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Boohoo's found 'many failings' in working conditions and low pay in Leicester supply chain

Yahoo Finance Staff
·5 mins read
Photo: Igor Golovniov/SOPA Images/LightRocket via Getty Images
Photo: Igor Golovniov/SOPA Images/LightRocket via Getty Images

UK-based budget fashion retailer Boohoo (BOO.L) revealed that an independent review into allegations about working conditions and low pay had found many failings in its Leicester supply chain.

On 8 July 2020 Boohoo’s Board announced that it was undertaking an Independent Review of its UK supply chain, in which Alison Levitt QC was appointed to conduct the Independent Review. The intention was to consider boohoo's obligations and duties of care in relation to the workforce in its Leicester supply chain.

The review was to:

  • Consider whether the allegations about working conditions and low pay are well-founded; and if they are;

  • Consider the extent to which boohoo monitored its Leicester supply chain and had knowledge of the allegations;

  • Consider the Group's compliance with the relevant law; and

  • Make recommendations for the future.

The Independent Review was completed and was delivered to the Board on 24 September 2020.

Levitt’s review found that there were “many failings in the Leicester supply chain and recommended improvements to boohoo's related corporate governance, compliance and monitoring processes.”

“Levitt is satisfied that Boohoo did not deliberately allow poor conditions and low pay to exist within its supply chain, it did not intentionally profit from them and its business model is not founded on exploiting workers in Leicester,” Boohoo said a statement.

The statement also pointed out that there was “ample evidence that the steps which Boohoo is now taking in relation to remedying problems in its Leicester supply chain had been implemented nearly a year ago.”

The report itself stated that Levitt is "confident that the adaptations which Boohoo should make involve a relatively easily-achieved realignment of its priorities and governance systems and that the Board should not feel discouraged. It has already made a significant start on putting things right."

What happened?

The online fashion portal Boohoo is pictured on a laptop on April 30, 2020 in London. Photo: BEN STANSALL/AFP via Getty Images
The online fashion portal Boohoo is pictured on a laptop on April 30, 2020 in London. Photo: BEN STANSALL/AFP via Getty Images

The review was initially launched after the Guardian ran a report on 4 July, suggesting Boohoo may have relied on factories in Leicester that did not close during lockdown, which could have contributed to the current COVID-19 outbreak in the city.

The Sunday Times followed with an undercover exposé alleging workers were paid as little as £3.50 ($4.37) an hour in Leicester factories supplying Boohoo, far below the minimum wage of £8.72 an hour.

Home Secretary Priti Patel promised a crackdown on the Leicester garment industry in the wake of the reports.

Boohoo said its initial investigation into the factory featured in the Sunday Times report has not found evidence of workers being paid £3.50 an hour. However, it had uncovered “other evidence of non-compliance.” Boohoo said it had terminated its relationship with two suppliers involved.

On the publication of the Independent Review on Friday, Brian Small, group deputy chairman and senior independent director, and boohoo representative for the Independent Review said:

"Although in some parts it makes for uncomfortable reading, I would like to take this opportunity to thank Levitt on record for her diligent and thorough Independent Review, which we are making public in full today.

“We welcome in particular her clear recommendations, which we accept, and as a Board are committed to driving up standards in our supply chain and business practices. The Board is also committed to adding further independent experience, increased oversight on matters of compliance and business practices, and adopting higher standards of corporate governance."

What are the recommendations?

In the lengthy statement, Boohoo said “it has reviewed and is wholly supportive of Levitt's recommendations, and intends to implement these in full.”

It split up the next steps in addressing the issues across:

  • Corporate governance: This includes appointing a “highly experienced and respected individual to provide independent oversight of the implementation of our change agenda.”

  • Redefining our purchasing practices: This includes appointing a new group director of Responsible Sourcing.

  • Raising standards across our supply chain: This includes consolidating an approved supplier list.

  • Supporting Leicester's workers and workers' rights: This includes, establishing a Garment & Textiles Community Trust, governed by independent trustees, providing it with start-up funding and ongoing annual support.

  • Support for suppliers: Working more closely with suppliers to ensure they are able to manage a more consistent and predictable flow of orders, to enable them to plan more effectively.

  • Demonstrating best practice in action: This includes developing and launching a state-of-the art manufacturing facility based in Leicester.

The review “has 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, oversight and compliance,” said John Lyttle, CEO Boohoo.

“As a result, the Group is implementing necessary enhancements to its supplier audit and compliance procedures, and the Board's oversight of these matters will increase significantly.

“As a Board, we recognise that we need to rebuild confidence that these matters will be dealt with appropriately and sensitively, and that they will not recur.

“Garment workers in Leicester, and our suppliers across the city, are an important part of our success. We recognise that boohoo has been a major force in driving the textile industry in Leicester and today want to reinforce our commitment to being a leader for positive change in the city, alongside workers, suppliers, local government, NGOs and the community at large.

“Today we are setting out the further steps we are taking to drive long-lasting and meaningful change that all stakeholders in the boohoo group will benefit from."