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Boohoo Explains New Supplier Fees

Boohoo Group clarified claims that it’s passing on fees from a recently enacted plastic packaging rule to its suppliers.

Like many companies, the Manchester-based fast-fashion empire is now beholden to a new tax that applies to all plastic packaging manufactured in or imported into the United Kingdom that does not contain at least 30 percent recycled content.

The Nasty Gal and PrettyLittleThing owner told Sourcing Journal Thursday that it had nominated a global supplier that produces 100 percent certified recycled material and recyclable packaging in advance of the policy. Because Boohoo wasn’t able to receive the correct certification in time, however, it had to shell out the required HM Revenue and Customs fees. It is incorrect, it said, to say that it was “charged,” as some media has reported.

Boohoo recently told its suppliers that they can source their own plastic packaging, but only if they can certify that the polybags they use comprise at least 50 percent recycled material by either Global Recycled Standard or Standard Global Services. Otherwise, they, not Boohoo, will be liable for any tax payments.

“To support them in managing this change we have covered the cost of any HMRC tax payments so far, but to ensure that our suppliers are complying with our Up.Front goal—by 2023 all customer garment packaging will be reusable, recyclable or compostable and any plastic used will contain over 50 percent recycled content, we have been clear that this will become the responsibility of suppliers in the near future,” a spokesperson said.

Up.Front refers to the Debenhams operator’s sustainability strategy, which it described last year as a “no-nonsense set of measurable targets” around creating eco-friendlier clothing, strengthening supplier relationships and tackling climate change. The strategy coalesced following a spate of bad publicity for Boohoo, which faced criticism that it was chasing untrammeled growth at the expense of workers and the environment.

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Also under scrutiny is whether Boohoo’s marketing of its products, specifically those in its Ready for the Future range, might give customers the impression that they’re eco-friendlier than they actually are.

“People who want to ‘buy green’ should be able to do so confident that they aren’t being misled,” Sarah Cardell, interim chief executive of the Competition and Markets Authority, Britain’s competition watchdog, said last month. “Eco-friendly and sustainable products can play a role in tackling climate change, but only if they are genuine.”

The British government introduced the plastic packaging tax, which went into effect in April, to provide a “clear economic incentive” for businesses to increase the recycled content in their plastic packaging, drumming up greater demand for the materials and incentivizing increased levels of collection and recycling. Companies that fail to meet the threshold will be subject to 200 pounds ($230) per metric ton of plastic packaging.

To mitigate the “disproportionate administrative burdens” in comparison to the tax liability for those who are likely affected, there is an exemption for manufacturers and importers of less than 10 metric tons of plastic packaging per year.

According to a March survey that YouGov conducted on behalf of waste-management firm Veolia, awareness of the tax was woefully low, though one-fifth of U.K. manufacturing and retail businesses had already opted for recycled content in their packaging. With the regulatory shift, however, 58 percent of the companies surveyed now use recycled content and 54 percent have made design tweaks to make packaging more recyclable.

Gavin Graveson, Northern Europe zone senior vice president at Veolia, said that the policy needs to go further with a “tax escalator” that would make choosing to incorporate recycled content in packaging both economically and environmentally preferable.

Not only could the United Kingdom save up to 2.89 million metric tons of carbon emissions every year if all plastic packaging included 30 percent recycled content, he said, but it would also “incentivize investment in domestic infrastructure which could make the U.K. a world leader in plastics recycling.”