relationships even through adverse conditions.
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A commitment to equitability in all dealings. Never exercise power arbitrarily, employ indecent means to gain advantage, or take undue advantage of others’ mistakes or hardships.
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Protect and build the company’s good reputation and the morale of its employees by not engaging in conduct that might undermine respect. Take whatever actions necessary to correct or prevent inappropriate conduct within their company.
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Willingness to admit and correct unjust behavior or positions. Accept responsibility for ethical lapses in business dealings with suppliers, and the negative ramifications of these decisions for all involved stakeholders.
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Understand and value the efforts suppliers make to meet fixed, commercial, and technical requirements.
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DEFINITION: Provide enough information about your planned business for suppliers to act.
A company following this principle:
Provides suppliers with information about future business far enough in advance and in enough detail for the supplier to act
Updates those forecasts on at least a monthly basis
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DEFINITION: Give your suppliers steady and predictable business across the year.
A company following this principle:
Plans an even volume of business across the year with its primary suppliers
Provides longer-term plans for suppliers used more seasonally
Avoids sharp increases and decreases in volume
Issues orders consistently to fill the planned volume
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Definition: Provide enough time for suppliers to complete all processes
A company following this principle:
Provides enough time for suppliers to complete all pre-production and production processes in compliance to laws and code of conduct
Sticks to the timeline and uses the time allocated as efficiently as possible
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Definition: Use fair financial practices with suppliers
A company following this principle:
Shares financial risks with their suppliers
Avoids making unilateral decisions that negatively impact suppliers’ financials
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Definition: Play your part in improving supply chain social and environment sustainability
A company following this principle:
Recognizes that achieving sustainability goals isn’t only the responsibility of suppliers and factories
Make sure that everyone in the company is contributing to improved working conditions and environmental performance
Before setting terms of trade, manufacturers should consider these recommendations for establishing purchasing practices. Learn more here.