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Boohoo sets out how it will deal with ‘substantially true’ supply chain allegations of poor working conditions and low pay

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Boohoo sets out how it will deal with ‘substantially true’ supply chain allegations of poor working conditions and low pay

Allegations of poor working conditions and low rates of pay in Leicester factories serving the Boohoo Group are “not merely well-founded but substantially true”, according to the independent review that it commissioned into its business in response to allegations this summer.

 

The company’s monitoring of its Leicester supply chain was “inadequate”, Alison Levitt QC’s independent review of its supply chain concluded. The report, which Boohoo Group published today, also found that while there is “no evidence that the company itself of its officers have committed any criminal offences”, senior directors did know there were serious issues about the treatment of “largely invisible” factory workers in Leicester and the programme it put in place to remedy this a year ago did not move quickly enough. “Boohoo’s culpability,” says the report, “lies not in doing nothing but that they did too little too late.”

 

In the last two years Boohoo Group has added brands from Karen Millen and Coast to Oasis and Warehouse to a stable that previously included boohoo.com, Nasty Gal and MissPap.

 

The newspaper allegations came after a Labour behind the Label report and The Sunday Times both alleged, in early July, unsafe conditions and minimum wage breaches at some Leicester factories serving Boohoo. A spike in infection rates in Leicester had led to the first UK local lockdown at the end of June.

 

In her report, Levitt argues that Boohoo “ought to have appreciated the serious risks created by ‘lockdown’ in relation to potential exploitation of the workforce of the Leicester factories.” She says that while the retailer “capitalised on the commercial opportunities offered by lockdown and believed that it was supporting Leicester factories by not cancelling orders” it “took no responsibility for the consequences for those who made the clothes they sold.” Levitt also said she had seen no evidence to suggest that the company’s purchasing practices had been responsible for an increased Covid-19 rate in Leicester. The report suggests that Boohoo buys from about 200 Tier One suppliers in Leicester, who subcontract to a further 300 Tier Two factories, located close to each other in the city,

 

Boohoo today set out out how it plans to respond to the independent report, which concludes that it has grown so quickly that its governance processes have failed to keep pace, while its focus on turnover has sometimes been at the expense of its other corporate obligations.

 

Alison Levitt QC, who was commissioned to produce the report into Boohoo’s Leicester-based supply chain following newspaper allegations of minimum wage breaches and Covid-19 safety breaches, also said the retailer had not felt responsible for conditions in the Leicester factories that supplied it “other than at a superficial level” and that it had on occasions failed to appreciate the responsibility to act in the best interests of all shareholders that come with being a listed company.

 

She warned that Boohoo now had the power to be a tremendous force for good - but that if it failed to live its values, it was “inevitable” that the problems would recur – and that was likely to hit its share price.

 

In the 235-page report published today, Levitt said Boohoo had grown so quickly that its governance processes had failed to keep pace, while its focus on turnover has sometimes been at the expense of its other corporate obligations. She said that she did not accept the argument that Boohoo’s business model was depending on profits made from the deliberate exploitation of the Leicester supply chain free from scrutiny. But, she said, that in the future Boohoo would need to change its approach, “not least in terms of how Boohoo educates and trains its suppliers”.

 

She added: “I have reached the conclusion that the true reason that Boohoo did not become more involved in monitoring conditions in Leicester was that it saw it as being a lower priority than matters which directly affected the company (such as commercial issues or their own employees). The Leicester workers are not employed by them and so they are not their responsibility in the way that their own workforce is. To some extent this is understandable, but can lead to serious issues of the kind which Boohoo is now facing.”

 

How Boohoo will respond

 

Boohoo Group has responded to Levitt’s Independent Review into the Boohoo Group PLC’s Leicester supply chain, by setting out six areas in which it plans to take action, reflecting the report’s recommendations. It says it will strengthen its board with two new non-executive directors, one of whom will be a specialist in environmental, social and governance issues, and a new supply chain compliance committee that report into a new board-level risk committee. It is appointing a new group director of responsible sourcing, while its buying team will also develop a new, mandatory set of purchasing principles.

 

At the same time the business plans to raise supply chain standards with a consolidated supplier list and an invitation to suppliers who can demonstrate an ethical and sustainable approach to business to join its list. It will continue to support Leicester workers and their rights through a new garment and textiles community trust. It says it will support suppliers with a more consistent and predictable flow of orders that will enable them to plan, while also introducing new KPIs aimed at improving management systems and worker engagement and it will advise its suppliers on how best to go about meeting them. Finally, it will also demonstrate best practice in action through its own state-of-the-art manufacturing facility to be opened in Leicester.

 

Boohoo Group chief executive John Lyttle said the Levitt review had “identified significant and clearly unacceptable issues in our supply chain and the steps we had taken to address them, but it is clear that we need to go further and faster to improve our governance, overnight and compliance.”

 

Setting the context

Today’s report and Boohoo’s response to it comes at a time when many retailers are responding as expectations of them change in areas from social responsibility to sustainability.

 

Earlier this year, Zalando became the first retailer to make it compulsory for brands selling via its platform to measure how sustainable their businesses are.

 

Asos this summer asked brands that sell via its website to sign up to four “ambitious” new commitment this year – from signing the transparency pledge to mapping its UK garment supply chains and identifying supply chain risks within them.

 

Quiz is also reviewing its supply chain in response to minimum wage allegations.

 

Beyond fashion, Unilever this week said it was working with Google Cloud towards its ambition of creating a deforestation-free supply chain by 2023.

 

Boohoo and Karen Millen are ranked Top100 in RXUK Top500 research, and Oasis is Top50, while Coast, Warehouse and NastyGal are Top250.

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