Boohoo slashes supplier list, admits ‘clearly unacceptable' supply chain issues
Boohoo has come clean on its supply chain woes, admitting it had “clearly unacceptable issues” as the fast-fashion retailer published the results of a long-awaiting independent review of its working practices.
The bottom line is that Boohoo has slashed the number of suppliers to 78 approved factories in 100 locations, down from an estimated 200 main manufacturers.
That reduction comes after the majority of its suppliers were audited twice by two independent companies via unannounced visits over the last eight months. Boohoo said the resulting review had identified "many failings, alongside recommended improvements to the firm’s related corporate governance, compliance and monitoring processes".
Group CEO John Lyttle said the review had identified “significant and clearly unacceptable issues” and that it was “clear that we need to go further and faster to improve our governance, oversight and compliance”.
Lyttle promised this would not be the end project “but the beginning of a new way of working with our suppliers”.
The published supplier list comes after damaging newspaper reports last year highlighted the firm’s controversial supply chain in Leicester where factory staff were allegedly paid less than minimum wages.
Although the report’s chief investigator Alison Levitt QC found no evidence Boohoo had committed any crimes last year, she said the company had failed take action quick enough on a supply chain that was "riddled with bad behaviour”.
In her report, Levitt said it was unlikely that Boohoo knew with any degree of certainty how many suppliers it had in total. She estimated the firm had 200 so-called tier-one suppliers and used up to 300 tier-two companies in Leicester.
Boohoo stressed that the report showed it had not deliberately allowed poor conditions and low pay to exist within its supply chain and “it did not intentionally profit from them and its business model is not founded on exploiting workers in Leicester”.
Lyttle said the group is implementing “necessary enhancements” to its supplier audit and compliance procedures, and the board’s oversight of these matters will increase significantly.
Those enhancements include a promise that, within the next six months, it will consolidate its approved supplier list, invite new suppliers with a track record of ethical and sustainability policies, extend its independent audit programme and complete the process of auditing all of its tier-one and tier-two UK suppliers.
“As a board, we recognise that we need to rebuild confidence that these matters will be dealt with appropriately and sensitively, and that they will not recur,” added Lyttle.
Alongside the review, Boohoo launched of its new Sustainability Strategy called ‘UP.FRONT Fashion Ready for theFuture’. Here it promises to “establish bold targets against priority issues in three key areas; smarter manufacturing of clothes; better terms for suppliers; and action in responsible business practices to reduce our carbon footprint”.
The group said it will provide a further update on its Sustainability Strategy at its full year results on 5 May, with the publication of its Sustainability Report to follow alongside its annual report and Accounts later in May. Boohoo also said it intends to publish its global supplier list by 25 September.
Meanwhile, analysts at finance firm Jeffries gave a thumbs-up signal to Boohoo's shareholders following today’s review. Complete with the headline ‘Transitioning from laggard to leader’, Jeffries said: “We see this publication as an important step in re-establishing momentum in the shares” and retained its ‘buy’ position on Boohoo stock.
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