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Boohoo knew of Leicester factory failings, says report Boohoo knew of Leicester factory failings, says report
(about 7 hours later)
Review finds allegations about low pay and poor conditions were ‘substantially true’ Review finds allegations about dangerous conditions and low pay were ‘substantially true’
A damning report found that Boohoo knew of “endemic” problems across Leicester garment factories in its supply chain, where workers faced serious health and safety violations, including life-threatening fire risks, and were paid less than the minimum wage. An independent report has found that Boohoo knew of “endemic” problems in its Leicester suppliers including minimum wage and life-threatening fire risks but did “too little too late” to fix them.
The independent review, which was commissioned by Boohoo but conducted by Alison Levitt QC, found that allegations about low pay and poor conditions were “substantially true” and that Boohoo’s monitoring of its supply chain was “inadequate” because of “weak corporate governance”. The damning review, conducted by Alison Levitt QC on behalf of the fast fashion retailer, found that allegations of poor working practices in the company’s supply chain – initially denied – were “substantially true”. It said that Boohoo’s monitoring of the factories was “inadequate” because of “weak corporate governance” and called the failure to assess the risk to workers during the coronavirus pandemic “inexcusable”.
While Boohoo responded to claims of minimum wage violations in Leicester earlier this summer by saying it was “shocked and appalled”, Levitt concluded that senior directors “knew for a fact that there were very serious issues” over the treatment of workers there since December 2019 at the latest. Boohoo accepted the review’s recommendations for change in full and apologised for failing to “match up to the high expectations we set for ourselves”. Group CEO John Lyttle said the company would be “a leader for positive change in the city”, adding: “It is clear that we need to go further and faster to improve our governance, oversight and compliance.”
The review reveals that in an email sent that month to Boohoo’s head of sustainability, Tom Kershaw, after visiting a factory in Leicester, a third-party auditor warned of problems at several suppliers, and said: “The factory has the worst working conditions that I have seen in the UK and is not safe for the workers. We have pictures and I will send to you.” The brand pledged a series of reforms including a move to publish a full list of companies in its supply chain, reducing the number of factories it relies on, and using new ethical suppliers. Investors reacted positively to Boohoo’s promises of reforms, with the company’s share price rising 16% on Friday.
According to the report, he went on: “I honestly feel that Boohoo should stop trading with the factory with immediate effect as it is such high risk. I do not usually make such suggestions but the risk is so high to the Boohoo brand and is a major news story waiting to happen.” Levitt’s review – commissioned after investigations by the Guardian and Sunday Times found evidence that factories in Leicester were putting workers’ health at risk during lockdown and failing to pay them the minimum wage – said that the company had failed to provide all of the evidence asked for. It also found that:
That email prompted Kershaw to warn the Boohoo chief executive, John Lyttle, that the auditor, Verisio, had produced an update that was “not a good read, at all”. Founder Mahmud Kamani in 2018 told staff to “trade faster harder and quicker” to push prices in Leicester down, and had for “too long” been “allowed to dictate company policy”, Levitt said.
Lyttle, Kershaw and the general counsel, Keri Devine, visited the factories in question days later, with Kershaw and Devine telling Levitt that they found conditions “appalling” and “really, really upsetting”. 93% of suppliers analysed had at least one instance of non-compliance with the company’s audits in recent years on issues including minimum wage and unauthorised subcontracting. Factories were found to have locked fire doors, filthy toilets, buildings in “deplorable” condition, and “no wholesome drinking water”.
However, the QC writes that “somewhat to our surprise”, Lyttle did not reveal the visit or the warning emails in an interview. And she adds: “It was my view that, given that John Lyttle could not possibly have forgotten this, his failure to tell me about it was significant.” Boohoo executives had exhibited an “occasional lack of frankness”, including joint CEO John Lyttle who failed to mention a trip to “appalling” factories which he “could not possibly have forgotten”.
The report said there was no evidence that Boohoo had committed any criminal offences. But it adds: “To the best of our knowledge and belief, Boohoo has not reported any possible criminal offences uncovered by its audits. There may be perfectly proper reasons for this but they have not been explained to us.” For long periods Boohoo’s on-the-ground audit team for hundreds of suppliers and subcontractors in Leicester consisted of a single person who told Levitt: “I admit I’m not a very good admin keeper … I don’t have comprehensive records.”
The review also found unacceptable working conditions, where some cramped factories had fallen into disrepair and had no open fire escapes. Profits were “prioritised to the extent that the company lost sight of other issues” and “a series of warning and red flags” were ignored.
“I have concluded that were a fire to break out in some of the buildings in Leicester it is likely that there would be loss of life,” Levitt said. Internal emails warning of social distancing breaches in factories were sent when the pandemic began in March, with one saying: “This is escalating … my instinct is this could blow up in our faces”.
Her report also found that employee rights were ignored and neglected on a wide scale. Many were not entitled to paid holidays or sick pay, faced “excessive” working hours and were paid less than the national minimum or living wage. The report concluded that the situation in Leicester was not allowed to worsen deliberately but was instead the result of “weak corporate governance”. Levitt said that Boohoo had “made a significant start on putting things right” and noted that there was no evidence that the company had committed any criminal offences.
“It is more likely than not that these conditions exist across the best part, if not the entirety, of Boohoo’s Leicester supply chain. The problems we have described are endemic,” Levitt said. But she added: “To the best of our knowledge and belief, Boohoo has not reported any possible criminal offences uncovered by its audits. There may be perfectly proper reasons for this but they have not been explained to us.”
“I have concluded that, 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. It is hard for people to empathise with the plight of those of whom they know little.” Levitt was also sharply critical of the authorities in Leicester and said: “If the law is not enforced, this sends a clear message that … the people affected do not matter.”
The review came after investigations by the Guardian and Sunday Times found that Boohoo had been selling clothes made by factories in Leicester that were paying less than the minimum wage to some workers. Leicester Labour MPs Liz Kendall, Jon Ashworth and Claudia Webbe issued a statement describing the findings as “unacceptable” and accused the government of “slashing the budgets of the very enforcement bodies that are supposed to keep workers safe”. They called on Lyttle to resign.
Boohoo apologised and said the report raised “significant and unacceptable issues” and made for “uncomfortable reading”. Andrew Bridgen, the Conservative MP for North West Leicestershire who has campaigned on the issue, said he had found Boohoo’s previous denials of issues in Leicester “laughable” and accused the company of “gaining huge commercial advantage” from turning a blind eye to conditions in the city.
A company spokesperson said: “Ms Levitt’s findings clearly demonstrate that we have not matched up to the high expectations we set for ourselves. We would like to apologise to those who have been affected, especially those working in the Leicester textile industry.” Labour Behind The Label’s Dominique Muller, author of the report that first drew attention to issues in Leicester factories during lockdown, said that the company’s plans for reform were “lacking in detail and ambition”.
Boohoo listed a number of actions it was taking in response, including engaging with new ethnical and sustainable suppliers, extending its independent auditing programme and annually publishing a list of audited suppliers in the UK. The 234-page report set out a wide range of findings – and concluded that the company had major concerns over practices in Leicester well before the pandemic.
It also committed to launching and funding a garment and textiles community trust to help support workers’ rights in Leicester and said it would take disciplinary action against anyone placing orders with unapproved suppliers. While Boohoo responded to claims of minimum wage violations in Leicester earlier this summer by saying it was “shocked and appalled”, Levitt concluded that senior directors “knew for a fact that there were very serious issues” over the treatment of workers there since late 2019 at the latest.
“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,” Boohoo’s Lyttle said. Levitt said that “somewhat to our surprise” Lyttle had missed three opportunities to reveal issues arising from a visit to factories in December last year including one that an auditor described as “the worst that I have seen in the UK” and warned was “a major news story waiting to happen”.
The Levitt report concluded that the retailer did not deliberately allow factory workers in Leicester to operate in poor conditions for low pay and did not intentionally profit from them. “I do not accept that Boohoo’s business model is founded on exploiting workers in Leicester,” Levitt said. The QC wrote: “It was my view that, given that John Lyttle could not possibly have forgotten this, his failure to tell me about it was significant.” She added that his silence may have been the result of a misunderstanding.
Levitt’s review also found that: Levitt’s review also details founder Mahmud Kamani’s attitude to problems in the city. In an interview, which the QC said was a “colourful experience”, Kamani said: “The way we treat our people is our responsibility, but if there is ... maybe 20-30,000 machinists [in Leicester], is that my responsibility? If they eat too many chapatis and become obese, is that my responsibility? I don’t know where this goes.”
Boohoo’s extraordinary commercial growth has been so fast that its governance processes have failed to keep pace. She said it would be crucial for Boohoo to begin by recognising the humanity of factory workers. Noting that staff she met at Boohoo HQ seemed astonished by the notion that machinists who make the clothes could be invited to the suppliers’ “fabulous parties”, she concluded: “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.”
It has concentrated on revenue generation sometimes at the expense of the other, equally important, obligations that large corporate entities have.
It has not felt responsible for conditions in the Leicester factories on anything other than a superficial level.
On occasions it has failed to appreciate that with the enormous advantages of being a publicly listed company come responsibilities, one of which is on all occasions to act in the best interests of all the shareholders.
Boohoo shares were up 14% in morning trading at 370p.