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Boohoo Knew of ‘Endemic’ Problems in Garment Supply Chain, Report Finds

An independent review, commissioned by Boohoo following allegations of sweatshop-like conditions at the factories making its clothes, found that the ultra-fast-fashion retailer knew of “widespread if not endemic” problems across its Leicester, England, supply chain, where workers faced numerous life-threatening health and safety violations and were paid less than the minimum wage.

The three-month investigation, led by Alison Levitt, a former legal advisor to the Crown Prosecution Service, and published Friday, concluded that while there was no evidence that Boohoo had committed any criminal offenses, reports about low wages and unsafe conditions were “substantially true” and the company’s own monitoring of the “many failings in the Leicester supply chain” proved “inadequate” because of “weak corporate governance.”

The report found that Boohoo, which also owns the PrettyLittleThing, Nasty Gal, Oasis, Karen Millen and Warehouse brands, did not maintain a comprehensive list of its suppliers and subcontractors, did not have a system of sanctions for non-compliance that could be enforced and that even “some very senior people” lacked a good understanding of how the supply chain worked.

For the most part, the “team” of people meant to monitor suppliers comprised a single person. (That one person told Levitt, “I admit I’m not a very good admin keeper…I don’t have comprehensive records.”)

“To the best of our knowledge and belief, Boohoo has not reported any possible criminal offences uncovered by its audits,” Levitt wrote in the report. “There may be perfectly proper reasons for this but they have not been explained to us.”

Levitt also wrote that the review identified a “significant number” of factories with a “significant risk of disaster in the future,” including several that lacked accessible fire escapes. “I have concluded that were a fire to break out in some of the buildings in Leicester it is likely that there would be loss of life,” she said.

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She also described filthy toilets, buildings in “deplorable” condition, and “no wholesome drinking water.” Of the suppliers reviewed, 93 percent showed at least one instance of non-compliance with the company’s audits on issues such as minimum wage and unauthorized subcontracting in recent years.

More damningly, Levitt said that “from (at the very latest) December 2019, senior Boohoo directors knew for a fact that there were very serious issues about the treatment of factory workers in Leicester.” Some steps to remedy them were taken at this point, she allowed, but “there was insufficient sense of urgency.”

She added that Boohoo has “concentrated on revenue generation sometimes at the expense of equally important obligations which large corporate entities have.”

The e-tailer should have “appreciated the serious risks” regarding the “potential exploitation” in Leicester factories during the lockdown period, and though Boohoo “believed that it was supporting Leicester factories by not cancelling orders” it also claimed “no responsibility for the consequences for those who made the clothes they sold.”

The rights of workers were widely ignored and neglected, Levitt said. Many were not entitled to paid holidays or sick pay, faced “excessive” working hours and earned far less than the 8.72 pounds ($11.08) mandated by law for those aged 25 and older.

Levitt said that “there was a degree of tacit reliance upon them in the sense that it allowed suppliers to handle volumes of orders which were placed in a way which did not pay real attention to levels of capacity.”

“Boohoo has not felt any real sense of responsibility for the factory workers in Leicester and the reason is a very human one: it is because they are largely invisible to them,” she added. “It is hard for people to empathize with the plight of those of whom they know little.”

Still, shares in Boohoo rose 15 percent Friday—continuing an upward trend that has seen the company’s stock recover nearly 70 percent of its market value since hitting a low in July, when it lost $2.5 billion in a matter of days—as investors homed in on the report’s conclusion that Boohoo did not deliberately allow poor conditions and low pay in its supply chain, did not intentionally profit from them and its “business model is not founded on exploiting workers in Leicester.”

While the report criticized Boohoo for earmarking “insufficient financial resource” to ensuring supply-chain compliance, Levitt said she was “confident” the company could implement changes using a “relatively easily achieved realignment of its priorities and governance systems.”

In response, Boohoo said that the report 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 it needs to go “further and faster to improve our governance, oversight and compliance.”

The group says it will be implementing “necessary enhancements” to its supplier audit and compliance procedures and that its board’s oversight of these matters will “increase significantly.”

Garment workers in Leicester, and our suppliers across the city, are an important part of our success,” said Boohoo CEO John Lyttle. “We recognize 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.”

Leicester Labour Ministers of Parliament Liz Kendall, Jon Ashworth and Claudia Webbe issued a joint statement criticizing Boohoo for knowing about the issues for years yet “failing to take necessary action anywhere quickly enough.” They’re calling for Lyttle’s resignation.

“Whilst Boohoo was quick to capitalize on the commercial opportunities offered by lockdown, it took no responsibility for the consequences for the people who made their clothes,” they wrote. “The report rightly says this is inexcusable. Ms. Levitt concludes ‘in truth Boohoo has not felt any real responsibility for the factory workers in Leicester.’”

But they also acknowledged that ministers must also take responsibility for “their failure to implement the recommendations of numerous inquiries into worker exploitation and for slashing the budgets of the very enforcement bodies that are supposed to keep workers safe.”

“This report must be a turning point for action and we, as the local MPs for Leicester, will be holding the government and Boohoo to account for their response,” they added.