The highly anticipated independent review of Boohoo's supply chain was published today and while it claims that bosses at Boohoo did not deliberately allow poor conditions and pay for workers at Leicester-based factories where its clothes were made, they simply did not feel responsible and had been aware for months of the potential issues.
Alison Levitt, a QC who was tasked to probe allegations of workers being paid less than the minimum wage and working in unsafe environments, which were published by The Sunday Times, said there were “serious issues” in the company’s supply chain.
In her report, Levitt said: “I am satisfied that Boohoo did not deliberately allow poor conditions and low pay to exist within its supply chain, nor did it intentionally profit from them.
But she added: “In truth 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.”
The report also found:
– 35 out of 49 companies probed failed a minimum wage probe
– “Serious health and safety violations” at some suppliers
– There were poor conditions “across the best part, if not the entirety” of Boohoo’s supply chain in Leicester
– Authorities contributed to the problem by not taking action
– Boohoo only had one compliance officer to monitor all 500 suppliers and subcontractors in Leicester
– Chief executive John Lyttle and other senior staff were sent an email in December 2019 describing one factory as having “the worst working conditions that I have seen in the UK”
– There is no evidence that Boohoo has committed any criminal offences
– Co-founder Carol Kane may have provided inaccurate information to MPs on the Environmental Audit Committee
The review was called in July after The Sunday Times published claims that workers in Boohoo’s supply chain could be earning as little as £3.50. The minimum wage for a person over 25 is £8.72.
Levitt’s report documents a company focused on keeping prices low and getting new products to market quickly.
By keeping large parts of its supply chain in the UK – 40% of its clothes are made here, for the most part in Leicester – Boohoo can prioritise speed, getting new products to market in as little as 48 hours.
Its speed and agility has made Boohoo a major player in the fashion world, and led to its worth being 2.5 times that of Marks & Spencer. Boohoo refers to this as its "test and repeat" model, whereby it can test new styles on its website and repeat order top sellers quickly to maximise the opportunity.
While Boohoo’s Leicester suppliers were producing clothes at incredible speed and at a low price, they were meant to be overseen by a compliance team. However, Levitt said only one person worked on the compliance “team”, having perhaps 500 suppliers and subcontractors to check.
Even this figure is unclear, as Boohoo was never able to give the lawyer a list of all the companies involved in making its clothes in Leicester. Regardless, it was “too much for one person”, one insider told investigators.
The insider, who was appointed in 2017, said he had asked repeatedly for additional help and thought the task was so big he needed two other full-time colleagues working in the city.
Levitt said: “In late 2018, he had suggested to members of the Boohoo Board that outside independent auditors should be engaged to audit both suppliers and subcontractors, but nothing happened.”
The difficulty of keeping an eye on the Leicester factories became obvious in August this year when auditors from Verisio did a spot check: “Ten people left through a fire exit as the auditors entered the premises,” Levitt said. At another site 40% of the workforce left during the audit.
The auditors found a majority of suppliers they visited did not comply with rules over employment documentation, records of working hours, minimum wage, health and safety, and Covid-19 controls, while nearly half fell short on payment practices.
Many workers were not getting statutory holiday pay, and one employee claimed they were being paid £3 per hour.
One factory’s managing director admitted workers were getting minimum wage. He explained that staff wanted to claim benefits so he was under pressure to pay less than minimum wage, and they would leave if he paid them more.
One factory had a locked fire door, another provided no toilet paper for staff and in one place there was no “wholesome drinking water”.
Auditors found some form of non-compliance of varying seriousness at all of Boohoo’s top 20 biggest suppliers.
The report details how senior staff knew about concerns over conditions at suppliers as early as December 2019 but did not act fast enough.
On December 11 the managing director of Verisio wrote an email that was forwarded to CEO Lyttle later that evening.
“The factory has the worst working conditions that I have seen in the UK and is not safe for the workers,” the email read.
“The risk is so high to the Boohoo brand and is a major news story waiting to happen.”
A few days later Boohoo’s director of sustainability Tom Kershaw went to see the factories in question with Lyttle and one other Boohoo staff member.
He told investigators: “One of them was pretty appalling working conditions in terms of the set-up of the site.”
Although Lyttle was getting tours of Leicester factories, Levitt found that chairman Mahmud Kamani had not seen the Verisio reports and did not know the name of Boohoo’s head of internal audit.
Speaking to investigators, Kamani said: “The way we treat our people is our responsibility. But if we’re subsequently getting so many garments made in Leicester and there is maybe 20,000 or 30,000 machinists, is that my responsibility? If they then eat too many chapatis and become obese, is that then my responsibility?”
Boohoo said on Friday it was taking steps to improve its processes after taking extensive feedback from Levitt.
“Today we are setting out the further steps we are taking to drive long-lasting and meaningful change that all stakeholders in the Boohoo group will benefit from,” said Lyttle.
Investment advisors PIRC said: “Directors knew in late 2019 that there were very serious issues regarding the treatment of factory workers in Leicester and this has been an open secret in the industry for longer. We would expect those directors responsible to consider their positions.”
After the revelations by The Sunday Times, Boohoo's shares tanked in value from more than 400p to 224p. They have since been recovering and, following the company's vow to improve its processes, today rose by 15.44% to 374.5p suggesting investors had been convinced of the business's intention to make changes for the better.