Boohoo drops more than 400 suppliers after allegations of mistreatment of factory workers

Boohoo
Boohoo

Boohoo has slashed its supplier network by more than 400 firms amid an overhaul of its supply chain after allegations over mistreatment of staff at factories, which emerged last year.

The online fashion giant has today published a list of 78 approved suppliers across 100 factories – a significant drop on the estimated 500 suppliers previously identified in an independent review of the business and its supply chain carried out at the request of Boohoo by Alison Levitt QC last year.

Following Levitt’s review Boohoo severed ties with 64 factories, consolidated others and cut out subcontracting.

The company has been seeking to repair its reputation after it was alleged last year that some factories in the UK working for the firm were paying staff as little as £3.50 an hour and had working conditions which did not meet lockdown restrictions.

Following an investigation by The Sunday Times at the height of the first Covid-19 lockdown last year, Boohoo said the factory in the newspaper’s report was not a direct supplier and that its clothes had been sent there for repacking having been made elsewhere.

This morning the group has issued a statement on the latest supplier cull saying it had “ceased doing business with a number of manufacturers who were unable to demonstrate the high standard of transparency required, despite being provided with opportunities to address any issues identified in the auditing process”.

It added that it asked the remaining suppliers to bring their cut-make-trim units in-house “to allow for greater oversight and remove the issue of unapproved subcontracting”.

The Sunday Times report had been highly damaging for Boohoo and wiped £1 billion of its share price over the course of two days (though they have recovered much of their value since as the company was seen to take quick action over the issues and are trading today at around 338p versus a low of 182p last April).

In addition other retailers such as Next and Asos dropped Boohoo brands from their websites, while an investigation was carried out. Boohoo swiftly hired Levitt to look into the allegations which its board said left them “shocked and appalled”.

In September last year, Levitt found that there were “serious issues” in the company’s supply chain. Boohoo has since pledged to strengthen internal controls, overhaul its suppliers and is also launching a sustainability strategy, called Up Front, to reduce its carbon footprint.

Bosses also hired judge Sir Brian Leveson to supervise the firm’s Agenda for Change reforms. In turn Sir Brian commissioned Tim Godwin OBE, former acting Commissioner of the Metropolitan Police, to carry out additional forensic level enquiries to identify and address any irregularities in the leadership and management of suppliers’ businesses.

In his second report published separately today, Sir Brian noted that improved supplier audits have changed the way the industry is run in Leicester and noted Boohoo’s efforts to embed a new way of working.

Sir Brian said: “It is important to underline that removal from the supply chain is being undertaken responsibly; existing contracts are being honoured but no new orders can be placed other than with a supplier who has been approved by the process”.

Boohoo CEO John Lyttle said: “This is the not the end of a project for us at Boohoo but the beginning of a new way of working with our suppliers.

“The publication of our UK Supply Chain List marks another step on our journey towards greater transparency and embedding positive change, not only in our own organisation, but through the wider network of businesses that make up our supply chain.”

Retail analysts at Jefferies said: “We see today’s publication of a fully audited UK supplier list as an important step in re-establishing trust in the business and momentum in the shares.”

Boohoo is currently building its own factory in Leicester in partnership with a supplier. The state of the art facility is due to open this year and the company says the move is a sign of its commitment to UK manufacturing.

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