Boohoo has ‘significant issues’ in its supply chain, review finds

Fashion retailer Boohoo said it would take urgent steps to improve governance and oversight of its supply chain after an independent report found widespread instances of dangerous working conditions and underpayment of staff.

The investigation, commissioned by Boohoo following allegations that factories making its clothes were paying workers less than the minimum wage, was led by prominent lawyer Alison Levitt and published on Friday.

The report found that a comprehensive list of all Boohoo’s suppliers and subcontractors simply did not exist; that some previous internal investigations into supply chain problems were not acted upon; and that much of the time, a “team” of people in Leicester meant to monitor suppliers consisted of just one person.

However, Ms Levitt, a former legal adviser to the Crown Prosecution Service, said she was satisfied that Boohoo did not deliberately allow poor conditions and low pay within its supply chain, did not intentionally profit from them and its business model was not founded on exploiting workers in Leicester.

Boohoo has denied illegal wages among its suppliers.

The review examined 62 suppliers and drew upon other supply-chain audit reports produced for Boohoo by Verisio and Veritas. It found failures in identity verification, recording of hours, payment of wages below the statutory national minimum wage, health and safety violations and instances of potential furlough fraud.

It added that during one inspection last month, 10 people left through a fire exit as auditors entered the premises. At another, in July, two-fifths of the workforce left while the audit was in process.

Internal emails and minutes suggested the company was increasingly concerned that it did not know enough about what was going on in its supply chain.

Boohoo said it planned to add two non-executive directors to strengthen its board and ensure independent directors were in the majority. It will appoint an independent person to provide oversight of how it is implementing the changes.

Ms Levitt said she was “confident” the changes Boohoo was willing to make involved a “relatively easily achieved realignment of its priorities and governance systems”.

The company said there was “ample evidence that the steps which Boohoo is now taking in relation to remedying problems in its Leicester supply chain had been implemented nearly a year ago”.

“Nevertheless, with the benefit of hindsight we regret that these processes did not advance quickly enough.”

The review “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 we need to go further and faster to improve our governance, oversight and compliance”, said John Lyttle, chief executive.

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