For anyone hoping that bad publicity surrounding Boohoo, the online clothes retailer, over recent months, would harm its business, last week’s figures came as a disappointment. Pre-tax profits at the group, founded in 2006 by Carol Kane and Mahmud Kamani, jumped 51% to £68.1m in the six months to 31 August. Sales surged to £816.5m. Without talking to Boohoo’s customers, it would be rash to draw conclusions about why reports of appalling labour practices by the company’s suppliers in Leicester have not changed their shopping habits. What can be safely assumed is that people aiming for improvements cannot leave it to consumers to drive them.
This should not come as a surprise. Fair and ethical trading initiatives are important. Over time it is to be hoped that more people, including the 16-30 age range targeted by Boohoo, will become more curious about the environmental and human impacts of their tastes and choices. But fashion lags a long way behind food in this area. And the failures of regulation, corporate governance and business culture that have been so brutally exposed in the case of Boohoo require a strategic and policy response, not a consumer-led, behavioural one.
A strongly critical report on the company’s Leicester supply chain by Alison Levitt QC provides a to-do list against which observers can measure its progress. The review, commissioned (and paid for) by the company after it was revealed in July that suppliers had continued to operate during the pandemic, placing workers at their factories in danger, sets out in detail how a realignment of Boohoo’s priorities could be achieved “relatively easily”. The key is to stop ignoring its supply chain. Boohoo says it can implement the report’s recommendations and is seeking an independent figure to oversee the process.
Ms Levitt offered carrot as well as stick: Mr Kamani, the chairman, “could become an icon in the industry”, if he and the chief executive, John Lyttle, clean up the company’s act. Its record does not inspire confidence, however. The report found that Boohoo knew of serious problems in the Leicester factories it uses by March 2019, if not earlier. Yet it took the decision to rip up its plans for this year, ordering new loungewear ranges that it correctly predicted would sell well during the pandemic, without any board-level assessment of the risks. Ms Levitt saw no evidence of criminal activity or proof that Boohoo was responsible for Leicester’s high rate of Covid-19. But there is no doubt that the city’s garment workers continued, during the pandemic, to labour in unsafe conditions for illegally low pay.
It started as a family business. But Boohoo is a publicly listed company that is experiencing rapid growth in the US as well as the UK. Investors should get stuck in, making their own demands of its governance arrangements, and not expect to ride hands-free. Ministers must also come under pressure. Weak regulation is at the heart of the dysfunction in Leicester, as has repeatedly been exposed by parliamentary committees as well as campaigners such as Labour Behind the Label.
Health and safety, tax and labour market inspectors need resources if they are to monitor conditions effectively, as well as incentives to work proactively together. Unions, too, should increase their efforts in the area. Boohoo’s commitment to reduce the number of its suppliers should make this easier. Currently, there are around 1,000 manufacturers of clothes and textiles in Leicester, with more than 50 people banned from running companies, often following tax violations.
The risks of inaction are plain, with broken fire regulations among the many issues raised. Minimum wage legislation and safety standards must be enforced. But with action comes another set of risks. The worst possible outcome of Boohoo’s disgrace would be for the retailer to take all its manufacturing overseas. Up to 10,000 people, many of them of south Asian and east European origin, work in Leicester’s clothing and textiles factories. And so the aim of national and local leaders must be to push Boohoo to mend its ways – to adjust its business model so that its famed speed is not at the expense of care and attention.