How the Ethical Denim Council Will Settle Disputes When Arbitration Fails
Andrew Olah has a problem. The CEO of Olah Inc. and the founder of Kingpins, Transformers Foundation and the Ethical Denim Council, can’t stand it when people don’t behave in a way he deems fair. Or in a way that’s not good business. He really hates it when brands place big orders then cancel them. He also loathes it when brands won’t own what they do wrong and make it right.
But he’s not getting mad, or trying to get even. He’s just trying to get everyone to play by the same rules.
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Olah is taking the concept of the Ethical Denim Council, a volunteer watchdog group established in 2022 that serves as informal ombudsman to the industry, another step closer to its goal of making the denim sector something everyone is proud to be a part of. He’s creating a way to look at what many consider to be egregious behavior and recommend the parties involved seek arbitration. Formed last year, the council serves only as facilitators, he said.
If the two parties don’t go the arbitration route, they will be asked to go before a small group of individuals, none of whom is related to the denim industry or the apparel business. That committee will listen to and review complaints then decide if a party is being wronged and make recommendations on how to make it right. Nothing will be binding.
According to Olah, the review committee will include individuals from academia, business, politics, an NGO, and maybe even religious leaders. Members of the group have not yet been finalized.
“We’re picking people not related to the business but whose opinions are worth listening to,” Olah said. “They will be like private citizens listening to a case of someone behaving unethically. It sounds benign but I don’t think anyone wants to be considered unethical.”
Tipping point
It was a constant thrum of stories of unethical behavior during the pandemic that brought Olah and his cohorts from the denim world to the point of taking action. There were too many anecdotes of orders getting cancelled late and not paid for, unpaid orders caught up in rampant supply chain issues, brands and retailers placing extremely large orders to ensure they had stock, then cancelling them and not making good on it with the vendor.
To Olah, such situations create a dramatic ripple effect. He gives the hypothetical example of an order of 100 units that swells to 200, requiring the supplier to hire extra help or pay to run his looms or factories around the clock. Then the order gets cancelled. The mill or factory owner is out the money, not just for the 200-unit order but the cost of the extra help and the power to run the facility. Then the producer ends up letting workers go, putting multiple families further down the food chain at risk of going hungry.
The industry didn’t used to be this way, Olah added, when the companies were privately owned.
“People behaved impeccably,” he said. “Individuals had pride in their work and their behavior. Now most of the companies are owned by corporations and hedge funds; they are motivated to make a profit and don’t even know what commercial compliance is.”
Olah is hoping to achieve social compliance through commercial compliance. Which is to say that signed contracts must be honored. “Otherwise, what is the point of a contract?” he asked.
He expects council members to hear the first grievance in the second half of this year, and hopes a resolution will help the program gain momentum. There was a complaint recently that almost went to arbitration, but a settlement was reached. At issue was an order that was filled and shipped to a buyer who ghosted the vendor for months. The seller finally accepted a very low price for the merchandise just to put the matter to rest.
Fear of retribution is what discourages anyone from complaining, no matter what the stakes, said Olah, who hopes to resurrect the Kingpins show in Hong Kong and the Kingpins City Tour in China, both put on hold during Covid-19. Wronged suppliers are afraid of losing business from major clients.
Three years ago, when the Transformers Foundation released its first report, “Ending Unethical Brand and Retailer Behavior: The Denim Supply Chain Speaks Up,” 79 denim suppliers were asked to reply anonymously to a survey about problems with “partners.” Only 25 responded, meaning that about two-thirds of the people who received the survey were afraid of buyer backlash.
“Are any of the suppliers brave enough to call them out?” Olah asked. “The supplier is afraid to say this is happening because they are afraid of losing all their business.”
Not uncommon is the buyer who threatens to stop doing business with a vendor completely, if that vendor doesn’t bend to the buyer’s wishes. If council members find someone guilty of unethical practices, the resolution will go up on the website of the Ethical Denim Council.
“Maybe we are naïve,” he said. “We want to find the companies we can help and if not, we will do what we have to do.”
“The suppliers are too petrified to complain,” he said. “As a member of this industry, it disgusts me.”
