Boohoo supply chain review identifies failings, leads to big change
Boohoo Group has announced the results of its independent review into UK supply chain practices and while company failings were highlighted, it was generally well received and the firm’s shares surged in early Friday trading.
The company had announced the review back in July after news stories about sub-contractors paying workers well below the UK's minimum wage and also making them work in unsafe conditions.
Overseen by Alison Levitt QC, the review “identified many failings in the Leicester supply chain”.
But it also said there’s “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. They were a product of processes it had itself put in place and not just a reaction to the negative publicity in July and August 2020”.
However, the company added that “with the benefit of hindsight we regret that these processes did not advance quickly enough”.
Levitt was “satisfied that Boohoo did not deliberately allow poor conditions and low pay to exist within its supply chain”. And she added that if it’s “willing to take a different approach to how it both views and interacts with the Leicester supply chain, it has within its power to be a tremendous force for good”.
So what’s the company doing in response to all of this? It’s “close to appointing a highly experienced and respected individual to provide independent oversight of the implementation of our change agenda”.
And it will name two new Non-Executive Directors to strengthen the board. Its aim is for one of the new roles to be filled by “an individual experienced in dealing with Environmental, Social and Governance (ESG) matters”.
Supply chain compliance now also become a mandatory item for every board meeting agenda and it has set up an additional board committee, known as the Risk Committee, to “enable better identification and closer monitoring of the risks we face as a business”.
A new Supply Chain Compliance Committee, comprised of recognised cross-sector experts, will report to the Risk Committee. Additionally, an immediate priority of the Supply Chain Compliance Committee will be to ensure supply chain compliance in relation to Covid-19.
In the report, Levitt had also emphasised the clear benefits of improved purchasing practices, and the group is reassessing how its manages and engages with its supply chain.
That includes strengthening its Sourcing Team with the recent appointment of a new Group Director of Responsible Sourcing, “who joins us from a major global apparel retailer with outstanding knowledge and experience of implementing sustainable supply chain systems”.
The team will also “continue to develop and implement a new set of purchasing principles for our buying teams, which will be mandatory. We will publish these in full on a six-monthly basis”.
There’ll be mandatory education and training for its purchasing teams and bonuses available for adherence to the principles, as well as “appropriate disciplinary action in place for anyone placing orders with unapproved suppliers”.
As far as those suppliers are concerned, the company will be consolidating its approved supplier list while "still maintaining a significant presence in the Leicester garment industry”. And it will “invite new suppliers who have a track record of ethical and sustainability policies to be included on our supplier list”. The independent audit programme is also being extended to the rest of its global supply chain.
The company is in the process of implementing an electronic audit programme too.
Further actions include establishing a Garment & Textiles Community Trust, to provide start-up funding and ongoing annual support, including a grant giving function to address hardship experienced by those working in the local garment industry.
Part of the problem identified at the time the scandal broke was of pressure being put on suppliers to deliver goods extra fast and the company said it will work more closely with suppliers “to ensure they are able to manage a more consistent and predictable flow of orders, to enable them to plan more effectively”.
CEO John Lyttle said of all this: ”[The] review has identified significant and clearly unacceptable issues in our supply chain. It is clear that we need to go further and faster to improve our governance, oversight and compliance. Garment workers in Leicester, and our suppliers across the city, are an important part of our success. We recognise that Boohoo has been a major force in driving the textile industry in Leicester and today want to reinforce our commitment to being a leader for positive change in the city, alongside workers, suppliers, local government, NGOs and the community at large.”
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