Boohoo today published the independent review into allegations about factories in Leicester. Retail Week explores its key findings and solutions to the controversy.
- Review finds “commercial concerns were prioritised in a way which made substantial areas of risk all but invisible at the most senior level”
- The coronavirus pandemic exacerbated existing issues as Boohoo placed orders with suppliers without checking capacity or safety procedures
- Alison Levitt QC concludes that Boohoo knew of issues in factories it used from March 2019 at the latest
When The Sunday Times published an article alleging unsafe working conditions and underpayment of workers in Leicester factories, fast fashion etailer Boohoo found itself at the centre of the storm.
The group, which owns BoohooMan, PrettyLittleThing, Nasty Gal, MissPap, Karen Millen, Coast, Oasis and Warehouse as well as the eponymous womenswear brand, commissioned an independent review led by Alison Levitt QC to investigate the situation and inform the shape of its supply chain in future.
“Many of the factories do not produce clothing for any other company, making them wholly dependent on the Boohoo brands”
Alison Levitt QC
As of August 2019, around 40% of Boohoo’s garments were manufactured in the UK. The majority were made in Leicester – a figure that Levitt believes is still accurate. Of all UK retailers, Boohoo sources the largest quantities of clothing from Leicester’s factories.
“What this means is that most of the factories manufacture for Boohoo and many of them do not produce clothing for any other company, making them wholly dependent on the Boohoo brands,” says Levitt in the review.
Boohoo’s supply chain, however, relies on a complex tiering system of suppliers and subcontractors.
Tier 1 are those suppliers with whom Boohoo has a direct contractual relationship and who receive orders; Tier 2 are those which carry out some of the manufacturing functions on behalf of those in Tier 1, but have no legal ties to Boohoo; and Tier 3 are those companies which supply parts, components or services to Tier 1 or Tier 2 companies, such as suppliers of zips, fabric and yarn.
With subcontracting rife throughout the supply chain and hundreds of suppliers on its roster, Boohoo had seemingly lost control over where its clothes come from, so can Levitt’s review provide the impetus for change?
What went wrong?
Since it was founded in 2006, Boohoo has grown exponentially as a pureplay business, reaching customers online and carving a niche for itself on social media.
It listed on the stock market in 2014 and Levitt pointed out that it is now worth more than British high street stalwart Marks & Spencer.
In recent years, Boohoo grew as it took over other fashion brands, the most recent deal being the acquisition of Oasis and Warehouse in June.
Levitt believes that one reason why scrutiny of the supply chain fell by the wayside was Boohoo’s focus on growth alone.
“Commercial concerns such as growth and profit were prioritised in a way which made substantial areas of risk all but invisible at the most senior level,” she says.
Part of the issue is that Boohoo does not see its suppliers as part of the business and factory workers are “largely invisible to them”.
Levitt concludes that the Leicester situation received insufficient attention because problems in the city’s textile industry did not directly affect the company.
“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,” she says.
The problem was exacerbated amid the coronavirus pandemic as Boohoo sought to capitalise on lockdown trends such as loungewear.
The etailer placed orders with suppliers without first checking their capacity or their compliance with safety requirements such as hand sanitiser, social distancing or PPE.
The review reveals a number of emails sent between Boohoo’s leadership team discussing whether it was ethically viable to continue to place orders, as well as emails sent directly to suppliers asking for evidence of safety measures.
Ultimately, those ignored emails were not followed up and Boohoo continued to place large orders, which in turn meant suppliers turning to more subcontractors in order to keep up with demand.
“Boohoo’s culpability lies not in doing nothing, but that they did too little too late”
Alison Levitt QC
The problem with subcontracting was highlighted in the initial investigation carried out by The Sunday Times in July. The article claimed garments were being made for Nasty Gal in a factory with inadequate working conditions, run by Jaswal Fashions.
What Levitt reveals is that Jaswal Fashions ceased operating in 2018 and the garment in question was placed to a company called Revolution, which subcontracted to Morefray, which in turn manufactured the item in a subsidiary in Morocco.
That Nasty Gal had no knowledge of its garments being produced abroad exemplifies how clueless the Boohoo team were about where their products came from. How could they, therefore, ensure they were produced in safe conditions?
Levitt found that a key issue for Boohoo is the level of autonomy given to buyers to place orders wherever they see fit and to negotiate their own prices.
That will often drive suppliers to accept orders they cannot realistically fulfil while paying their workers a fair wage, and in turn leads to more subcontracting.
The group has no robust testing system for bringing new suppliers into the fold, with few onboarding controls.
While Boohoo has an in-house compliance team, monitoring of suppliers was lax at best with visits informal, short and often announced.
The Leicester apparel industry has had problems with ethical standards for years and Levitt concludes that Boohoo knew of issues in factories it used from March 2019 at the latest, but was too slow to react.
“Boohoo’s culpability lies not in doing nothing, but that they did too little too late,” says Levitt, who has created a roadmap to lead the retailer forward on a better path.
What should be done?
“If Boohoo is willing to take a different approach to how it both views and interacts with the Leicester supply chain, it has it within its power to be a tremendous force for good,” Levitt believes.
While the group had initially set about some changes in December 2019, albeit with an “insufficient sense of urgency”, Levitt’s review lays out an “agenda for change” including short, medium and long-term suggestions.
In the immediate term, within the next six months, Levitt suggests that Boohoo reduce its approved suppliers to a list that contains a manageable number of companies, with the goal of eliminating subcontracting and therefore giving full visibility of the workings of its supply chain.
By having direct contractual relationships with all suppliers, Boohoo will be able to track its sourcing and complete a sufficient onboarding process to ensure ethical and sustainable credentials.
Levitt says that Boohoo should publish a list of both its Tier 1 and Tier 2 suppliers within six months of her review, and should commit to publishing an updated list annually.
Approved suppliers and subcontractors will have to adhere to a strict list of “essential parameters” in order to be eligible.
Boohoo should also endeavour to open a dialogue with all suppliers to understand their capacity and keep a regular flow of orders so suppliers do not suffer.
By placing a “mixed bag” of orders across brands with each supplier, for example, mixing more complicated clothes with higher margin with basic cheaper items, Boohoo will be able to keep the prices of simple clothing low while still allowing the supplier to pay proper wages and make a reasonable profit, suggests Levitt.
In the same way that Boohoo looks after its own employees, Levitt thinks the retailer should welcome suppliers’ staff into the fold so as not to let standards slip again.
“Thought should be given to events which include not just the factory owners but their workers. The aim should be to create a greater feeling of partnership between these two business-critical components”
Alison Levitt QC
“The factory workers who make the clothes upon which Boohoo’s success is founded, whilst not becoming employees, should be celebrated as (and made to feel) part of the Boohoo family,” she says.
“Thought should be given to events which include not just the factory owners but their workers. The aim should be to create a greater feeling of partnership between these two business-critical components.”
To tackle the problem in-house, Levitt advises Boohoo to retrain its buyers to understand the cost of creating garments so they do not push for the lowest prices at the risk of impacting ethical practices.
With strict sanctions for misbehaviour and rewards for using the approved list of suppliers, Levitt hopes that the Boohoo buying team will also help to drive change.
Boohoo has already said that it intends to hire a sourcing director and Levitt suggests it hire an independent person – not a director – to oversee the changes across the group in the coming months and years.
She also tasks Boohoo with creating a supply chain compliance committee within the next four weeks to establish an audit programme and ensure that supply chain issues are on the agenda at every board meeting.
Longer-term, Levitt believes that Boohoo should rethink its brand position. While she acknowledges that it is in essence a fast-fashion business, she hopes that the controversy has highlighted the social responsibility that comes with being a public company.
She maintains that its new stance should be to become “the first choice for the fashionable and thrifty young woman with a social conscience and who cares about the environment” – and that it should work to include this commitment to change into future marketing and press information.
While Levitt has put forward an “agenda for change”, ultimately such change has to come from Boohoo itself.
Levitt seems convinced of Boohoo’s sincerity when it comes to implementing a real supply chain transformation. It should be clear within a matter of weeks whether Boohoo puts her plan into action.
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