Boohoo investors called upon to hold firm to account over promises

Boohoo shareholders have been called upon to make sure the fast-fashion company keeps its promise to improve conditions in its supply chain after it emerged a similar pledge to stop using unethical factories was made six years ago.

In 2015, Boohoo’s annual report said the Manchester-based firm had launched a compliance team in May 2014 and introduced a traffic light system to rate suppliers, with the aim of ensuring all factories it worked with met strict standards within a year. It added that it had reduced the number of suppliers it works with to aid compliance and had developed a corporate social responsibility plan with the charity Business in the Community (BitC).

The online retailer admitted in its 2016 annual report that a fifth of its factories were still not audited and approved. Boohoo offered no update on any progress or on the traffic light monitoring system in its 2017 and 2018 reports. The company left BitC after one year.

Boohoo said in those annual reports that it continued to expect factories to meet certain ethical standards, carry out audits and meet a code of conduct and its policy is based on base code of the Ethical Trading Initiative (ETI), an alliance of retailers, trade unions and workers rights groups. It does not mention that it is not a member of the ETI, or that it cancelled scheduled meetings about joining in 2015.

The 2015 promises echo some of those made last month in response to a damning report into Boohoo’s supply chain by Alison Levitt QC, who said she had found executives knew about problems from late 2019 at the latest. Among measures to clean up its act, Boohoo has promised to reduce the number of suppliers, carry out audits and set up a supply chain compliance committee.

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Martin Buttle, at the activist group ShareAction, has written to 31 major investors who together control 29% of Boohoo, urging them to hold the company to account despite a surge in the company’s share price after the Levitt report was published.

He warned that investors needed to look beyond Levitt’s assertion that Boohoo could “relatively easily” clean up its act and focus on the detail of the report, which outlines “multiple instances of abusive practices” and “direct warnings to Boohoo execs from their own auditors that workers were being subjected to appalling conditions”.

“We want all investors to be fully aware of the failures of governance, supplier monitoring and management of the buying function within Boohoo and to proactively monitor the company’s commitment and progress towards eradicating labour rights abuses,” Buttle writes in the letter.

Nigel Venes, at the ETI, added that all stakeholders should also consider the findings of worker’s rights group Labour Behind the Label’s report into poor conditions in the Leicester factories Boohoo uses.

“Consumers and investors involved with Boohoo should express their concerns about this kind of activity within the supply chain of one of the UK’s most profitable companies,” he said.

“What is needed is a change of business practices. Will they do it? We want to see evidence of systematic changes and full transparency instead of further promises.”

Former insiders at Boohoo claim the company knew about problems within its supply chain many years earlier, partly because of audits it instituted over the years. Some of these were paid for by suppliers and carried out by external companies, and some were carried out by Boohoo personnel.

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One well placed former staff member said the company was “completely aware” of problems at the Leicester factories right up to director level: “Anybody who came into contact with the ethical team, they knew those factories were non-compliant from many perspectives.”

But they added: “They were not following a rigorous auditing programme. Some of the premises [in Leicester] would not have passed as it didn’t have suitable fire exits, the right distance between machines or fire extinguishers. There were a lot of [problematic] things other than wages.

“I don’t think there was ever an really concerted effort [to improve conditions in factories] because of the cost implications and prices going up.”

Another former employee claimed that staff had raised issues about overcrowding and fire safety in factories but that orders continued to go to those suppliers. “They [Boohoo] have known about this for years,” she said.

Boohoo said its team had acknowledged to Levitt that more needed to be done to address its audit process at the Leicester factories and that it had “significantly advanced” work there to rectify issues far more quickly.

It added that the board had set a time scale to implement changes recommended by Levitt and in the next few weeks would announce the appointment of a “respected and wholly independent individual” to oversee that change.

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John Lyttle, the chief executive of Boohoo, said the rapid growth of company since 2014 had “presented numerous challenges” in ensuring the right team and framework was in place, adding that he was “genuinely sorry” that those working for some garment suppliers in Leicester had not been treated well.

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He said: “We are determined to implement Ms Levitt’s recommendations to help to rectify this and I am personally fully committed to doing so. We cannot do this in isolation, which is why our teams are working side by side with the local council, regulatory authorities and civil partners to affect the change required. Together we will be able to make a real difference”.

The company is to be called by a parliamentary committee to give evidence at an inquiry into the fast-fashion industry. Boohoo said it had confirmed to the environmental audit committee that it would answer any questions MPs had. Carol Kane, a co-founder, gave evidence to an earlier investigation by the committee in 2018.



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